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MEA IT spending forecast to top $110bn

Regina Pazvakavambwa
By Regina Pazvakavambwa, ITWeb portals journalist.
Johannesburg, 22 Sept 2016
he fastest-growing sector in the IT industry over the coming years will be healthcare, says IDC.
he fastest-growing sector in the IT industry over the coming years will be healthcare, says IDC.

Annual IT spending in the Middle East and Africa (MEA) is forecast to reach $110.94 billion this year, representing year-on-year growth of 5.1%.

This is according to IDC's latest 'Worldwide Semi-annual IT Spending Guide: Vertical and Company Size'.

Statista says total IT spending is estimated to reach $105.3 billion in 2016, down from around US$107 billion in 2015. Spending on services is expected to make up about 18% of total IT spending in MEA in 2016.

Globally, information technology spending is expected to reach some US$2.25 trillion in 2016.

In SA, IT spending is forecast to total R272 billion in 2016, says Gartner, which notes this as a 3.8% increase from 2015.

"Meanwhile, device spending in the country is estimated to decline 6.5% in 2016. "Mobile phones, PCs and tablets are cyclical, with dips in 2014 and 2016, says John-David Lovelock, research vice president at Gartner.

Both the consumer and business segments are showing a decline in 2016, with the larger drop coming from consumers, says Lovelock.

"Users in SA are holding onto their expensive phones longer and refraining from buying cheaper phones. With prices going up, the total spend on mobile phones was down 4.5% from last year."

IDC expects the MEA market to total $133.56 billion in 2020, expanding at a compound annual growth rate (CAGR) of 4.8% over the 2015-20 forecast period.

Overall IT spending reached $105.51 billion in 2015, with consumers accounting for just over $50 billion of the total, or 47.6%, it says.

The consumer sector exhibited strong growth over the 2012-15 period, with spending increasing at a CAGR of 19.1%. However, IDC expects that rate to slow considerably to 3.5% for 2015 - 20, with faltering smartphone demand largely to blame.

"The high rate of growth seen in the consumer sector over the last few years was driven by a surge in demand for smartphones, with the devices accounting for a majority share of consumer spending," says Jebin George, a senior research analyst for industry solutions at IDC Middle East and Africa.

"However, market saturation and a challenging economic climate have led to a slowdown in demand for new smartphones, a trend that is expected to continue over the coming years."

Spending by the business sector is expected to total $57.69 billion in 2016, with IDC forecasting a five-year CAGR of 6.0% through 2020.

The telecommunications ($12.88 billion), finance ($9.27 billion), government ($8.85 billion), and manufacturing ($7.13 billion) sectors will account for the largest share of spending this year.

However, the fastest-growing sector over the coming years will be healthcare, with IDC expecting IT spending by the industry to increase at a CAGR of 7.9% over the 2015 to 20 forecast period.

"Organisations across the region are increasingly focusing on reducing costs and driving efficiency improvements as they try to come to terms with the prevailing economic environment," says George.

"Businesses no longer see IT as a cost centre, but rather as an enabler of innovation and efficiency, and this change in perspective is helping to drive IT spending growth in the region."

In terms of size, IDC expects large businesses (more than 500 employees) to account for 56% of total business IT spending in 2016.

On the other hand, Gartner says worldwide IT spending is forecast to total $3.49 trillion in 2016, a decline of 0.5% over 2015 spending of $3.5 trillion.

The change in the forecast is mainly due to currency fluctuations.

Lovelock says there is an undercurrent of economic uncertainty that is driving organisations to tighten their belts, and IT spending is one of the casualties.

"Concurrently, the need to invest in IT to support digital business is more urgent than ever. Business leaders know that they need to become digital businesses or face irrelevance in a digital world."

To make that happen, leaders are engaging in tough cost optimisation efforts in some areas to fund digital business in others, says Lovelock.

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