Saudi managed services market set to breach half-bn mark in 2015: IDC

Revenue from outsourced functions due in part to e-gov projects
Saudi managed services market set to breach half-b, Research, Data

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The outsourcing, managed services, and data centre services market in Saudi Arabia is expected to total $570.6m in 2015, according to a recent study published by International Data Corporation (IDC).

The market is set to grow 16.2%, year on year, primarily driven by increased spending on network and desktop outsourcing, and hosting infrastructure services. The cloud market, in particular, will perform strongly, spurred by the growing maturity of the Saudi ICT market and the increase in the number of companies using cloud services.

IDC expects the Saudi cloud market to total $77.5m in 2015, up 53.8% on 2014. Spending on network and desktop outsourcing services and hosting infrastructure services will expand 22.1% and 18.5%, respectively, over the same period, while the hosted application management services market will grow 16.5%. The application management outsourcing market will record comparatively slower growth of 8.7% in 2015, due mainly to the hardware-driven nature of the IT market in Saudi Arabia.

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"Organisations in Saudi Arabia are gradually warming to the idea of commissioning third-party providers for managed and outsourcing services," said Uzair Mujtaba, senior analyst for software and IT services at IDC Saudi Arabia. "While the inherent preference of Saudi organisations to retain complete control over IT and keep their infrastructure in-house has inhibited the widespread adoption of these services across the kingdom, CIOs are increasingly becoming aware of the benefits that these technologies offer and are showing a growing inclination toward adopting managed and outsourcing services."

Local providers are investing in upgrading their data centre infrastructures and expanding their data centre capacities to deliver various hosting and managed services to the government, finance, education, healthcare, and transportation verticals. According to IDC, the government vertical, in particular, is one of the largest users of managed services in the kingdom due to the various e-government initiatives and IT infrastructure and modernization projects underway that require the services of third-party service providers.

In global terms, the Saudi cloud market is fairly small at present, but there are promising signs that attitudes in the country are beginning to change, IDC said.

"Public cloud investments have typically had a low priority, but this area is expected to see strong adoption in the medium term as a growing band of Saudi organisations has started to recognise the benefits associated with public cloud services and is increasingly exploring this delivery model as a viable option," said Mujtaba. "Service providers' investments in augmenting their capabilities, together with their quest to forge value-driven partnerships, are certainly building confidence in cloud-based services and driving adoption across the country."

IDC forecasts the Saudi public cloud market to expand at a compound annual growth rate (CAGR) of 40.37% until the end of 2018, while private and virtual private cloud services are forecast to expand 40.7% and 67.7%, respectively, over the same period.

"Providers seeking to expand their footprint in the Saudi ICT market will need to maintain the right balance between cost and quality in order to be competitive," said Mujtaba. "In order to remain relevant in the changing market landscape, providers should also embrace new services, including cloud and managed security services, as a strong shift toward these services is expected over the forecast period."

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