((Market Research Report))
Kuwait, the third-largest computer market in the Gulf, made a recovery in 2010 from the economic slowdown, and local IT spending is expected by BMI to reach around US$846mn in 2011. The market should continue to provide opportunities for IT vendors over our five-year forecast period, with drivers including government projects, population growth, and strong demand from the oil and gas sector. Kuwait's IT spending is forecast to record solid growth in 2011 as the market consolidates its recovery from the impact of the economic crisis, which hit Kuwait particularly hard. In 2010/11, Kuwait government spending was expected to increase by 10%. Kuwait's Development Plan, announced in 2010, will boost economic growth through a gradual pick-up in the non-hydrocarbon sector over the coming years.
BMI projects a 2011-2015 IT spending compound annual growth rate (CAGR) of 7%. Kuwait's IT market has a number of enduring strengths, including its relatively small but tech-literate and wealthy population, which make the country an important regional testing ground for new products. Per-capita IT spending is forecast to reach US$326 in 2015 from US$258 in 2011.
Despite the global economic downturn, the last two years have seen continued e-project implementation by various Kuwaiti state organisations. The social welfare ministry now allows online submission of forms and email notifications. The defence and finance ministries are also recognised as particularly advanced, while the finance minister has called on the ministry's IT staff to redouble their efforts in this area.
In Q410, the Kuwaiti Ministry of Education announced the launch of a New Technology Infrastructure Project (NTIP), aimed at raising the level of IT utilisation in schools. The NTIP project has been billed as just one of the first in a series of planned projects to raise the standard of IT systems in schools. Another related project announced by the education ministry is the establishment of a cloud computing centre to serve students and teachers.
In January 2011, Kuwait Oil Company (KOC) became one of the first major companies in the regional oil and gas sector to deploy Windows 7. KOC installed Windows 7 across its whole infrastructure, claiming significant benefits from increased flexibility and security. Microsoft hopes that migrations to its Windows 7 operating system, launched in October 2009, will continue to boost its sales in the Kuwaiti market.
Business software vendor Oracle reported a number of Kuwait market contact wins in 2010. In August 2010, Kuwait Airways renewed its services agreement with Oracle Services. The National Petroleum Company also signed a services agreement with Oracle last year. Other Kuwaiti clients of Oracle's include Salhia Real Estate, Kuwait University and QualityNet.
The regional IT services opportunity is attracting growing interest. French IT Services giant Atos Origin announced in 2010 that it would return to Kuwait. Meanwhile Capinnova Investment Bank announced a minority investment of US$20mn in Kuwait IT services vendor EBLA Computer Consultancy. The investment was one of the largest technology investments in the GCC in 2010.
In 2011, the Kuwaiti computer hardware market is expected to reach a value of US$355mn. Overall computer hardware sales were estimated at around US$335mn in 2010, making Kuwait the third largest market in the region after Saudi Arabia and the UAE.
The public sector and e-government projects will continue to be a mainstay of the market, with sizeable budgets allocated. Privatisation initiatives will boost spending, as will retail channel evolution and more foreign investment. Small and medium-sized enterprises (SMEs) will be a key segment, as growth in regional trade encourages many to invest in information systems.
In 2011, total spending on software is forecast at US$228mn, up from US$204mn the previous year. The oil, gas and utility industries in Kuwait will remain a major source of spending and the government's plans to expand oil production to 4.0mn barrels/day in the next 10 years will necessitate additional investment. With trade liberalisation and growing regional competition continuing to fuel enterprise spending on software and systems, however, there should be growth potential across many sectors. Facing change and seeking efficiencies, SMEs are likely to generate opportunities. Manufacturing and trading firms are both seeking to transition from manual environments to full automation of back-office systems.
The Kuwaiti IT services market is projected to be worth around US$262mn in 2011 and is forecast to grow at a 8% CAGR to a value of US$355mn by 2015. The economic situation and credit tightening have had an impact on projects in some key verticals that have been driving IT spending. These include not only oil and gas but the financial, government, education, construction and healthcare sectors.
There has been a trend towards larger deals, particularly from government, which is often keen to act as an agent of new technology adoption in Kuwait's industry sectors. A more volatile environment for the oil industry has encouraged companies to look for solutions that will increase operational efficiency and boost overall business agility.
Kuwait is one of the most advanced technological markets in the Gulf, but high subscription costs continue to restrict internet penetration. Growth in the numbers of broadband subscribers has been stronger, but numbers are still very low. Competition is limited in the supply of broadband services and thus prices have remained high, deterring many potential subscribers.
The government hopes to drive IT development with its broadband access initiative. Alcatel was chosen by Kuwait's State Ministry of Communications to supply a gigabit passive optical network (GPON) solution that will serve about 60% of access areas involved in the ministry's present roll-out. The ministry's access network is gradually being upgraded by replacing the existing copper access with a passive optical fibre infrastructure.