IT spending in the Middle East and North Africa (MENA) region is anticipated to accelerate to over $180 billion in 2024 — a notable and consistent trend.
According to Gartner, organizations, particularly in the GCC, are continuing to focus on digitalizing their IT infrastructure. To this end, IDC statistics reveal that ICT investments in the Middle East, Turkey and Africa (META) will surge relative to other regions in the coming years.
Saudi Arabia and the UAE, the Arab world's two largest economies, are likely to spend over $20 billion each to drive their digital economic transformation. More than $2 billion in ICT spending is also expected this year in Bahrain, with such spending set to grow to $1 billion by 2026. Additionally, Qatar is predicted to spend $5.6 billion on ICT this year, with its budget for IT spending reaching as high as $3.6 billion by 2026. With this in mind, it's important to look at the primary factors shaping this growth.
Cybersecurity
Cybersecurity is the invisible shield defending us from digital intruders. But are our defenses strong enough to keep pace with the ever-evolving tactics of cybercriminals?
The emergence of various disruptive technologies such as cloud, IoT and 5G has facilitated ease of working and automation, particularly adding new capabilities in the ICT sector. However, it has also made IT and telecom companies vulnerable to cyberattacks. It is essential for telcos to synchronize their cybersecurity strategy with their transformation plan in order to fully benefit from their growing investments.
Expenditures on cybersecurity-related services, hardware and software are projected to approach the $300 billion mark by 2026. In parallel, the World Security Report found that almost half of security chiefs at the world’s biggest companies expect to increase their budgets significantly over the next year. Asked about future spending, 42% of respondents said they intended to invest in AI and AI-powered surveillance to spot threats more quickly.
Cloud
According to a noted AWS report, the UAE alone stands to generate an additional $181 billion in economic value over the coming decade by expediting the adoption of cloud technology. BMI industry research also predicts that the UAE will surpass Saudi Arabia in terms of cloud expenditure.
Cloud computing has been one of the most continuously disruptive forces in the IT market since the early days of the digital era. By 2024, more than 45% of IT investments in system infrastructure, infrastructure software, application software and business process outsourcing are anticipated to transition from traditional solutions to the cloud.
As organizations pursue novel IT architectures and operational philosophies, they establish a foundation for new and exciting opportunities in digital business, including cutting-edge IT solutions. Thus, organizations that embrace dynamic, cloud-based operational models are well-positioned for enhanced competitiveness, particularly in today's swiftly evolving business landscape.
According to Gartner, the momentum behind the shift to cloud computing is unprecedented, with more than half of enterprise IT spending in key market segments projected to migrate to the cloud by 2025. This accelerating transition to the cloud presents both opportunities and challenges for technology and service providers as they adapt to the evolving market dynamics.
For instance, prominent telcos are expected to allocate an average of $1 billion each to transform their network infrastructure to a cloud-based model in the coming years, as per Capgemini's research. The potential for top-line improvement ranges from $110 to 210 million per year per operator, while the potential for bottom-line improvement could vary between $260 and 380 million per year per operator.
Data Management
The need for data is rapidly increasing, with businesses sourcing information from a greater variety of channels and investing more heavily in its acquisition. According to a recent survey by a data science company, 44% of firms acquire external data from five or more providers. Budgets for external data are significant and growing, as over 20% of respondents said they were spending over $500,000 on external data, with 13% saying they spent over $1 million.
According to IDC, spending on big data analytics will grow 11.4% to top $4.1 billion in 2023. As per data from Appledore Research, investments in network automation software by telecom operators grew by more than 42% between 2020 and 2022 to $6.21 billion, with network data management identified as the fastest-growing segment in the market.
The rise of data management as a leading IT priority coincides with the ongoing adoption of AI and machine learning (ML). The effective adoption of those technologies heavily depends on data.
Data Centers
Data centers are typically owned and operated by large corporations, such as cloud providers, banks or telcos, or by co-location firms. Currently, the influence of AI is significantly impacting data center expenses, mainly due to increased power consumption that necessitates advanced cooling systems, which tend to be pricier than traditional cooling methods.
These cost escalations should prompt chief information officers and other IT leaders to reevaluate their data center strategies. Simultaneously, data center operators must find ways to better anticipate future demands and optimize their capacity utilization.
Tirias Research predicts that, based on current trends, the combined expenses for generative AI data center infrastructure and operational costs will exceed $76 billion by 2028. This growth poses challenges to the business models and profitability of emerging services like search, content generation and business automation incorporating generative AI. To put this in perspective, this cost surpasses the estimated annual operating expenses of AWS, which currently holds one-third of the cloud infrastructure services market.
According to Uptime Institute's Data Center and IT Spending Survey for 2022, more than two-thirds of enterprise and co-location operators anticipate increased spending on data center costs in 2023.
In the Middle East, investor interest in data centers is surging as the region, particularly GCC countries, accelerates its digital transformation. The data center capacity in key markets — Egypt, Saudi Arabia and the UAE — is expected to more than double in the next two years as the region advances its digital transformation goals.
CBRE analysts project that the combined data center capacity of these three markets is currently estimated at around 336 megawatts but is expected to grow to 707 megawatts by 2025, with Saudi Arabia and the UAE contributing the majority of the additional capacity.
Conclusion
Will companies seize the opportunities presented by strategic investments to shape their digital futures or risk falling behind in this rapidly evolving landscape? Only time will tell. But those who recognize the potential of well-planned investments will not only stay competitive but also spearhead innovation and ultimately reshape the digital landscape, all while championing digital excellence.
