Saudi Arabia IT Services Market Segmented By Service Type (Managed Services, Professional Services), By Organization Size (Small and Medium Enterprise, Large Enterprise), By Deployment Type (On-Premises, Cloud-Based), By Business Functions (Finance & Accounting, Operations & Support, Human Resources, Sales & Marketing, Supply Chain Management, Others), By End-User Industry (BFSI, IT & Telecom, Gov
Published Date: November - 2024 | Publisher: MIR | No of Pages: 320 | Industry: ICT | Format: Report available in PDF / Excel Format
View Details Buy Now 2890 Download Sample Ask for Discount Request CustomizationSaudi Arabia IT Services Market Segmented By Service Type (Managed Services, Professional Services), By Organization Size (Small and Medium Enterprise, Large Enterprise), By Deployment Type (On-Premises, Cloud-Based), By Business Functions (Finance & Accounting, Operations & Support, Human Resources, Sales & Marketing, Supply Chain Management, Others), By End-User Industry (BFSI, IT & Telecom, Gov
| Forecast Period | 2024-2028 |
| Market Size (2022) | USD 5807.17 Million |
| CAGR (2023-2028) | 8.06% |
| Fastest Growing Segment | Cloud-Based |
| Largest Market | Riyadh |
| Market Size (2028) | USD 9183.25 million |
Market Overview
Saudi Arabia IT Services Market has valued at USD 5807.17 Million in 2022 and is anticipated to project robust growth in the forecast period with a CAGR of 8.06% through 2028. The booming e-commerce sector is driving growth in the Saudi Arabian IT market. The government launched a development program in 2016 called the NTP, which is part of the Vision 2030 program. The plan sets out strategies for the diversification of the economy and the creation of new employment opportunities. The use of IT is rapidly growing in Saudi Arabia as the government intends to enable all sectors of the economy digitally, including manufacturing, government, healthcare, and BFSI, under the NTP. Owing to which the market is expected to grow in the future.
Key Market Drivers
Increasing Government Initiatives to Diversify Economy
The Saudi government has launched Vision 2030 with the objective of diversifying the economy and reducing reliance on oil. The goal is to increase the contribution of the digital economy to GDP from its current level of less than 2% to over 10% by 2030. Several initiatives, including the National Transformation Program and Digital Saudi program, are driving IT adoption across various sectors. As organizations strive for digital transformation, this is fueling significant growth in the IT services market. Consequently, the demand for the Saudi Arabia IT services market is expected to grow during the forecast period.
Growing Demand from Private Sector & Rising Young, Tech-savvy Population
The rapid expansion of Saudi Arabia's private sector is fueling the demand for digital transformation. Key sectors such as banking, healthcare, and manufacturing are making significant investments in technologies to optimize operations and enhance customer experiences. In particular, the manufacturing industry is leveraging cutting-edge solutions like IoT, 3D printing, and robotics to drive Industry 4.0. Transportation and logistics sectors are also adopting advanced technologies for fleet management and warehouse automation. In the face of intensifying competition, companies are increasingly recognizing the efficiency and cost-saving benefits of digital tools. As a result, larger IT budgets are being allocated for modernization and digital strategies.
Saudi Arabia boasts a sizable, youthful population, with over 60% below the age of 30. This demographic exhibits a high level of technological literacy and readily embraces innovative solutions. Their increasing demand for digital services spans across various sectors such as education, entertainment, and healthcare. Notably, government data reveals that internet usage in Saudi Arabia surged by over 20% in 2021, with 95% of the population now connected online. This burgeoning digital lifestyle among citizens is fueling the adoption of IT services.
