Saudi Arabia is to become the Middle East’s main manufacturing hub as IT spending is increasing at a faster rate than in any other country in the Central Europe, Middle East and Africa (CEMA) region, according to IDC Manufacturing Insights.
IDC’s Saudi Arabia Country Highlight: Understanding the Manufacturing Landscape report predicted that software and IT services will be the fastest-growing segments in Saudi Arabia’s manufacturing industry, which will transform the traditional hardware-oriented IT market. IT spending in this sector is expected to increase at a compound annual growth rate of 7.5% between 2013 and 2018.
In addition, third platform IT solutions and the internet of things are set to play a more essential role in the Saudi manufacturing sector over the next five to ten years.
“The Saudi manufacturing sector is poised for significant growth and has the potential to become a technology-intensive industry, not only on an advanced regional level but also on a par with global competition in most areas,” said Martin Kuban, lead research analyst at IDC Manufacturing Insights, CEMA. “The diversification of the country’s oil-based economy is progressing steadily, supported by a positive economic environment and favourable investment attitudes. Plus, IT innovation spirits are rather high, as many of the new businesses are not saddled with extensive client-based solutions.”
IDC’s report indicated that the manufacturing sector generates around 10% of Saudi Arabia’s GDP, with oil and gas processing and the related chemical industry remaining the major drivers of economic growth. The sector is expected to remain dominated by large entities and conglomerates focusing on asset-oriented and brand-oriented manufacturing.
However, IDC predicted that new players are likely to emerge in the non-oil resource mining and processing sectors, and other high-added-value industries such as aerospace and defence, pharmaceuticals and life science, electrical machinery, and high-tech equipment. Although these industries are currently small in comparison, they show high growth rates and offer a number of opportunities for both IT and non-IT investments.
“Manufacturing in technology and engineering-oriented value chains will be driven by emerging SMBs, mostly established in industrial zones surrounding big cities,” said Kuban. “Many of these hubs will emerge as centres of innovation and excellence, closely tied to newly developed R&D facilities.”
According to Kuban, IT will play a crucial role in these new establishments. He said: “While these will also undergo considerable IT transformation, it will typically be at a much slower pace and with less grace due to the lack of IT skills and poorer decision-making capabilities of their internal IT organisations.”
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