Kuwait Information Technology Report Q1 2009

Market Overview Kuwait is the third-largest computer market in the fast-growing Gulf region, and the total size of the domestic IT spending is expected by BMI to increase from US$774mn in 2008 to around US$1.3bn in 2013. This double-digit compound annual growth rate (CAGR) performance makes Kuwait a significant regional market, especially considering its relatively small but tech literate and wealthy population, which allows it to adapt faster to trends. Meanwhile, growing regional competition, and opportunities, with the development of the Arab Free Trade Zone will encourage spending by small- to medium-sized enterprises (SMEs).

In H108 hardware spending continued to grow rapidly, with revenues from high oil prices managing to sustain a new wave of infrastructure investment. Although oil prices fell precipitously in the second half of the year, many sectors of the Kuwaiti IT market still have growth potential over the forecast period. Oil and gas companies are looking to optimise cost structures, while Banks are implementing solutions to increase business flexibility and introduce new services, including Islamic banking. The government is also getting in on the act, with new waves of new e-government initiatives launched in 2008, and an increasing number of state institutions offering online services.

Having received a windfall from record high oil prices, the country embarked on a major new programme of modernising its oil sector, while the booming property and newly liberalised telecommunications sectors also provide plenty of opportunities for vendors of IT products and services. Several additional industry sectors will drive IT spending growth with demand for vertical solutions, including in the construction, retail, and automotive industries. However, Kuwait's economy remains quite heavily dependent on oil, and we do see spending slowing over the coming years as oil prices moderate Industry Developments In 2008 the Kuwaiti Cabinet recently approved the transfer of the Central Agency for Information Technology (CAIT) to the authority of the Ministry of Communications. Established in 2006, CAIT has emerged as influential in the past two years as an active driver of e-government programmes, and also made recommendations on budget. The transfer to the Communications Ministry was part of a broader series of changes in governmental structures.

CAIT has led the drive to launch the Kuwaiti government's new portal for e-services in 2008, making all government services available through a single site, and eventually over a mobile platform. With CAIT playing a co-ordinating role, Kuwait has ramped up its e-government efforts, rolling out a number of new services for citizens in 2008.

2008 saw an acceleration of projects from various state organisations. The Social Welfare Ministry, the Defence Ministry and Finance Ministry are recognised as particularly advanced. Despite such progress, big challenges remain to Kuwait's e-development, particularly excessive bureaucracy and lagging education systems.

Company News In 2008 the Kuwaiti PC market remained dominated by global vendors, such as Acer, HP and Dell, with international players holding most of the top 10 spots in the PC rankings. The continuing rapid growth in PC sales in H108 in Kuwait did not significantly alter the competitive landscape of a market which accounts for only around 8% of regional PC sales, despite being the third-largest market in the Gulf.

However, there were signs that some vendors are looking more closely at in-country distribution. Dell recently hired Aptec as a new distributor in Kuwait, where Aptec will develop an SME channel for Dell's enterprise products.

One of the most lucrative verticals in the region for software vendors is Banking and Financial Services, and in August 2008 Microsoft signed an enterprise licensing agreement with leading Kuwaiti investment firm Global Investment House. The licensing agreement covers Global Investment House's headquarters, as well as branches in Bahrain, UAE and Jordan. The package comes with a wide range of Microsoft extras including 24x7 phone and web support, technical training, new version upgrades, and consulting services.

Satyam has seen strong benefits from its relationship with SAP, and reported a tripling of SAP related orders in Kuwait H108, making Kuwait one of its fastest growth markets in the region. The company is now focused on developing SAP-based solutions for industries like automotive, retail, engineering, construction, and oil and gas. Among Satyam's clients in 2008 was First Holding, a large Kuwaiti group with multiple businesses, which signed a deal with Satyam to implement SAP construction and engineering industry solutions.

