One of the world’s biggest oil producers has responded to tumbling crude prices by announcing a $2tn war chest to fund an economic diversification strategy, with IT set to be a beneficiary.
As Saudi Arabia attempts to diversify its economy away from a reliance on petroleum production, technologies such as cloud computing will become increasingly important for business connectivity and performance.
According to data from IDC, Saudi Arabia remains one of the top spenders on IT services in the Middle East and Africa (Mea) region. In 2014, cloud services investment in the country totalled $50.4m, and is estimated to reach $77.4m in 2015.
Much of this growth is driven by spending on public cloud services such as infrastructure as a service (IaaS) and software as a service (SaaS).
Uzair Mujtaba, senior research analyst for IT services and software at IDC Saudi Arabia, said the country represents a sizable revenue opportunity for local, regional and global services providers.
While “data security concerns” have led local enterprises to favour the private cloud over public, Mujtaba said the cumulative benefits of the public cloud will eventually win out over information ownership concerns.
“In the coming few years, interest in private cloud deployments will be overtaken by public cloud services, as a growing number of organisations explore public cloud as a viable option for procuring IT computing and storage resources, as well as application workloads,” said Mujtaba.
According to IDC, public cloud services accounted for 62% of total cloud services spending in Saudi Arabia in 2014, while private cloud services made up the remaining 38%.
Keeping the data in the kingdom
While self-run, self-managed deployments are preferred under the private cloud model, SaaS is seeing strong adoption compared with other public cloud deployment models, said IDC.
However, Biswajeet Mahapatra, research director at Gartner Middle East, is not convinced that a public cloud revolution is imminent. “I don’t see a huge demand for public cloud right now. I think the growth potential lies in private cloud. There are a lot of public cloud plans but Saudi Arabia is far behind in adoption compared with most western countries,” he said.
“The kingdom would prefer that public cloud is managed in the region at least, not overseas, and currently that is a difficult task, due to scarcity of infrastructure, connectivity and skills,” he added. “Someone needs to take the plunge and invest in local cloud infrastructure.”
Saudi Arabia has historically been guarded over its national affairs and this cautiousness naturally filters into its attitude to data and IT systems, said Mahapatra.
“[They] are not comfortable when data moves out of the country. Saudi wants to own its applications. Eventually they will be fine with storing data out of the country, but it’s not the preferred option,” he said.
Saudi Arabia “a virgin market for cloud”
While it’s true that Saudi only commandeers a small slice of the estimated worldwide public cloud services spending pot, worth around $56.58bn according to IDC, the country’s appeal for sellers and consultants remains undiminished.
Ali Al Asiri, customer services director at Juniper Networks in Saudi Arabia, said: “Times are changing, and as the network becomes ever more strategic to companies while the need to streamline costs also increases, outsourcing service models are becoming increasingly popular in Saudi Arabia.”
Facing up to the challenges of deployment
As an example, two local telecom operators, STC Solutions and Mobily, have seized the opportunity to provide cloud services for the enterprise sector, using agile and scalable technology to provide managed services.
However, despite these positive developments, a number of challenges remain around the adoption of cloud services. Chief among these are concerns over data sovereignty, the lack of cloud-related regulations, the absence of national cloud strategies and limited visibility of the long-term cost impact.
While some user reservations can be smartly countered by IT suppliers, much of the responsibility for paving the way for public cloud service lies with the public sector.
National directives and regulation
According to IDC, mature IT economies already have national cloud strategies that are either standalone, or a part of an overall ICT framework, but a national level cloud directive does not currently exist in Saudi Arabia.
More regulations would increase accountability in the cloud industry and raise consumer confidence, while a national IT roadmap would provide clear technology direction for businesses.
Saudi CIOs have regularly voiced concerns about the quality and reliability of connectivity in Saudi Arabia. This can mainly be attributed to connectivity providers’ failure to adhere to service-level agreements, as well as the loosely regulated connectivity market.
“In an ecosystem where regulations prohibit offshore data hosting, customers have to rely on the local hosting community, but its efficiency is severely compromised by the scarcity of trained and experienced human resources staff, particularly for advanced and emerging technologies such as cloud,” said Al Asiri.
He added that the kingdom’s regulatory environment to control cloud computing is embryonic, but “definitely growing very quickly, essentially to keep pace with growing demand for these outsourced services that deliver innovation and collaboration”.