Market Overview Kuwait, the third-largest computer market in the Gulf, has recovered from the economic slowdown, and local IT spending is expected by BMI to be around US$917mn in 2012. 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 2012 as the market consolidates a recovery from the impact of the global economic crisis, which hit Kuwait hard. Oil companies such as Kuwait leader Kuwait National Petroleum Company (KNPC) continue to invest in IT in 2011, while Kuwait's Development Plan should encourage a gradual pick-up in the non-hydrocarbons sector over the coming years.
BMI projects a 2012-2016 IT spending compound annual growth rate (CAGR) of 5%. Kuwait's IT market has a number of enduring strengths, including its relatively small but tech-literate and wealthy population, which makes the country an important regional testing ground for new products. Per capita IT spending is forecast to reach US$334 in 2016 from US$276 in 2012.
Industry Developments
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.
The Kuwaiti Ministry of Education is implementing 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.
Company News
The oil and gas sector has continued to be a major spending vertical for software. In June 2011, KNPC announced that it had implemented HP's Business Service Management software, as part of a drive to increase efficiency and data visibility. Meanwhile, 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.
Cloud computing has also been identified as an opportunity by vendors, which in 2011 were forming new partnerships to facilitate expanded cloud offerings. In October 2011 local data communications vendor Zajil announced an agreement with Middle East cloud security services provider Zservices. Zajil will offer Zservices cloud-delivered, web security solutions as a value-added service to its customers.
Computer Sales
In 2012 the Kuwaiti computer hardware market is expected to reach a value of US$385mn, after aggressive pricing helped to keep PC market growth on a positive trajectory in 2011. 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.
Software
In 2011, total spending on software is forecast at US$248mn, up from US$233 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.
Services
The Kuwaiti IT services market is projected to be worth around US$284mn in 2012 and is forecast to grow at 6% CAGR to a value of US$364mn by 2016. 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.
E-Readiness
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 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 rollout. The ministry's access network is gradually being upgraded by replacing the existing copper access with a passive optical fibre infrastructure
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