Developments in Saudi Arabia’s Information Technology Market

April 2018

Saudi Arabia has an attractive market for foreign information technology providers. In 2017, sales of hardware, software, and services in the Kingdom exceeded forecasts published by market analysts. And, the Saudi Government’s spending on new digital infrastructure as part of Vision 2030 implementation supports the growth of the IT industry. Efforts to incorporate more Saudis and women into the workforce, requiring new purchases and upgrades of hardware and software as well as expanded services, only reinforces these growth trends.

According to BMI Research, the value of the information technology (IT) market in Saudi Arabia will account for approximately 1.6 percent of GDP in 2018, up from 1.2 percent of GDP five years ago. We forecast the IT market value to increase by 9.5 percent y-o-y in 2018, reaching a value of SR44.6 billion ($11.9 billion). By 2022, the value of the IT market is expected to reach SR63.5 billion ($16.9 billion). The chart below shows trends in Saudi Arabia’s IT market value between 2011 and 2017, with forecasts through 2022.

Source: The Council, BMI Research, National Sources, 2018

Computer hardware sales, software sales, and service sales make up Saudi Arabia’s IT industry. For 2018, software sales are expected to account for a 17 percent share of the total industry, computer hardware sales for 34.7 percent, while services sales account for the lion’s share – 48.3 percent. The chart below highlights the respective sales of these segments on an annual basis.

Source: The Council, BMI Research

Additionally, Saudi Arabia’s spending on cloud computing is forecasted at approximately $1.2 billion in 2018 and is expected to reach nearly $2.3 billion by 2022.

Google and Amazon’s cloud computing division, Amazon Web Services (AWS), announced the construction of advanced datacenters in Saudi Arabia. AWS currently sells its products in Saudi Arabia via third parties, though reportedly plans to create a direct presence. These companies may try to get a first-mover advantage in opening datacenters, though may face competition from other U.S. companies like Microsoft Azure, IBM Bluematrix, and Oracle Cloud along with foreign competitors like Alibaba Cloud.

IT services and data centers will be critical for Vision 2030 plans for e-government and smart cities. However, growth of the sector is limited by current limits to local infrastructure and sector expertise. To attract foreign development, the Saudi Government has made revisions to its overlapping cloud computing laws.
Digital transformation will continue to evolve through increasing foreign presence, and a focus on the development of disruptive technologies will continue to boost expansion of the IT segments.

U.S.-Saudi Arabian Business Council Information Technology Sector Events

The Council is planning a number of events related to bilateral trade and investment in the IT sector. Please contact us for more information.

ussaudi@us-sabc.org
703-962-9300