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October 22, 2012
One of the main talking points of the ITU Telecom World this year was the state and future of cloud computing services. The interest from stakeholders in emerging markets was particularly high: The questions focused on the potential of the data center and cloud services in emerging markets, including Africa and the Middle East.
In our recent Telecom Insider, "Challenges and Opportunities for Cloud Computing in the Middle East," we also found the value of dealing with these questions in the case of the Middle Eastern markets. In particular, we looked at issues surrounding the readiness of the markets of the region in terms of their (1) business demographics, (2) technical and regulatory infrastructure, and (3) availability of necessary skills. Not surprisingly, these three points attracted considerable attention from the participants of ITU Telecom World as well.
Overall, there appears to be an agreement that markets with established SME bases are the most suitable settings for cloud services to flourish. IT services on the cloud are flexible, scalable and do not require initial capital expenditures — this makes them an attractive proposition for small and new businesses. In the Middle East, SME demographics are quite favorable in terms of population, but less so in terms of revenue and average IT spending. Even then, if we apply the global average cloud adoption rates to the 11m SMEs of the region and assume the use of the most basic email services (such as Microsoft Exchange), then we arrive at a market opportunity of around $400m annually. Of course, we are still far from these figures, but the potential for adoption and revenue generation is there even if SMEs are adopting mostly basic services at this point.
In terms of technical infrastructure, the region is certainly on the rise, with international capacity and reliability improving through redundant and high-bandwidth fiber rings, both terrestrial and underwater. Of course, there are expected discrepancies between the Levant and the Gulf regions, but overall the tide is rising fast for all.
Regulatory infrastructure is certainly less prepared. The regulations on the privacy and protection of electronic data are still unclear and often supported by secondary laws. The good news is that these issues are climbing rapidly to the top of the priority lists of many governments and regulators in the Gulf region and are already being addressed in Turkey.
The most daunting challenge facing SME cloud computing adoption in the Middle East is a lack of the skills and awareness necessary to embrace cloud services. With the exception of Israel, all countries of the region are finding it difficult to breed the domestic workforce with the necessary technical skills. For instance, Turkey is still far behind the European average in terms of ICT specialists in the workforce, at around 1.7%. In Israel, the same rate is approximately 8%. Gulf countries depend almost entirely on expatriates for technical occupations, including those related to information technologies. While this is completely fine, it also makes this particular workforce volatile and vulnerable to the immigration policies of these countries.
Overall, given that cloud services are already proven in multiple developed markets, the arrival of cloud services in the Middle East is inevitable. Although the overall readiness of the region currently sends mixed signals, operators see data centers and cloud services as their most obvious new revenue stream. In Turkey, Saudi Arabia, the UAE and most Gulf countries, all operators are actively deploying their services and aggressively promoting them. With so much commitment, they are bound to push the regional market past its tipping point, even if it is initially for mainly basic IT operations.
— Kerem Arsal, Senior Analyst, AME
Related resources:
OTT IP Messaging: Operator Strategies for Over-the-Top Communication
Telecom Insider published October 2012
The main focus of this report is on mobile IP messaging. We examine the significance of OTT communication (voice and messaging), and more specifically the impact of OTT messaging, and take a closer look at six different strategies that operators are currently using to respond to the threat posed by OTT. The report presents case studies from SingTel, Claro, Orange, Telefonica, T-Mobile, Vodafone and Three and examines how these different operators are approaching OTT communication. We conclude with some recommendations for operators as they rethink and refine their strategies.
Pyramid Research Mobile Data Forecast
Forecast published quarterly
A premium version of the Mobile Demand Forecast, it tracks current and future demand for mobile data services, within the context of overall mobile demand. This forecast includes all the same tracking as the standard Mobile Demand Forecast but breaks down mobile data ARPS, revenues and subscriptions at the service level.
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Pyramid Points
