Established e-business markets have slowed considerably. But nevertheless, there is still strong market potential in developing regions such as Brazil, South East Asia, India and China, according to a new study by Frost & Sullivan.
‘The Middle East, adjacent to Europe and logistically well connected, has more to offer than meets the eye,’ said Robert McKellar, Industry Analyst at Frost & Sullivan.
‘Not every area of this region can be regarded as a potential hotbed of activity for providers of software solutions,’ he cautions, ‘but the Arab Gulf – consisting of Saudi Arabia, Kuwait, Oman, Qatar, the UAE and Bahrain – is a readily accessible high-growth sub-region with a distinct and workable business environment. For the committed vendor, the Gulf represents a unique and lucrative opportunity.’
In global strategic terms, the Gulf might be a niche, but it is one that offers excellent returns and a rewarding business experience for the software vendor willing to explore unconventional geographic horizons.
Frost & Sullivan puts total IT spending in the Gulf at $2.1 billion (excluding telecoms spending) in 2001. Of this, hardware and networking form the bulk, but an increasing portion, about 3 percent in 2001, represents spending on e-business software solutions.
ERP, which depends mainly on internal networking, boasts the most developed enterprise software market, with a size of about $57 million in 2001. Solutions that rely on the internet are far less market-ready – for example, only about $8 million will be spent on e-commerce software in the same year.
‘Internet-based solutions, however, promise excellent longer-term potential because of massive state and private investments in internet infrastructure and growing end-user awareness of the benefits associated with internet-based business,’ McKellar adds.
‘Both network-dependent and internet-based software markets are growing at more than twice the rate in developed markets in Europe and North America. In absolute terms the market is small, but the high growth in demand gives it considerable potential as a long-term source of incremental revenues,’ he says.
The Arab Gulf IT market’s attractiveness has not remained unnoticed. Oracle has been the lynchpin of the competitive landscape since 1988, when it penetrated the market to provide database solutions. SAP has also become a major supplier to some of the region’s massive oil firms.
Baan is an ‘old hand’ in the Gulf market, and is staging a rapid revival after flagging revenue growth in 2000. An array of smaller vendors has also been recording healthy growth. Sage has carved a comfortable niche through its commitment to a direct presence, as has Great Plains / Solomon. JD Edwards still relies on resellers, but they too are well-known name among the region’s IT managers and resellers.
‘The region’s e-commerce sector is sparsely populated, but several vendors, including CommerceOne, Brokat, Intershop and Broadvision, remain poised to ride the wave of market growth as the internet infrastructure and user base are set to take off in the next couple of years. There are some steady players from both sectors in the region, but as smaller entrants are successfully proving, there is still room for more,’ McKellar adds.