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Sun 1 Oct 2006 04:00 AM

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Outsourcing tops Saudi IT spend

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Spending on IT services in Saudi Arabia increased 6.4% from 2004 to 2005 to more than US$700million; driven by a large demand for outsourcing services, according to analyst firm IDC.

The Saudi results reflected the general growth in the regional economy, according to Mark Walker, director of development at IDC.

“What [the study] is showing us is a new level of maturity in the way services are being deployed in the market,” he added.

“More and more local companies and international companies represented locally are starting to consider IT services as a viable alternative and actually make use of those services whereas previously they would keep things in-house as much as possible.”

Spend on outsourcing services in the Kingdom leapt 56% in 2005 year-on-year, according to IDC.

Investment in customisation was another growth area with spend rising nearly 32% even though outsourcing and investment in customisation together represent less than a third of total IT services spending.

“The surge in demand for customisation and outsourcing services caught many vendors off guard but enabled them to sustain revenue,” Philip van Heerden, research manager, IT Services, Verticals and Consulting at IDC, commented.

Though moderate in 2005, total services spending will pick up again this year and is expected to grow more than 13% year-onyear, predicted IDC.

Growth will be led by high oil prices, rapid IT developments in the banking and telecommunications sectors and growing adoption of outsourcing services, the firm said in its annual report Saudi Arabia IT Services 2006-2010 Forecast and 2005 Vendor Shares.

Demand for outsourcing is expected to settle over time, but not taper off, Walker said.

Among the vendors in Saudi Arabia, Saudi Business Machines retained the top spot in 2005, followed by Atos Origin, Ebttikar and Al Alamiah, while the newly-formed Ejada took fifth place in the rankings.

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