The global Covid-19 outbreak continues to pose significant challenges to the world economy and its potential recovery outlook.
The impact on the Middle East, Turkey, and Africa (Meta) region have been no different, although some countries are now exploring ways to restart economic activity in measured steps.
Meanwhile, the ICT industry continues to experience the effects of this economic shock and its impact on the recovery trajectory of enterprises, governments, and consumers alike.
Research firm International Data Corporation (IDC) has revised its ICT spending forecast for the region this year and outlines emerging opportunities that tech vendors and providers can explore to help their customers define a new way forward while also highlighting CIO perspectives.
Covid-10 macro headlines are looming global recession, uncertainty over pandemic recovery time, vaccine availability, weak equity markets, oil and commodity prices crash, currency fluctuations, the collapse of the real economy – consumer, SMEs and B2B, squeeze in government spending, looming unemployment crisis and uncertainties around mega-events and giga projects.
Jyoti Lalchandani, Group Vice-President and Regional Managing Director for Middle East, Turkey and Africa at IDC, said that GDP growth has been revised in the past five weeks. In April forecast, Saudi Arabia is expected to contract 4.5% and the UAE by 5%. The UAE and South Africa have seen a major downward revision.
In the UAE, the slowdown in retail, transportation, real estate, hospitality, trade and distribution sectors have weakened further.
In Saudi Arabia, the slowdown in giga projects and transformative projects and the proposed increase in VAT may adversely impact the economy in the short to medium term.
ICT spending in the Middle East, Turkey and Africa are revised down further. In January, the spending was projected to grow by 2.3% to $212b for the year.
Assuming the optimistic scenario (if recovery happens in three months), the overall ICT spending is expected to fall by $8b while in the pessimistic scenario (if recovery happens in 12 months); it is expected to fall by $15b and to $201b in probabilistic scenario (if recovery happens in six to nine months) from $209b in 2019.
Telecom services contribute two-thirds of the overall ICT spend. Although the fixed data services have shown an upward trend in a few countries, driven primarily by consumer demand, it is expected to be outweighed by a decline in B2B segment and SMEs are expected to default in payments.
The mobile data segment is expected to rise by 8.8% while fixed voice segment will continue to decline due to the uptake of VoIP and other communications tools in B2B and B2C sectors. The mobile voice segment is expected to decline by 2.5% due to fall in roaming revenues for telecom operators.
It is expected to cross $72b this year in the probabilistic scenario from $80b in January. Laptops, computers, tablets and smartphones are expected to fall by more than 14% despite an uptake in initial sales in remote work and remote learning initiatives. IT peripherals sector is expected to decline by more than 15%. Enterprise infrastructure is also expected to fall further.
Major adjustments have been done to the spending outlook. Drastic fall in Turkey, UAE and Saudi Arabian markets due to weak economic activity and weak GDP growth rates.
In Turkey, its currency lira has lost 15% of its value against the dollar in just four months of this year and it had a major impact on Turkish organisations to allocate overall IT budget.
In the UAE, IDC has seen a significant acceleration around customer-oriented digital transformation programmes in both public and private sectors such as contactless services but the overall IT spending is expected to fall by 7.5% to $7.7b.
In Saudi Arabia, the significant impact in oil prices and the future of oil prices and how long the lockdown will continue will pose significant challenges to the Kingdom. In the short- to medium-term, the spending is going to have an impact but the long-term goals are intact.
Cloud spending is accelerating and the regional public cloud market is expected to grow to $6.3b by 2024 from $2.6b this year, at an annual growth rate of 23%. Covid-19 has impacted IT markets across the region but there is positive momentum in cloud adoption. While on-premises software is headed for a 10% fall this year and that is not headed to the cloud entirely, software-as-a-service (SaaS) is expected to grow 26% this year.
Hyperscalers continue to open and announce new availability zones in the region due to strong demand.
Risks have grown tremendously in the last two months due to remote working. The security software market is expected to grow by 3.9% to $963m this year. The endpoint security market is expected to grow by 3.8% while the network security market is expected to grow by 3.7%.
Post Covid-19, healthcare, insurance, banking, education and media sectors are expected to see a 9.4% surge in security spend while sectors such as transportation, retail, and personal and consumer are expected to see a flat or negative growth for the year.
Future of work
Investments by CIOs in the next 12-18 months will focus on team collaboration applications, unified video communications and conferencing systems and digital workplaces.
Many organisations are increasing their investments in automation and robotic workers to reduce operational costs and improve efficiency.
The current crisis will accelerate workforce transformation as more non-human workers are expected into the workforce as the economy expands, building dynamic and hybrid workforce in the future.
There has been a significant shift in CIOs’ priorities. The short- to medium-term priorities are changing. In March and April, the immediate priority was to provide immediate access to IT services and applications for remote working and strengthen technology for disaster recovery and business continuity. Many of the priorities have decreased now as many of these initiatives have been implemented or underway.
The area where there is an increase now when compared to April is the building of new applications for consumers and employees to enable the digital experience.
In the medium- to long-term approach, there are certain changes in CIOs technology roadmap.