Key Market Challenges
Shortage of Local Digital Talent
One of the significant challenges faced by the IT services industry in Saudi Arabia is the scarcity of local digital talent. As organizations across various sectors actively pursue digital transformation initiatives, there has been a surge in demand for skilled professionals. However, the availability of Saudi nationals with expertise in emerging technologies remains limited. According to a 2022 study conducted by Saudi Aramco, the Kingdom is grappling with a shortage of over 100,000 skilled technology workers. The areas most affected by this talent crunch include AI, cloud, cybersecurity, and blockchain. To meet the increasing talent requirements, more than 80% of IT jobs in the country are currently filled by expatriates. However, relying on foreign talent also brings about additional costs and risks for companies. The National Transformation Program aims to address this issue by developing local skills through initiatives like the Digital Training Centers program. Nonetheless, bridging the significant digital talent gap remains an ongoing endeavor that hinders faster industry growth.
Lack of Advanced Digital Infrastructure
One of the challenges faced is the limited availability of advanced digital infrastructure in certain regions of the country. According to a study conducted in 2022, only 82% of households in Saudi Arabia have access to broadband internet. This poses a hindrance for IT service providers seeking to expand their operations beyond major urban centers. To address this issue, the government has initiated the Digital Saudi program, with a planned investment of USD33 billion by 2023, aimed at establishing a robust nationwide digital infrastructure. However, the existing connectivity and infrastructure gaps in certain regions currently restrict the potential market reach for IT companies. It is crucial to enhance the last mile connectivity across the Kingdom to promote more inclusive and sustainable growth in the industry in the long term.
Key Market Trends
Cloud Adoption on the Rise
The widespread adoption of cloud computing is being driven by both public and private sector entities seeking operational efficiency and cost reduction by moving away from traditional on-premise servers and data centers. The pay-as-you-go model of cloud services offers compelling cost savings and the flexibility to scale resources as needed. Moreover, it enables IT departments to shift their focus from infrastructure management to innovation. Across industries, organizations are leveraging cloud-based platforms such as IaaS, PaaS, and SaaS to enhance agility, improve collaboration, and gain rapid access to advanced technologies. As cloud computing becomes increasingly prevalent in Saudi Arabia, there is a growing demand for specialized IT services in areas such as cloud consulting, architecture, migration, security, and support. Local service providers are well-positioned to seize this opportunity by developing their expertise in cloud solutions. They are witnessing a rise in projects involving the implementation of ERPs, CRMs, and other core systems on the cloud. This increasing reliance on scalable cloud infrastructure represents a significant trend for the thriving IT services industry in the Kingdom.
Cyber threats have witnessed a rapid escalation in both sophistication and frequency in recent years. With the increasing digitization of enterprises and public infrastructure, the risks associated with cyber-attacks have multiplied significantly. As cybercriminals continually innovate new techniques, organizations across industries are increasingly recognizing the critical importance of implementing robust security measures and strategies. This recognition has translated into a substantial increase in budgets allocated to cybersecurity solutions and services in Saudi Arabia. Several studies indicate a significant rise in cybersecurity spending by both government and private entities in the past year alone. The growing expenditures are driven by the urgent need to establish stronger access controls, deploy advanced endpoint protection, and enable robust identity and access management capabilities. Furthermore, there is a rising demand for managed security services that can provide round-the-clock network monitoring and swift threat detection and response. These trends clearly indicate that cybersecurity will play a pivotal role in boosting the IT services market in Saudi Arabia during the forecast period.
Accelerating Digital Transformation
Saudi Arabia has undertaken an ambitious national agenda for digital transformation through the Vision 2030 program. A key objective of this initiative is to increase the contribution of the digital economy to over 10% of GDP. Consequently, public and private entities throughout the Kingdom have expedited their digitalization efforts to align with the nation's strategic priorities. As a result, there has been a significant rise in investment in digital transformation projects and enabling technologies. Many organizations are conducting comprehensive assessments of legacy systems and processes to identify opportunities for modernization. The demand for consulting and advisory services to develop robust transformation roadmaps is also growing. Additionally, there is a high demand for implementation capabilities in areas such as cloud, AI, blockchain, cybersecurity, and customer experience. The prioritization of digital transformation at the highest levels of government is a major driving force behind the IT services industry. Leading local service providers are capitalizing on this momentum by expanding their digital capabilities and solutions. The intensified focus on transformation ensures that demand will remain strong in both the public and private sectors.
