Why locate in the Middle East – ICT

Ian O’Hara, partner for technology infrastructure consultancy Citihub, says despite recent challenges, colocation is set to grow, and technology (#ICT) mature in the Middle East

The economies of the Middle East – and the GCC (Cooperation Council for the Arab States of the Gulf) in particular – are slowly recovering from the financial crisis. Forecasts for GDP growth in the next five years range from the explosive (Qatar: 19.9% for 2011) through to the steady (UAE: 3.3% for 2011).

The importance of ICT and the growth in internet literacy has been demonstrated by social upheaval across the region this year – this is a trend that will continue at a rapid pace over the next two years.

Broadband uptake will reach the 40%+ tipping point in most states through 2011 and 2012 driving demand for online and web services.

Across the GCC we should expect to see a greater focus on the de-regulation of the telecommunications market, huge investment in e-government, investment in centralized health care systems, dynamic growth in PC sales (20%+) and the associated use of social media and other online services, and wide spread investment in B2B and B2C e-commerce. Each of these developments will drive demand for high-quality commercial DC space as firms seek greater flexibility whilst minimising capital commitments.

Currently the colocation, hosting, managed service and cloud offerings within the MENA (Middle East and North Africa) region are immature by comparison with other markets.

There has been minimal investment in, and adoption of, commercial data center facilities, cloud and managed services. Large vendors have focussed their investments in Europe, North America and Asia and there has been a lag in ICT infrastructure investment and skilling across the region. The net result of this trend has been a huge concentration of ‘out of region’ hosting of web services and content and the provisioning of expensive ‘internal data rooms’ that often fail to meet business requirements.

Many international and regional firms meet their requirements from outside the region –for example, research by one provider suggests that hosting in Europe and the US accounts for more than 90% of all web hosting in the region. There are several reasons why this is an issue for Gulf-based businesses:

• Out of region provisioning means that there is inconsistent content delivery and poor user experience
• Around 1% of the world’s web sites are in Arabic – demands for local content are increasing
• Many users (commercial, government and individual) worry about confidential data being misused by foreign governments through the enforcement of the US Patriot act and similar legislation
• Most businesses have been forced to provision their own applications (ERP, pay roll etc) at sub-optimal implementation and operating costs, with sub-optimal access to a narrow pool of skills, and with business continuity arrangements that (often) do not meet business requirements.
• Staying ahead of the curve

Many companies in the Middle East are starting to realize how important data center investment for business competitiveness is. This is bringing more advanced technology skills into the region – including new courses seen at educational institutes focussed on the data center and technologies within. Disaster recovery and third-party data center services are growing in demand, leading to more data center development.

Driven by the telecomms

Most new data centers in the Middle East are being built as carrier-based facilities. Carrier neutral data centers are now starting to make their way into the market, however, driven by the liberalization of telecommunications services. Governments in the Middle East are also recognizing the importance of the data center sector to big business, and making efforts to attract external funding fromprivate sector providers. The result is the overall growth in the IP, telecommunications, hosting, integrator, business process and IT outsourcing sectors. That said, most data centers in the Middle East are still contained inhouse.

ADSL broadband investment is also taking place as a result of the growing market for mobile communications. In the past, bandwidth and international submarine capabiltiy had held the market back.

As demand for ICT infrastructure develops over the next five years Citihub expects to see commercial enterprises and government organizations look to minimise capital commitments and to seek better quality and greater flexibility. Consequently we are forecasting that demand for commercial data centre facilities will grow from about 40,000 sq m in 2010 to about 90,000 sq m in 2015.

To find out more about ICT visit Smart Cities World MENA 2011 the region’s premier conference for strategizing the design, build and management of intelligent communities.

The article first appeared in the Datacenterdynamics Locations guide, out soon.