STC Group and Alibaba to set up $238m Saudi cloud services venture

New company aims to boost knowledge transfer in the kingdom, contribute to job creation and support economic diversification

The new company will offer a wide range of cloud computing services to businesses in Saudi Arabia. Reuters

Saudi Telecom Group, the kingdom's biggest mobile operator, and China's Alibaba Group have teamed up to establish a cloud computing venture in the Arab world's biggest economy at an investment of 894 million riyals ($238m).

The new company aims to boost knowledge transfer in Saudi Arabia, contribute to job creation, increase investment opportunities in the cloud computing sector, and support the kingdom's economic diversification agenda, STC said in a statement on Wednesday.

The new company is being established in partnership with industry majors, including eWTP Arabia for Technical Innovation, Saudi Company for Artificial Intelligence and Saudi Information Technology Company.

"The company will contribute to developing the kingdom’s digital infrastructure and preparing it to provide the latest digital data storage services and solutions and ensure its protection and security, which will enhance the kingdom’s ability to provide cloud computing services to global companies," the statement said.

It will provide "advanced cloud computing services to companies operating in Saudi Arabia, ensuring that they employ the highest standards of security and protection", STC added.

Saudi Arabia is currently implementing its Vision 2030 strategy, which aims to steer its economy away from oil dependence. One crucial pillar is technology, with Riyadh encouraging entrepreneurship and seeking investments from both local and foreign entities to develop the sector.

The kingdom is projected to spend about $33 billion on ICT development in 2022, the International Data Corporation said in an April report. The sector grew 8 per cent between 2019 and 2021.

Many major Saudi entities are also contributing to the digital push. Saudi Aramco, the world's biggest oil producer and Riyadh-based Advanced Electronics Company in December signed a deal to further develop the kingdom’s digital ecosystem and accelerate the localisation of digital businesses.

STC has also partnered with the Public Investment Fund, Saudi Arabia's sovereign wealth fund, to establish an Internet of Things company. This will accelerate IoT adoption and offer smart solutions in critical economic sectors, it said last month.

The kingdom's growing technology space has also started to attract global interest. This week, Alphabet-owned Google, the world's largest internet company, said in its first Economic Impact Report that it was able to help to drive about 12.2bn riyals into the Saudi economy in 2021.

The partnership between STC and Alibaba comes amid significant increase in demand for cloud computing services and solutions regionally and globally.

Global spending on public cloud services is expected to jump 20.4 per cent annually to $495bn this year, research firm Gartner said earlier this month. Total spending is nearly $84bn more than the amount spent in 2020, and is expected to climb roughly 22 per cent yearly to almost $600bn next year, it added.

Alibaba, one of the world's biggest providers of cloud computing services, will offer a wide range of services and solutions in the kingdom. This is "a step that will enable local companies and institutions to digitise their businesses, employ the technologies of the Fourth Industrial Revolution, raise work standards and enhance businesses".

In August last year, Alibaba also joined forces with the Saudi Tourism Authority to boost the entity's digital infrastructure.