Segmental Insights
By Deployment Type
The on-premises deployment type dominates the Saudi Arabia IT services market, accounting for over 76.87% of market share in 2023. This dominance is expected to continue in the coming years, as many organizations in Saudi Arabia are still reluctant to move their IT infrastructure to the cloud.
There are a number of reasons why on-premises deployment is so popular in Saudi Arabia. First, many organizations have already invested heavily in on-premises IT infrastructure, and they are reluctant to switch to a new deployment model. Second, some organizations have concerns about security and compliance when it comes to moving their data to the cloud. Third, the cloud market in Saudi Arabia is still relatively immature, and many organizations are not yet comfortable with the idea of moving their IT infrastructure to a third-party provider.
However, the cloud market in Saudi Arabia is growing rapidly, and it is expected to overtake the on-premises market in the next few years. This growth is being driven by a number of factors, including the increasing adoption of cloud-based applications, the growing awareness of the benefits of cloud computing, and the government's support for cloud adoption.
Regional Insights
Riyadh IT Services Market stood at USD 2,312.57 million in 2022 and is projected to register a CAGR of 8.24% during 2023-2028. The capital city of Saudi Arabia, has seen tremendous growth over the past decade, driven by large-scale government investment and modernization initiatives across sectors. As the political and economic center of the country, Riyadh represents the single largest regional market for IT services in the Middle East.
Major technology giants, including IBM Middle East - FZ LLC, Microsoft Arabia, Oracle Systems Limited Saudi Arabia, etc., have established significant presence in the city, undertaking diverse outsourcing and smart infrastructure projects commissioned by public agencies. Concurrently, local Saudi firms have emerged as notable players, with companies like STS, Ajeeb, and Hala Systems generating substantial combined revenue last year.
All indicators point towards continued expansion as the Saudi government endeavors to diversify the economy and accelerate digital transformation under Vision 2030. Key ongoing programs reshaping Riyadh encompass the smart city initiative, expansion of e-government services, and a growing emphasis on sectors such as education technology, digital healthcare, and FinTech. The thriving startup ecosystem in Riyadh, which is now home to several local unicorn companies, has also created fresh opportunities for specialized IT consultancies and system integrators. Overall, the IT services industry in Riyadh is poised for well sustained growth in the next decade.
The Makkah IT Services Market stood at USD2,071.54 million in 2022 and is projected to register a CAGR of 8.68% from 2023-2028. The IT services market in Makkah, Saudi Arabia has seen significant growth over the past five years and is poised for further expansion. Makkah is the holiest city in Islam and a major religious destination, welcoming millions of pilgrims each year for Hajj and Umrah. With a population of over 2 million in the city itself and millions more visiting annually, Makkah represents an important market for IT services. Recent estimates value the total IT services spending in Makkah at over USD500 million annually. This marks a 25% increase from 2020 levels and reflects rising demand across both public and private sectors. Major areas driving growth include cloud computing, cybersecurity, software development, and IT infrastructure projects. The Saudi government has undertaken massive digital transformation initiatives and invested heavily in smart city technologies in Makkah, creating opportunities for local and international IT firms.
Recent Developments
- TheNational Transformation Program and Vision 2030 have played a crucial role indriving investments in priority technologies and expanding internetaccessibility nationwide, creating a substantial demand for services related tocloud computing, cybersecurity, artificial intelligence, and blockchainimplementation.
Key Market Players
- AccentureSaudi Arabia Limited
- CiscoSaudi Arabia Limited Company
- EjadaSystems Ltd
- IBMMiddle East - FZ LLC
- MicrosoftArabia
- SAPSaudi Arabia Software Services Co. Ltd.
- OracleSystems Limited Saudi Arabia
- InfosysArabia Ltd.
- SaudiEricsson Communication Co. Ltd.
- SaudiTelecom Company
| By Service Type | By Organization Size | By Deployment Type | By Business Functions | By End-User Industry | By Region |
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