Dubai: Information technology spending in the Gulf countries is likely to fall sharply for first time this year, led by the UAE, as negative sentiments reign in consumer and enterprise segments.
IT spending in six Gulf countries is forecast at $12.18 billion (Dh44.7 billion), a decrease of 5.83 per cent compared to $12.94 billion in 2008.
Research firm IDC has slashed its growth forecast for the third time this year. In December, they revised the figures from $15.93 billion to $14.95 billion and now to $12.18 billion.
"Gulf countries had enjoyed a strong growth in IT spending for the last few years due to high oil prices, emergence of new sectors, low infrastructure investments by both public and private sectors, and over 6 per cent GDP growth," Jyoti Lalchandani, Vice-President and Regional MD, IDC MEA and Turkey, said.
He said the UAE is going to be the worst hit due to the uncertainty and witness 11.6 per cent drop this year to $4.14 billion. Last year, IT spending in the UAE was $4.68 billion.
"Qatar is the only region to register positive growth as the GDP is expected to post 6-7 per cent rise while Saudi Arabia is expected to remain flat. Bahrain, Kuwait and Oman likely to register slight decreases," Lalchandani said.
Qatar is projected to record $679.77 million in sales, an increase of 2.91 per cent over 2008.
He said the impact of slowdown would be felt more on the hardware sector. The UAE is the hardest hit as the country is a major re-export market for IT hardware. Around 20-30 per cent of hardware products are re-exported to countries like Iran, CIS countries and Africa.
The UAE is also a hub for tourists. Due to the drop in tourist inflow, there will be around 19 per cent drop in IT hardware spending in the UAE. But there is likelty to be slight growth in software and services, he said.
Anthony Peters, Associate Director and Group General Manager of Panasonic, said "talking to our partners, distributors and consumers, they remain bullish as do we. We have seen effects of the global recession in the region, but the Middle East remains one of the better performing geographies globally. Businesses are investing in IT which is a positive sign."
Chris Moore, managing director, Middle East, Africa and Mediterranean, said: "As a security vendor and speaking to our customers we have not seen a real dip in IT spending across the region."
"Our assumption is till first half of 2010, there is going to be a slowdown and only after that we expect double-digit growth in the region while focus is clearly shifting to utilisation of assets," Lalchandani said.
Hardware sector is projected to fall 12 per cent this year while software and service sector is forecast to grow 4.5 per cent to 5.5 per cent.
The Gulf spending is projected to grow more than eight per cent in 2010 to $13.19 billion.
"The crisis is impacting various sectors in varying degrees. The government is still investing in infrastructure and keeps the economy afloat due to high oil prices. The private sector has taken a back seat. Trade and distribution has taken a hit and in the UAE the most. In the UAE, trade and distribution is the heart of the economy. Trade between UAE and other counties are going to be affected severely this year.
"Transportation sector has been badly affected. Fewer people are coming in despite low oil prices. New investments planned in banking and financial services were put on hold. A lot of investments are going to the existing infrastructure just to keep the lights on. Retail sector and home sector is also affected by the crisis. The areas we see growth are utilities, telecom, healthcare, education, as these sectors are unfazed by the crisis," Jyoti said.
He said this current crisis has forced many CIOs to re-look their investments. Now CIOs are realigning their goals with business goals. Previously business had one set of goals and now business initiatives are driving IT initiatives and which is a great sign in this part of the world.
Moore said that by start of 2011 things will have taken a turn for the better..
"We expect a significant growth in the region, back to pre-crisis levels, in IT spending in early 2011. When the Gulf market rebounds, it will rebound strongly due to two to three year pent-up demand in various sectors," Jyoti said.
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