Saudi public sector to remain highest spender on digital tech in 2020, says IDC

The government spending on information and communication technologies (ICT) in Saudi Arabia will increase at a compound annual growth rate (CAGR) of 6.4% over the next 4 years, according to the latest forecast from global technology research and consulting services firm, International Data Corporation (IDC).

As Saudi Arabia looks forward to realizing the goals of National Transformation Program (NTP) in 2020, the private and public sectors will strengthen their roles in the digital economy and proactively address the emerging needs and requirements.

“Digitalization forms the core of the Saudi government’s strategy to meet changing demands of the tech-savvy young population,” Hamza Naqshbandi, country manager for Saudi Arabia at IDC, told Argaam in an interview.

He highlighted that the public sector will remain the biggest spender on digital technologies in 2020, expecting the government’s push towards digitization would affect the spending on the overall economy and different industries.

“As the days of bloated budgets are gone, organizations are constantly looking to do more with less with a heavy focus on automation,” Naqshbandi stated.

Accordingly, the manufacturing sector remains in the forefront when it comes to the growing investments by Saudi organizations. “I believe Saudi organizations will spend more on automating the manufacturing sector; they have been driven by the government. This will not only help grow and sustain their businesses, but will also attract customers and diversify their products,” he noted.

Benefit to SMEs

Investments in developing digital technologies are no longer being driven solely by large global conglomerates but also by smaller and medium enterprises (SMEs). Naqshbandi mentioned there is a large and under-utilized SME segment in Saudi Arabia, which will play an important role in future towards digitalization.

“Most of the organizations that exist in Saudi Arabia are SMEs, comprising less than 250 employees. And if you look at how much these organizations actually spend on ICT, it's less than 28%,” he said.

However, the focus on SMEs and emerging technologies is certainly pushing the Saudi government towards establishing a body that will be mandated to empower in inculcating the culture of using technology.

“The move from a Capital Expenditure (CAPEX) to an Operating Expense (OPEX) model will definitely provide SMEs with agility and give an edge in terms of future adoption,” Naqshbandi said.

2020 outlook

For Saudi Arabia, 2020 is meant to be the year of moving on from the planning and strategy phase towards implementing NTP goals, according to Naqshbandi. He said he believed the Saudi ICT market is set to grow this year and will be driven by cloud services.

“We can see the level of maturity in Saudi Arabia. Digital roadmaps are being incorporated by the public and private sector firms,” he said.

However, Naqshbandi noted that the availability of required skills in the Kingdom remains a concern. “The availability of advanced ICT skills is a challenge, especially around areas of cybersecurity, cloud architecture, data science, and leadership to name a few,” he said.

“The government’s ambitious digital transformation roadmap has led to demand for digitization rising, with not enough supply of resources at hand,” Naqshbandi continued.

He called for defining a regulatory framework around these emerging technologies, apart from a few areas of ICT.

Steps are being taken to shorten the skill gap with adequate international cooperation as well as revamping the education system, Naqshbandi mentioned. “The public sector has been actively looking for international partners to train the next breed of Saudi manpower to be well versed with the emerging digital technologies,” he said.

By offering the Saudi youth with platforms and opportunities in the ICT sector to ramp up the skills, one can argue that the government is on the right track. This will ensure that the sector is ever evolving, on trend, and focused with the changing needs of the industry at its core.

Write to Paromita Dey at paromita.dey@argaam.com