By Mark Sutton
Mark Sutton takes a look forward into 2008 to see how the pace of change in the information and communications technology will pick up, and how it will affect businesses, and consumers, across the region.
If 2007 is a memorable year for the Middle East ICT industry for any single reason, it will be because of the sheer amount of activity in the telecoms sector. From the launch of competition in traditional monopoly markets, to the seemingly non-stop round of licence auctions and the major players increasing tendency to look outside of the region for opportunities, the sector has made headlines all year, and its growth looks set to have a fundamental impact on the Middle East in the year ahead.
The Middle East telecoms markets may have slumbered for a while, but there can be no doubt that increased competition has shaken up the market. The GSM Association announced that mobile subscriptions grew by 8.5 million subscribers in the first quarter of 2007 alone.
In the United Arab Emirates, new entrant du claimed a subscriber base of one million by the end of November after launching services in February, accounting for 15% of the market. The competition between du and incumbent Etisalat, which has manifested clearly in areas like promotional pricing for special occasions and deals on pre-paid cards, shows the potential benefits to subscribers in terms of value for money.
Upping competition further will be the entrance of Mobile Virtual Network Operators (MVNOs) - telecoms operators that use other operator's infrastructure and spectrum allocation to deliver services - to the region. i2 is set to be the first MVNO in the region, serving Jordan, with the total MVNO market for the Middle East estimated at a possible US$5bn by analyst company Delta Partners.
The MVNO model has the potential to drive competition in the region, because it can allow new operators to rapidly gain market share in markets that are already saturated, as has happened in Europe, if the MVNO offers innovative services targeted at distinct markets. Rogier van Driessche of Delta Partners said: "The introduction of MVNOs would fundamentally change the industry landscape. It is a truly disruptive model."
This growing wave of telecoms competition should have one fundamental benefit for IT users, corporate or otherwise - faster, cheaper, more reliable data and voice connections. Mobile penetration rates might be high in the region, but internet access, and in particular all important high speed broadband access lag far behind the developed economies of the west. According to InternetWorldStats (IWS), internet penetration in the Middle East stood at 17.3% as of Sept 2007, compared to 41.7% in Europe and 70.2% in North America. No Middle East country ranked in the top twenty for broadband penetration.
The lack of bandwidth in the region creates a roadblock for many different types of services, from mobile applications for business and consumers, to e-commerce, to interactive home entertainment to software as a service and remote management of businesses. While there are other hurdles to the adoption of various services, bandwidth is essential to ICT growth.
It is a situation that is recognised in the region. Bahrain's Telecoms Regulatory Authority reported on a study it had commissioned in August which showed that Bahrain needs further competition on internet availability, or risk hindering economic development.
Operators too are rapidly moving in the right direction. Along with new licence signings, 2007 seemed to bring a constant stream of announcements about investment in broadband and wireless services. In October, Batelco announced US$16m investment to expand its broadband reach; Mobily bought broadband services provider Bayanat Al-Oula for US$800m to expand its data capacity in Saudi; and Jordan's Umniah launched WiMAX services, widely predicted as the new standard for wireless broadband access, in the region. Both Batelco and Mena Telecom also made soft launches of WiMAX, and there are numerous other trials of the technology going on around the region.
WiMAX is promoted as having particular potential for the region, in that it is a wireless technology which can provide services to either fixed or roaming end users and can be deployed much more easily than having to lay cables for connectivity. The system also has the flexibility and range to quickly add capacity to metropolitan areas, when operators need to enhance service, or to provide a cost-effective way of connecting remote areas.
Ahead of the predicted broadband boom, players in the region and from outside are looking to position themselves to deliver a very wide range of services targeted at different segments.
In the business sector, bandwidth hungry applications that are more established in developed markets, but have not been feasible in this region are starting to gain some traction. Next generation videoconferencing is gaining interest from corporates, while software-as-a-service, where end users pay to access business applications from a central service provider is also getting serious attention.
In the consumer segment, more bandwidth is helping to drive converged services on the web, for mobile and fixed users. Mobile TV is undergoing tests - during Ramadan, du made a US$2m deal with Middle East Broadcasting Company (MBC) to provide MBC content to du mobile subscribers, and Middle East websites are starting to offer rich multimedia content and integrated services using applications such as Google maps.
Major web players are also showing an interest in the region. Google launched its offices here in November - Mohammad Gawdat, Google's managing director for emerging markets in Eastern Europe, Middle East and Africa commented: "It is just starting here, the awareness both of Google and the awareness of online. You have early adopters who are really doing well and understand the opportunities, but the majority today are not online - from a marketing point of view - and in the case of many small businesses here, not online at all. Internet take-up was slow here early on, but with government support and lots of changes over the past two or three years, you can now see the penetration numbers doubling and trebling. This is driving the next wave, which is utilising the internet for business."
ICT goes green
Alongside the wide ranging impact of competition in the telecoms sector, the next most talked about trend for IT has to be ‘green' computing.
Of course, with no manufacturing of PCs or components in the region as such, the concerns of environmental groups about toxic or non-sustainable materials being used in IT manufacturing are not going to have any real impact on the industry locally, although disposal of end-of-life machines continues to be a difficult issue for ethical consumers.
Likewise, while the EU/US Energy Star 4.0 standard, which governs energy consumption in consumer electronics and IT hardware, is becoming increasingly prevalent in products in the region, and while it may be a factor in some purchasing decisions, it is not going to have an impact on buying cycles, even among corporate buyers who are looking form more efficient hardware.
What is likely to make an impact in the large scale IT environments is the move towards ‘green' data centres. Hand-in-hand with a growth in online services is a massive growth in data, which has to be stored and managed in power-hungry, large scale data centres.
Not only do data centres require a lot of power to run the computers, but they also need even more power to provide cooling to keep systems running. The sheer amount of energy consumed by data centres is a growing concern - research sponsored by processor manufacturer AMD, released this year, showed that data centre power consumption doubled in the US between 2000, to account for 1.2% of total electricity use nationwide. According to the report, that growth was driven by increased demand for online content and data storage, a situation that is likely to be mirrored in other parts of the world as internet access and IT roll out ramps up.
At a time of unprecedented concern over energy prices, it is no surprise that over 70% of Global 2000 businesses are considering green data centre initiatives, according to security and storage software company Symantec, and also unsurprisingly, it is commercial concerns that are driving the green trend.
Omar Dajani, Manager of Systems Engineering, Symantec MENA commented: "When we talk to CIOs running large enterprises and large data centres in the region, whether they are in Kuwait, or Riyadh or Cairo, they have developed a sense of environmental responsibility in varying degrees.
"Most customers are not yet thinking about adopting [green] strategies because of environmental responsibility, but because they have responsibilities and SLAs they have to meet, so Green Data Centre initiatives build on their current cost saving and ROI focus.
"The reality is that data centres in the region will keep expanding. The Middle East is booming and the sheer amount of data is growing globally. In cities like Dubai, where [power company] DEWA has already sounded the alarm over capacity, and there is still a lot of construction going on, if data centre managers and CIOs really do their share to improve energy efficiency, then they can save money and work toward sustaining growth for all," he added.For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.