Saudi Arabia: ICT in Saudi Arabia draws private sector interest

Several international players have recently committed to enhancing their engagement with Saudi Arabia’s ICT sector.

Internal support

One such move took place at the end of last month, when telecoms company Zain Saudi Arabia inked a memorandum of understanding (MoU) with global ICT software, infrastructure and services provider Ericsson to assist in the development of Zain’s software-defined (fully automated) infrastructure.

Under the terms of the deal, which is valued at $70m over five years, the two companies will collaborate to develop hyperscale data centres for Zain’s cloud services.

“We will help Zain growing its business in the public cloud domain by using the latest technology in hyperscale and automation, and Ericsson’s transformation services,” Ali Eid, head of Ericsson Saudi Arabia, Jordan and Palestine, told international press.
Private partnership

While boosting the participation of private sector players in Saudi Arabia’s ICT industry is a key aim of the National Transformation Programme (NTP) – the roadmap launched in mid-2016 for achieving the government’s medium-term goals – the plan also advocates “the development of public-private business models”.

To this end, the Ministry of Communications and Information Technology signed an MoU earlier this month with US tech giant IBM. Under the partnership, IBM will train 38,000 people over the next of four years in various ICT programmes.

Instruction will be conducted in 30 new educational institutions, with the aim of providing certification to 19,000 students by 2020.

If the target is achieved, it will represent a significant contribution to the NTP’s goal of having 20,000 Saudis retrained and employed in the ICT sector by 2020.
E-government targets

A total of 500 initiatives fall under the NTP, of which six come under the remit of Yesser – the Saudi e-government programme. Under these six initiatives there are 55 projects, with 30 currently in the tendering process and 25 in the pipeline to be tendered in near future.

These efforts are expected to lead to greater efficiencies in state service provision, as well as the enhancement of the business environment and investment appeal, according to Abdulaziz Alshouiby, director general of Yesser.

“Digitalisation will not only make business easier in Saudi Arabia but it will also make it more transparent and attractive to investors,” he told OBG.

The evolution of e-government services are a key aspect of this drive, with the NTP aiming to bring the maturity level of government e-services to 85% by 2020 from a baseline of 44%. Furthermore, SR470m ($125.3m) has been committed under the NTP to transform Yesser into an independent body.
Strong foundations

Many of the foundations for the process of digitalisation have already been laid, with ongoing projects seeking to boost broadband connectivity and expand network solutions to more remote areas.

When the NTP was launched, fibre to the home (FTTH) coverage stood at 44% in densely populated urban areas and 12% in normal urban areas, with these figures expected to rise to 80% and 55%, respectively, by the end of the decade.

To help reach these targets and develop the Kingdom’s digital infrastructure further, the government signed an MoU with multinational technological conglomerate Cisco Systems in June.

However, according to Yasser Alobaidan, CEO of domestic ICT solutions provider Jawraa, “there is already a shift from capital expenditure to operational expenditure, given the solid infrastructural backbone and the relatively low level of data services utilisation in Saudi Arabia”.
Room to grow

That low level of utilisation across some components of the economy was reflected in the “Digital Middle East” report issued in October by global management consultancy McKinsey, which highlighted that just 15% of small and medium-sized enterprises in Saudi Arabia have an online presence.

Of the nine countries ranked in McKinsey’s Digitisation Index for the Middle East, Saudi Arabia was fourth – behind the UAE, Qatar and Bahrain – with solid state-based demand offset by weak private sector uptake and only moderate ICT supply and innovation capacity.

According to McKinsey, Saudi Arabia’s digital economy contributes 3.8% to GDP, below the regional level of 4.1% and less than half the 8% seen in the US. The report also noted that Saudi Arabia, along with other countries in the Middle East, had only captured a fraction of its digital potential.

However, the Kingdom was ahead of most of its regional neighbours in realising its digital capabilities, with McKinsey assessing it had achieved 11.5% of its potential, against a regional average of 8.4%.