Qatar Information Technology Report Q2 2008

Market Overview Qatar's total IT market is expected to reach US$375mn in 2008 and US$550mn by 2012, surpassing that of similarly sized neighbours Bahrain and Oman. Qatar's IT market may only rank fourth in the Gulf for size but its robust growth is now attracting greater interest from vendors due to soaring investment in many sectors. At the forefront of this growth will be the IT services market, which is expected to surpass a value of US$100mn by 2009, as major technology-using sectors such as financial services, communications and oil invest in solutions to meet strategic objectives.

Growth in 2007 was inevitably slower than in 2006 when the Doha Asian Games stimulated phenomenal spending, but Qatar's economy remains on an elevated path. The economy is well positioned for a sustained period of growth, driven not only by the oil and gas sector, but by a wider investment boom that is driving a real estate boom in Doha. Overall IT market CAGR is expected to be around 11%, with smaller enterprises showing an increasing interest in IT investments while there are several ongoing major infrastructure developments.

High oil prices are underpinning the generally positive economic situation, but there is more economic diversification epitomised by buoyant construction and real estate industries. With strong spending from government, financial, telecoms and enterprise sectors, conditions should provide strong support for IT spending during BMI's forecast period. Further measures in 2008 to introduce telecoms liberalisation should provide a renewed boost to ICT development as well as triggering new spending in that industry vertical.

Industry Developments Qatar's e-government programme reached a landmark with the launch in February 2008 of Humookmi - the new one-stop shop portal for Qatar government entities. The portal, commissioned by ICT Qatar in 2007, currently links and hosts 48 government organisations providing information and online services.

The portal is expected to act as a foundation to support development and rollout of a new generation of eservices in a shorter timeframe.

In 2007 the Qatari government reinforced its e-government programme with the establishment of a new i- Gov Sponsor Group. The group is to provide all necessary support to the e-Government programme, which will still be coordinated by ictQATAR as one of its programmes. The group has a broad mandate to enhance institutional performance across economic, government, financial, social, education and health sectors.

Competitive Landscape Despite the growing importance of SMEs, Oracle continues to claim new major clients, such as major Qatari conglomerate Salam International, which in 2008 has deployed a number of Oracle e-business suite modules including Financial and HR. Oracle has a number of other major clients in the country including UDC, the largest shareholding group in Qatar, which last year signed a deal to implement Oracle's e-Business Suite with the initial focus on a real-estate project.

It is the IT services opportunity which is really attracting vendors' attention thanks to spending in key sectors such as government, financial services and communications. Leading regional IT and communications services provider NCS Group recently delivered on he high profile Hukoomi portal project for ictQATAR (see Industry Developments). While regional players are well placed to win major contracts due to relationship and cultural background, international vendors such as Satyam and EDS are increasing activity.

Computer Sales Computer sales are expected to reach US$167mn in 2008, up from US$145mn in 2007. Overall, the computer market should have CAGR of 10% for 2007-2012. While this is slower than the incredible growth seen around the time for the 2006 Asian Games in Doha, the market will be sustained by demand for notebooks with channel sellers such as Mindbranch pricing more competitively to capture opportunities, particularly in the household sector. The fast growth of notebook sales is sparking fierce vendor competition across all price segments. Notebook sales are now growing at something like twice the speed of desktops in the country.

Software BMI predicts a value of US$68mn in 2008, up from US$55mn in 2007. With the evolution of the Qatari IT market, a stronger focus on software spending is now being seen, with most enterprise customers prioritising affordability and simplicity. Software spending CAGR is put at 13% for the 2007-2012.

Major account spending is being driven by a desire for integrated solutions that provide a whole view of operations, rather than individual applications.

However, with SMBs accounting for around 34% of regional IT spending, vendors will continue to streamline applications to meet the need of this segment to increase efficiency in the face of more open and deregulated markets. The Qatari authorities have been stepping up their efforts to restrict the use and trade of pirated software, with a number of high profile raids.

IT Services With IT services spending estimated to grow to US$94mn in 2008, the next period promises to see even more opportunities, particularly in key sectors such as government, financial services and communications. CAGR for the 2007-2012 period is put at 13%, and fast demand growth is expected, especially from corporate and government clients. The recent landmark deal won by global IT services giant EDS from the Qatar Foundation shows the potential. The IT services market is expected to be the fastest growing segment of the Qatari IT market between 2007 and 2012, outperforming the hardware and software sectors. Indeed, it has been increasing steadily for the last 10 years E-Readiness In 2008 body ictQatar announced that eight operators have submitted bids for the auction for a new fixed line licence. The development should spur development of broadband services and e-infrastructure in Qatar. US-based AT&T and Verizon, Bahrain's Batelco, UK-based British Telecom and Vodafone, as well as Italy's Eutelia, Jordan Telecom and Hong Kong's PCCW, have all expressed an interest in the licence. The government also launched a tender for a second mobile licence. For full details, see BMI's Qatar Telecoms Reports. Internet penetration is expected to reach 20% in 2008 but broadband penetration is still only around 5%.