Computer Sales In 2008 Kuwaiti computer market, driven by demand for high-end brand notebooks, continued to grow rapidly, to a value of around US$266mn. Despite the global financial crisis, overall hardware sales were up to around US$333mn, from US$293mn the previous year, making Kuwait the third-largest market in the region after Saudi Arabia and the UAE. Forecasts are for a CAGR of 10% over the 2008-2013 forecast period, with growth slowing over the forecast period, due largely to exogenous factors such as falling oil prices and credit tightening. The public sector and e-government projects will continue to be a mainstay of the market, with sizable budgets allocated. Privatisation initiatives will boost spending, as will more foreign investment. SMEs will be a key segment, as growth in regional trade encourages many to invest in information systems.

Software In 2008 total spending on software is estimated to have reached US$42mn, up 18% from US$36mn the previous year. Oil prices and growing regional competition continue to fuel enterprise spending on software and systems, and there should be many opportunities across many sectors. Facing change and seeking efficiencies, SMEs are likely to lead spending growth, with manufacturing and trading firms both seeking efficiencies by transitioning from manual environments to full automation of back-office systems.

There should be opportunities in emerging verticals such as construction, manufacturing and services.

However, market development will depend in part on progress in tackling an estimated 62% software piracy rate.

Services The Kuwaiti IT services market was expected to be worth around US$232mn in 2008, with strong growth expected in the years to come. Market CAGR is forecast at 12% for 2008-2013, with market size reaching around US$415mn by 2013. Telecoms, banking and retail verticals all provide strong demand, and there has been a recent trend towards larger deals, particularly from government. Meanwhile, a more volatile environment for the oil industry is encouraging 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 broadband penetration, which has exhibited stagnant growth in recent years and is very low at just 1.4% in 2008. According to BMI figures, the number of internet subscribers is projected to increase to nearly 1.5mn by 2013. The planned award of a third mobile licence should help spur telecoms development.

The government is hoping to drive IT development with its new broadband access initiative. Alcatel was chosen by Kuwait's State Ministry of Communications (MOC) to supply a gigabit passive optical network (GPON) solution that will serve about 60% of access areas involved in the ministry's present rollout. MOC's access network is gradually being upgraded by replacing the existing copper access with a passive optical fibre infrastructure. Even so there will only be slightly more than 100,000 broadband subscribers by 2013, on latest BMI projections.

• Executive Summary
• SWOT Analysis
• Kuwait IT SWOT
• Kuwait Business Environment SWOT
• Kuwait Telecommunications Sector - SWOT
• Kuwait Economic SWOT
• Kuwait Political SWOT
• Middle East Regional IT Markets Overview
• Market Growth And Drivers
• Sectors And Verticals
• IT Business Environment Ratings
• Market Overview
• Government Authority
• History And Market Structure
• Hardware
• Software
• Services
• End-User Analysis
• Industry Developments
• Industry Forecast
• Internet Forecast
• Macroeconomic Outlook
• Country Context
• Competitive Landscape
• Hardware
• Software
• IT services
• Internet Competitive Landscape
• Company Monitor
• Microsoft
• IBM
• HP
• Oracle
• Khorafi Business Machines
• Country Snapshot: Kuwait Demographic Data
• Section 1: Population
• Section 2: Education And Healthcare
• Section 3: Labour Market And Spending Power
• BMI Forecast Modelling
• How We Generate Our Industry Forecasts
• IT Industry
• IT Ratings - Methodology
• Weighting
• Sources
• List of Tables
  • Table: Regional IT Business Environment Ratings
  • Table: Kuwaiti IT Sector - Historical Data And Forecasts (US$mn unless otherwise stated), 2006-2013
  • Table: Internet Sector - Historical Data & Forecasts, 2006-2013
  • Table: Kuwait - Economic Activity, 2006-2013
  • Table: Rural/Urban Breakdown, 2005-2030
  • Table: Consumer Expenditure, 2000-2012 (US$)
  • Table: Demographic Indicators, 2005-2030
  • Table: Education, 2002-2005
  • Table: Vital Statistics, 2005-2030
  • Table: Employment Indicators, 1997-2006
  • Table: IT Business Environment Indicators
  • Table: Weighting Of Components