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Mena IT spending to lag behind global average

As consumer spending on smartphones and laptops drops due to inflationary pressures, spending by businesses on data centre systems is also set to fall by 3.5% this year Creative Commons/Daoducquan
As consumer spending on smartphones and laptops drops due to inflationary pressures, spending by businesses on data centre systems is also set to fall by 3.5% this year
  • Discrepancy due to drop in consumer spending on mobiles and laptops
  • Barrier to technology adoption in the region is a shortage of talent
  • Focus on developing homegrown talent could close the skills gap

IT spending across the Middle East and North Africa is forecast to drop below the global average this year as rising inflation dents consumer spending.

While global growth in IT spending is expected to hit 5.5 percent by the end of this year, predictions for the Mena region show just a 2 percent increase, according to the latest forecast from Gartner Inc.

John-David Lovelock, based in Dubai as research vice president and analyst at Gartner, told AGBI the discrepancy was attributed to a drop in spending in the consumer market.

He said: “Inflation and currency decline has negatively affected consumers’ purchasing power, resulting in a deferral away from PC, tablets and mobile phone purchases.”

Lovelock revealed that in Turkey, which saw inflation hit a 24-year peak above 85 percent last October, before it dipped to near 50 percent in March, consumer spending is to decline at 13.6 percent in US dollar terms.

Investment in data centres saw strong growth of 13.7 percent in 2022 in Mena, although Gartner forecasts a more modest increase of just 3.7 percent this year.

Lovelock explained that data centre spending is not coming to an end but returning to parity after the high levels of investment of the previous 12 months.

Mena IT spending forecast (millions of US dollars)

Category2022
spending
2022
growth (%)
2023
spending
2023
growth (%)
Data centre systems3,87312.33,738–3.5
Devices26,682–11.924,973–6.4
Software12,1586.813,3479.8
IT services16,9087.718,2578.0
Communication services112,3120.4115,1332.5
Overall IT171,932–0.4175,4492.0
Source: Gartner (April 2023)

“Chief information officers will continue to spend on enterprise data centres to at least maintain existing workloads and in many cases expand,” he said.

A positive from the report is the IT services segment, which will continue its growth trajectory through 2024, largely driven by the infrastructure as a service market, which Gartner predicts will reach over 30 percent growth this year.

“While some countries like Turkey have passed legislation that curtails the use of cloud with its jurisdictional boundaries, cloud adoption is a driving force behind the overall growth in software and services in the region,” said Lovelock.

Also falling under the guise of IT services is recruitment. In a previous interview with AGBI, Miriam Burt, managing vice president at Gartner, said the most significant barrier to technology adoption in the region is a shortage of talent.

She said there is really a lack of talent to be able to advise and implement forward technologies such as AI, IoT, 5G, AR and VR.

Technology companies in the Middle East are in a prime position to attract top talent from around the world as some of Silicon Valley’s biggest names make massive job cuts, according to recruitment experts.

Some of the biggest names in the business, including Amazon, Google, Microsoft, Yahoo and Zoom have all announced significant redundancies over the last 12 months.

A total of 575 tech companies globally have shed almost 170,000 jobs since the start of the year, according to the Layoffs.fyi platform.

Vladimir Vrzhovski, workforce mobility leader at professional services firm Mercer Middle East, said: “We are in an amazing growth market that is going through a digital renaissance. The positive outlook for the GCC region may help close some of the talent gaps and attract more tech talent.”

Vrzhovski added: “Focusing on developing homegrown talent instead of competing for it would be the real game-changer to closing this gap.”

According to Mordor Intelligence, the GCC Managed Services Market is expected to register a compound annual growth rate of 9 percent from 2021 through to 2026.

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