Dubai: Declining oil prices, currency fluctuations and political instability in the Middle East, Turkey and Africa (META) has forced research firm International Data Corporation (IDC) to revise its information and communications technology (ICT) spending forecast for next year.

According to IDC, the spending forecast for 2015 was supposed to be $270 billion (Dh991 billion) as of December 2014, but revised it to $255 billion in July 2015 and again revised it to $250 billion as of November 2015, which means a year-on-year growth of 4.17 per cent compared to $240 billion in 2014.

It is expected to grow by four cent in 2016 to $260 billion.

Jyoti Lalchandani, vice-president and regional managing director for the Middle East, Africa and Turkey at IDC, told Gulf News that regional public sector is taking a long-term strategic view and a cautious approach not only due to low oil prices but also due to political instability.

“We are expecting oil prices throughout 2016 to be between $45 and $50 a barrel. If oil prices fall further, we are going to see a dramatic shift in redistribution of projects.”

The governments across the region are “prioritising projects” into three buckets — projects that are strategic and long-term important ones driven around infrastructure, those projects are going on; projects that are nice to have but can wait two to three years depending on recovery in oil prices; and projects that are not important and strategic are put on hold.

But, he said that IT investments in health care and education sectors are going forward, occupying a major portion.

Consensus

Governments may look at “taxation to add additional revenue streams” to diversify economies but doesn’t expect that to happen in 2016 because they need to form consensus with all the regional bodies.

He said that a lot of IT investment in the hardware sector is going to slow down as companies continue to rationalise their spending, but areas such as software and services are going to go up in a bid to save more.

“Organisations are looking to reduce Capex [capital expenditure] and move to Opex [operational expenditure] model. They are going to spend less on infrastructure and spend more on software and services to see the real business value,” Lalchandani said.

Public cloud spending is expected to cross $500 million next year, driven by the need for “Opex” spending.

He said that public cloud will be seen as a way to overcome budget constraints, growing at 22.6 per cent in 2016. SaaS (software as a service) will form nearly 56 per cent of the public cloud market.

“Most non-core applications will be migrated to public cloud, some will begin to shift core applications for simplified management purposes. Cloud adoption will drive the demand for ‘cost-optimised’ infrastructure spending,” he said.

Megha Kumar, senior research manager, software and enterprise solutions at IDC, said that the IT market is going to grow by 4.8 per cent year on year to $100 billion in 2016 from $95 billion in 2015.

Spearhead innovation

Regional governments will account for 10 per cent of overall spending next year to $10 billion.

She said that governments will prioritise spending — infrastructure, health care and education. Select countries in the Gulf will spearhead “innovation”.

A good example, she said is that of UAE’s plan to invest more than Dh300 billion to foster a knowledge economy and innovation, and prepare the UAE for a world after oil, and a Dh2 billion fund designed to provide financing solutions for innovators across various sectors within the UAE, and support them in transforming ideas and suggestions into innovative projects.

IDC said that Internet of Things (IoT) will create a market opportunity of $7.03 billion next year.

IoT is defined as the network of devices that are connected to the Internet and can be controlled remotely.

Kumar said that security investments will rise by 12 per cent year on year as innovator accelerators disrupt the ecosystem. META security solutions market will rise to $1.5 billion in 2016.

“Cost optimisation and lack of skills will drive demand for security services. IoT will drive concerns around privacy and physical security. Lack of governance around robotics and droves will be major challenge. IT organisations will shift their focus to advanced ‘contain and control’ rather than go with the usual attitude of ‘how can be fix this as soon as possible’,” she said.