While Saudi organizations have typically been slow to open up to the concept of outsourcing and managed services, primarily due to their inherent desire to retain full control over their IT functions amid increasing security fears, the adoption of outsourcing services in the kingdom has been growing faster than the overall uptake of IT services in recent years. Indeed, the latest projections from global market advisory firm International Data Corporation (IDC) show the combined Saudi outsourcing market growing 16.3% year on year in 2014, compared to 13.9% for the IT services market as a whole. Meanwhile, spending on cloud services is expected to increase 52.9% over the same period, albeit from a low base.
“Saudi organizations are under increasing pressure to improve business agility, optimize IT operations, and enhance operational efficiency,” says Hamza Naqshbandi, a senior research analyst for software and IT services at IDC Saudi Arabia. “At the same time, they are critically reassessing their current positions on technologies such as virtualization, cloud computing, and analytics, which are all gradually becoming pervasive across the kingdom. In fact, many organizations are gradually realizing that outsourcing offers the potential for better-structured SLAs than the internal management of operations. Additionally, the lack of IT skills in advanced technologies like cloud computing is helping to propel the adoption of outsourcing services.”
The Saudi Arabian cloud market has evolved considerably over the past 12 months, with local providers in general—and telecom operators in particular—investing significantly in developing a portfolio of cloud offerings. “It is generally acknowledged that Saudi customers prefer providers that have a local presence, and that these customers desire close interaction during sales and project cycles,” continues Naqshbandi. “There has been an increase in local provider activity as pure-play cloud providers are increasingly partnering with local players in order to effectively gain access to the local market, especially for business development, consulting, migration, training, and onboarding.”
IDC has observed that while persistent concerns around security have translated into a strong preference for in-house private cloud deployments, only a handful of Saudi organizations have actually progressed to converting their virtualized infrastructures into full-fledged private cloud environments. However, that is expected to change as cloud service providers continue to invest in customer education and customers better understand the benefits of features such as automation, metering, and chargeback that are part of a “true” cloud deployment.
Commercial expectations, risk management, and cost-reduction considerations are now all paramount concerns at the organizational level and are driving Saudi CIOs to develop strategies for cloud computing and identify appropriate workloads and models for their organizations. While the benefits of cloud services are slowly being realized by early adopters, concerns about security, usability, data privacy, and connectivity persist.
IDC has observed that the Saudi market is characterized by a shortage of qualified IT skills. Paradoxically, the increasing shortage of skills will both positively and negatively affect cloud services adoption. “With respect to SaaS platforms, cloud technologies will enable organizations to utilize applications without having to worry about the management aspect,” says Naqshbandi. “However, other areas such as private cloud (or platform as a service [PaaS]) and even IaaS, will require organizations to possess the necessary skills to manage their cloud-based environments.”
IDC’s Saudi Arabian Cloud, Hosted, Managed, and Outsourced Services Market 2012 Analysis and 2013–2017 Forecast, study presents an assessment of the Saudi Arabia cloud, hosted, managed services, and outsourced services market in 2012. The study contains details on market sizing, summarizes the major impacts indicated by IDC’s qualitative surveys of end users conducted in Q2 2013, and presents forecasts for the market categories for the next five years (2013–2017).