The movement of large organizations and small and medium enterprises to transform their businesses digitally is driving public spending in the cloud in the Middle East and North Africa (Mena).
Sid Nag, vice president of research at Gartner, said government initiatives such as Smart Dubai, Smart Abu Dhabi, the 2019 Bahrain Cloud First Policy have fueled cloud adoption among large organizations in the region.
Organizations are also increasingly moving their applications and workloads to the public cloud as security and governance concerns dissipate even more, as many global technology companies have opened data centers in the region for regulations on data residence
Large technology companies have shown interest in the UAE to open data centers. Amazon Web Services has a group of data centers in Bahrain and the UAE.
Oracle has already opened its first data center in the United Arab Emirates last year in Abu Dhabi and plans to open one more in Dubai this year, and two in Saudi Arabia this year, one had already opened in Jeddah, while Microsoft opened its centers of data in Dubai and Abu Dhabi last year.
Alibaba Cloud, the cloud computing arm of Chinese e-commerce giant Alibaba Group, has already invested in a data center in the UAE, while SAP opened its data centers in the UAE and Saudi Arabia last year.
IBM opened two data centers, one in Dubai and Abu Dhabi, this year.
Large cloud providers need to have local data centers to serve governments, financial and banking sectors for data residence regulations.
Necip Ozyucel, Leader of the Cloud and Enterprise Group at Microsoft UAE, said that cloud adoption was strong in the UAE but that the challenge was the financial and government industries due to data redundancy and latency was also another challenge for others. industries too.
After the opening of data centers in the UAE, he said there is a strong adoption of cloud services in all industries and that it has also unlocked all government problems.
"Governments and financial sectors are moving mission-critical applications to the cloud and many customers in retail, construction, airlines and small and medium-sized businesses are migrating," he said.
Arun Khehar, senior vice president for Central and Eastern Europe, the Middle East, Africa and India at Oracle, said the data center is a great catalyst for local customers to move to the cloud, as they can expand beyond their geographies and it can only be done through the internet and the cloud.
“The government sector is not a problem, since we sold them three years ago. The problem is with the sensitive part of the government, such as the finance department. This happened due to the Abu Dhabi data center. Data sovereignty is a key issue. Human resources and payroll are crucial and sensitive in this part of the world, ”he said.
Security and privacy issues have been fixed due to the local data center, he said and added that the cost of running a cloud is cheaper since there is no infrastructure cost, no skills are needed, since Oracle has the skills and updates .
Growth engines: CRM and ERP
Khehar said that business problems have become critical and that digital transformation has become a much bigger problem than where the data will reside.
Nag said the region’s collective economic goal to focus more on technology and data has been the cornerstone of this rapid acceptance of the public and private cloud.
The regional market is expected to increase 21% year-on-year to $ 3b this year compared to $ 2.5b a year ago and this figure is expected to increase to $ 3.6b in 2021.
Nag said SMEs in the region are focusing their investments on cloud implementations that will allow faster business analysis and artificial intelligence, which are key growth engines for the public cloud in the region.
In the public space in the cloud, software as a service (SaaS) is expected to represent 53% of total revenue from the service in the public cloud at $ 1.6b this year compared to $ 1.3b a year ago.
“SaaS products are generally sold by subscription, allowing companies to avoid large upfront license fees and capital costs. The profitability of SaaS is one of the motivations for organizations to increase their expenses in the segment, ”said Nag.
Customer relationship management (CRM) and enterprise resource planning (ERP) remain the two main segments that drive SaaS growth and will continue to increase as companies continue to improve their customer experience.
Nag said ERP will represent 12% of the overall revenue forecast for public cloud services this year and this is because most independent software providers have converted their ERP applications from local offers based on licenses to SaaS offers based on Cloud.
While business intelligence (BI) applications are currently low in the region, he said it is the fastest growing segment among SaaS offers and is on track to total $ 29 million in 2020, an increase of 37% since 2019 .
"BI revenues are expected to reach 30% growth over the next three years as local businesses take advantage of BI-based analysis to make smarter decisions and optimize their business operations," he said.