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Kuwait, as the third largest computer market in the Gulf, is not immune to the regional slowdown, and local IT spending is expected by BMI to dip to US$736mn in 2009. Despite the challenging trading environment, the market is relatively well placed to withstand current economic headwinds and should continue to be a lucrative one for information technology vendors over the forecast period. In some respects the Kuwaiti market appeared relatively well placed to withstand the slowdown.
The market is quite self-contained, being less dependent on re-export than the UAE. The market also has potential for a strong recovery after 2010 and, if potential is met, could possibly outperform many other markets in the region. Kuwait's IT market has a number of enduring strengths. These include its relatively small but tech-literate and wealthy population, which makes Kuwait an important regional testing ground for new products. In H109, there were signs that the slowdown was not too severe, but distributors were being more cautious about awarding credit, or ordering stock, and this is likely to remain a restraint.
Industry Developments
In 2009, directors of the Central Agency for Information Technology (CAIT) called for an updating of business laws and legislation dealing with e-commerce. CAIT has led the drive to launch the Kuwaiti government's new portal for e-services, 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 the 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
The Kuwaiti PC market remains dominated by global vendors, such as Acer, HP and Dell, with international players holding most of the top 10 spots in the PC rankings. In 2009 the emergence of small form factor notebooks as a PC market growth area have attracted vendors such as Toshiba to attempt to strengthen their presence in this segment with new product releases. There were signs that some leading vendors were looking more closely at in-country distribution. In 2009, Dell signed a contact authorising regional IT distribution giant Redington to carry its consumer product line-up in Kuwait. The tie-up with Redington is merely the latest in a series of new partnerships for the region that Dell has announced recently. Microsoft was among vendors who reported that regional sales in the oil and gas segment had been affected by the economic crisis, with some clients cutting back spending on systems. The company warned of 'challenging conditions'. Microsoft's local clients in the oil sector include Kuwait Oil Company (KOC), but the company's local oil and gas operations are now run from Dubai. Meanwhile, Gulf Business Machines (GBM), partner of IBM and Cisco, believes that new and emerging technologies will enable it to keep growing despite the current more difficult situation.
Computer Sales
In 2009, the Kuwaiti computer hardware market is forecast at US$317mn, with a single-digit contraction from last year, as the economic slowdown belatedly hits home. Despite the global financial crisis, overall computer hardware sales was estimated at around US$330mn last year, making Kuwait the third largest market in the region after Saudi Arabia and the UAE. In H209 businesses are expected to maintain a cautious attitude to IT investments due to the economic headwinds, but there should still be growth areas. Over BMI's five-year forecast period, demand is expected to grow at a compound annual growth rate (CAGR) of 7% to around US$414mn by 2013. 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 retail channel evolution, and more foreign investment.
Small and medium-sized enterprises (SMEs) will be a key segment, as growth in regional trade encourages many to invest in information systems. Software In 2009, total spending on software is forecast at US$199mn, down from US$207mn the previous year. The market decelerated in H109 as enterprises came under pressure to focus more on the bottom line. With trade liberalisation and growing regional competition continuing to fuel enterprise spending on software and systems, however, there should still be opportunities across many sectors. Commercial organisations remain the most significant driver of Kuwait's IT spending. In the medium term, facing change and seeking efficiencies, SMEs are likely to generate opportunities. Manufacturing and trading firms are both seeking to transition from manual environments to full automation of backoffice systems.
Services
The Kuwaiti IT services market is projected to be worth around US$221mn in 2009 and is forecast to grow at a 10% CAGR to a value of US$277mn by 2013. The economic situation, and credit tightening, is likely to have an impact on projects in some key verticals that have been driving IT spending. These include not only oil and gas but the financial, government, education, construction and healthcare sectors. In 2009, there were reports of IT managers in various areas looking to cut costs. However, the emphasis often seemed to be more on scaling back projects by 10-20% rather than cancellation. In the near term, budgets have often already been commissioned, and so the effects are more likely to be felt in H209 and 2010.
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 and was estimated at just 1.3% in 2008. According to BMI figures, the number of internet subscribers is projected to increase to over 1.5mn by 2013. Growth in the numbers of broadband subscribers seems much stronger, but the numbers are still very low. Competition is limited in the supply of broadband services, and thus prices have remained high, deterring many potential subscribers. 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 roll-out. The 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.
Kuwait Information Technology Report Q4 2009: http://www.companiesandmarkets.com/r.ashx?id=I8C11E5S8162223
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