Software spending fastest growing component of MENA IT industry, Gartner
Middle East and North Africa IT spending is projected to reach $156 billion in 2017 a 2.4% increase from 2016, according to the latest forecast by Gartner. Analysts said the key vertical segments driving IT spending growth include the communications, media and services, banking and securities, manufacturing and utilities markets.
The devices segment will represent nearly 17% of total IT spending in 2017. This market is expected to grow 4% this year, mainly due to a strong increase in mobile phone expenditure. Other devices, which include PCs are forecast for negative growth.
Datacentre systems will see an overall growth of 6% in 2017, versus flat performance in 2016, due to increase in demand for servers and unified communications. Software spending is forecast to increase 9%, with enterprise application software projected to grow 13% and infrastructure software spending to increase 6%. IT services will post 4% growth, with business IT services reaching nearly 5% growth this year. Consumer mobile services will represent close to 60% of the total expenditures in communication services.
“The MENA region is moving in the right digital direction, where demand for the latest and most emerging technologies like Blockchain will continue to reflect the profound changes the IT markets are experiencing. The growing and influential role of business leaders toward embracing technologies and processes such as cloud, business intelligence BI, analytics, customer relationship management CRM, digital business and marketing, are contributing to fuel digital transformation,” said Peter Sondergaard, Senior Vice President and Global Head of Research at Gartner.
“A new type of infrastructure needs to be built that is not just going to reshape business, but also the way people live. CIOs are the builders of this infrastructure, which Gartner calls the civilisation infrastructure,” said Sondergaard. “Middle East user organisations must realise the next evolution of digitalisation is here: the rise of the digital ecosystem, where enterprises, competitors, customers, regulators and other stakeholders form an interdependent business network.”
CIOs will participate in the building of a new digital platform with intelligence at the centre. That platform will enable ecosystems, connecting businesses and collapsing industries. Gartner analysts said it will change society itself, and the way people live.
The new digital platform consists of five domains: traditional IT systems, customer experience, The Internet of Things, an ecosystem foundation and the intelligence platform that ties all the domains together.
“Each of these domains are interconnected and interdependent. All have a role, and all are required,” said Sondergaard. “Your new digital platform will allow you to participate in the evolving world of business, government, and consumer ecosystems because ecosystems are the next evolution for digital. It is how you compete at scale.”
Further insight into the five elements of the new digital platform include:
Traditional core IT systems
This is how CIOs run and scale operations. It is building on what has already been built. It is taking high performing traditional IT systems such as the datacentres and networks and modernising them to be part of the digital platform. For example, leading organisations are halfway through the transition to the cloud. It started with sales and marketing, and now half of sales-support capabilities are in the cloud. This migration will continue through the end of the decade into functions such as human resources, procurement and financial management. You now need to make cloud, mobile, social and data your core capabilities while investing in resilience, business continuity and disaster recover, insight and outside in a hybrid approach.
This is how CIOs connect and engage in new ways. The digital customer experience may be the only one that the customers have. This is how the business engages in the digital world. The pioneers are exploring how new experiences such as virtual and augmented reality will change the way customers engage.
In the world of chatbots and virtual personal assistants, your mobile applications, and even your web presence, will be much less relevant. The new competitive differentiator is understanding the customer’s intent through advanced algorithms and artificial intelligence. Creating new experiences that solve problems customers did not realise they had.
The Internet of Things
This is how the organisation senses and acts in the physical world. Adding devices to the IoT domain is the easy part. Processes, workflows, and data integration are much harder. In fact, two-third of organisations have had to rework their existing IT systems to accommodate IoT.
IoT also changes how CIOs should invest in analytics because decisions must move from days to minutes to instant. CIOs should plan to shift their investments in analytics to real-time. Real-time analytics will outpace traditional analytics by a factor of three by 2020 to become 30% of the market.
This is how systems analyse, learn and decide independently. CIOs start with traditional data management, data science and data intelligence. Algorithms determine the action. The new type of intelligence, driven by machine learning is artificial intelligence.
We are building machines that learn from experience and produce outcomes their designers did not explicitly envision. Systems that can experience and adapt to the world via the data they collect. Machine learning and artificial intelligence move at the speed of data, not at the speed of code releases. Information is the new code base.
This is how the enterprise interacts as an institution in the digital world. Ecosystems go beyond the capability to decide, CIOs need to build the capability to interact with customers, partners, adjacent industries, even your competitors. The ecosystems allow for the transformation from traditional business with linear value supply chains to networked digital ecosystem businesses.
Many industry models will transform with digital ecosystems. Moving from simple relationships run by intermediaries toward distributed partnerships possibly managed by a shared distributed ledger system like blockchain. Building a strong ecosystem will help you manage these dynamic interactions. Ecosystems are the future of digital.
CIOs in the Gulf Cooperation Council are ideally positioned to become global leaders in digital transformation and innovation, according to Gartner. As enterprises in the GCC nations of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates grow and find their place on the world stage, digital ecosystem participation will be a vital element in their success.
“CIOs must take a lead in assessing their organisation’s current ecosystem involvement, and investigating the strategic value of digital ecosystems,” said Ed Gabrys, Research Director at Gartner. “In the GCC, there has been adoption of locally provided, shared services within government agencies, such as Smart Dubai Office, the Tejari eSupply portal and Oman’s G-Cloud, and an increased interest in cloud-based ERP services,” Gabrys said. “Although these are encouraging preliminary steps in a broader adoption of digital ecosystems, participation in more advanced digital ecosystems will be increasingly important for private-sector organisations to remain competitive and for public-sector organisations to fulfill their mission.”
Although cost reductions and optimisation efforts will remain a priority for many GCC IT organisations, top-performing organisations worldwide have shed a light on an alternative approach whereby budgets and value are treated differently. Adoption of similar practices can help GCC CIOs shift their IT organisations from being perceived as a cost centre to being treated as a strategic value generator.
As IT begins to differentiate its portfolio of assets by commoditising run-the-business services and increasing value-generating solutions, those value-generating related costs could be shared more broadly. The technologies, and the related benefits of increased digitalisation, are no longer an IT-only affair.
This requires a multidisciplinary team approach that expands far beyond the borders of IT, into a broader digital ecosystem that includes internal-business partners, vendors, and in some cases, even competitors. As digitisation evolves, it will become easier to share expenses, and grow the amount of spend. Value will be expressed beyond pure run-the-business costs and can be more directly linked to the things executives will appreciate and fund: growth, cost management and risk management.
While global top performers are redirecting funding to technologies that support digitalisation, in the GCC many CIOs still plan new investments in cold spots such as enterprise resource planning. Although ERP remains relevant and an important asset for running the business, it typically does not warrant the same levels of funding as in recent years.
Gartner recommends reviewing these cold spots, which are ripe for investment reductions and commoditisation, and directing resulting savings toward renovating the core and value-generating services and technologies.
CIOs in the region should look for opportunities to divest from cold spots and redirect funding into areas that can derive superior strategic value for the enterprise and serve as a platform to build, run or otherwise participate in the most beneficial digital ecosystems.