UAE IT services market getting hot amid demand shift toward value-added services, says IDC

According to a recent IDC study, IT services spending in UAE skyrocketed 41.0% year on year in 2007 to nearly $791m. In coming years, IDC expects IT services spending in UAE to continue to expand rapidly, fueled by a strong economy, a maturing IT market, skilled-labor shortages, increased foreign investment, and the increasing complexity of IT and its impact on operational management across all economic sectors. This is supported by the fact that IT services providers within the region have been investing heavily to expand both their services teams and offerings.

"Organizations in the UAE are facing a myriad of challenges that are heavily impacting their investments in IT services," said Margaret Adam, Research Manager, IT Services, IDC MEA.

"The desire to accelerate revenue growth and rapidly take advantage of the opportunities in the region, as well as compliance and regulatory pressures and a drive for cost effectiveness, all fuel growth in the UAE IT services industry."

While 2006 saw infrastructure-related services, such as hardware and software installation and support,making up the largest portion of the IT services market,the situation changed in 2007 when systems integration services took the lead, constituting 19% of the market. It was followed by hardware support and installation (15.7%) and software support and installation (12.8%). The combined outsourcing category comprised 18.1% of the IT services market in UAE last year.

"The more sophisticated service areas such as systems integration, application customization, and outsourcing were the fastest growing in 2007," said Adam."Year-on-year growth of around 50% in these categories testifies to a maturing IT services market and a shift towards more strategic IT decision-making."

The top three players on the UAE IT services market in 2006 - MDS, Emirates Computers, and Injazat Data Systems - led also in 2007. Combined, they garnered more than a quarter of total revenues.

On the demand side, the combined government sector, with 26.7% of total services spending, was the largest customer for IT services, followed by the financial sector with 16.7%. The third-largest sector, with an 8.6% market share, was the combined agriculture, construction, and mining vertical.

IDC predicts that spending on IT services in UAE will continue to grow by a 23.9% annual average over the next five years to reach $2.3bn in 2012.

IDC's UAE IT Services 2008-2012 Forecast and 2007 Vendor Shares (IDC # ZS08Q) presents the IT services industry in the United Arab Emirates in 2007 and forecasts expenditures on IT services through 2012. The study provides market size information, vendor market shares, and revenues broken down by IT services categories and vertical markets. The study presents profiles of the top ten IT services providers, including their IT services portfolio, their presence in individual vertical markets, and their largest contracts in 2007.