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Top five trends that will shape the technology sector in UAE in 2020

With 2019 been a challenging and a transition year, how is 2020 going to be for the information and communications technology in the UAE and what the top trends are that will shape the industry.

Jyoti Lalchandani, vice-president and regional managing director for research firm International Data Corporation (IDC), told in an exclusive to TechRadar Middle East that ICT spending in the UAE is expected to increase by 3.80% to $16.84b compared to $16.22b a year ago.

The research firm has revised its forecast for this year from $16.7b due to a slowdown in the telecommunications sector.

He said that telecom services are feeling the impact of weak consumer confidence and a slowdown in mobile data services.

Even in 2020, the telecom sector is expected to grow the slowest at 1.01% while devices and infrastructure sectors are expected to grow close to 6% and software and IT services (hardware and support services, consulting services, training, education, system integration services, managed services, outsourcing) are expected to grow close to 8%.

 “Commercial segment is looking more positive than the consumer space. The consumer side is going to face pressure due to weak consumer confidence, uptake of trade between the countries, retail, real estate, hospitality,” he said.

On the commercial segment, he said that the services market is growing, driven by strong uptake in cloud-based services, interesting movements on the systems and storage side.

The shifting trends across the globe, he said is that enterprise customers are taking a more cautious approach when investing and in expanding. There is a number of variables such as assumption around global trade, will oil prices be flat or is it going to fluctuate, regional political uncertainty, cost of living index and economic growth.

However, he said that organisations are investing in technology to drive certain things.

“They are investing in technology to get operational efficiency, to cut cost and are investing in Opex-based models such as cloud, and create new revenue streams using AI and cognitive technologies,” he said.

Moreover, he said that people are looking at Expo 2020 and investments regarding it are almost done. 

With 5G gaining adoption, the industry is going to see a significant intake of AI and the internet of things.

(Image credit: Future)

1. Cloud

Public cloud services are seeing a big uptake. The public cloud market is expected to grow by 35% to $406m compared to $299m this year.

Two-thirds of the organisations will approach the cloud through a hybrid model. Organisations in public and government sectors, retail, utilities, transportation, wholesale distribution, hospitality are on the public cloud.

Due to some of the regulatory challenges, banking and financial services and some of the mission-critical applications rely on building their private cloud infrastructure.

The overall business environment is a strong driver for the uptake in cloud services. CFOs love it as it is opex-based and organisation line of business loves it because they get agility and speed. IT organisations love it because of the scale it provides while channels love it because of the “lift and shift” approach as companies move from on-premises to the cloud.  

The on-premise [non-cloud] spending is declining quite rapidly and a lot of spending is moving to the cloud as a subscription-based model. Speed and agility are the key drivers for the cloud.

There is going to be a consolidation in the public cloud space to key four or five players. Cost is going to be a key factor when moving to the cloud for organisations. 

2. Digital transformation

Organisations are getting a bit more aggressive on digital transformation. A lot of pilot projects will enter the mainstream.

A lot of projects and initiatives are around transforming the customer experience. Organisations are leveraging some of the technologies to enrich the customer experience.

Some of the traditional IT areas such as devices and infrastructure are slowing down and companies are using the investment to drive adoption of more disruptive technologies such as artificial intelligence, robotic process automation, internet of things, big data analytics, blockchain and cloud to cut cost and drive more efficiency.

About 25% to 30% of large enterprises are currently in the process of digital transformation, investing in the third platform such as social, mobile, cloud and big data to do one of four things – to be operationally efficient, more agile, create new experiences for customers and create new revenue streams. It is a five to eight-year journey.

Initially, blockchain started off to facilitate a lot of trade financing deals between banks. It hasn’t got a lot of widespread adoption. A lot of the use cases happened in between banks to banks, Smart Dubai and Real Estate Regulatory Agency. The next phase is called the mature of a technology.

The blockchain technology will be matured when you have high volume and low-value transactions. Currently, a lot of the blockchain investments happen in low volume and high-value transactions.

In the next three to four years, blockchain will be embedded into the compute and that will open a significant amount of opportunities.

3. Cybersecurity

Security investments continue to be a major driver for growth. One of the reasons for that is companies are one of the most challenging areas for CIOs and IT.

Now, even CEOs have security as one of their top priority areas. 

Given the region in which we operate due to geopolitical issues and some of the malware that is taking place, security is becoming an important part of the agenda for banks and public sectors.

4. AI and cognitive technologies

Organisations are quite strongly investing in AI and cognitive technologies such as chatbots, analytics and robotic process automation to cut cost, boost operational efficiencies by taking out some of the repetitive tasks humans do and automating it.

The cognitive AI spend is expected to grow by 25.63% to $73.66m compared to $58.63m this year.

Banks, utilities, RTA, Dewa and public sectors have deployed AI and cognitive in a big way.

The AI and cognitive market in the UAE is set to grow between 25% and 30% year over year in the next two to three years. The impact of AI, along with 5G and IoT, will be extremely powerful.

IoT is already embedded into a lot of the technologies in manufacturing and production, fleet management, etc. IoT has become a part of the ecosystem now.

AI is going to automate several tasks and roles while creating new roles that are not yet defined today. It will create more jobs than eliminating.

To run AI and cognitive technologies, the industry needs a lot of data scientists and new skills that do not exist today. It will also force organisations to reskill some of their existing staff and resources. A lot of big organisations are already doing that and investing in training. In the autonomy phase, the machine decides, analyses and executes based on guiding principles that are set.

The overall economic situation is a key driver for that and due to lack of skills. So, these kinds of technologies play nicely into the story. It works 24/7 operation and lesser mistakes or risks compared to humans, so productivity and efficiency are a lot more at a lesser cost.

A lot of private and public sectors have leveraged some of these technologies to automate and cut costs. So, we are seeing an explosion in the digital workforce.

5. Restructuring

Organisations are making fundamental changes in their organisational focus areas and priorities. Several companies are resetting their plans, given the overall economic environment across the region, in rightsizing in several areas, especially in banking, retail, hospitality, banking and financial services.

Organisations need to rightsize in the next two to three years as it is going to be challenging. Organisations are holding back on investments and cutting staff to adapt to the business environment.

Consolidation is taking place in the banking sector and retail margins are under pressure, re-export from Dubai to other regions is down and there is an impact on financial [insurance] services and education sectors.