Spending on information and communications technology (ICT) in the Middle East, Turkey and Africa region is projected to grow almost 4 per cent annually to surpass $234 billion this year, the International Data Corporation (IDC) said.
Saudi Arabia and the UAE, the Arab world's two biggest economies, will likely spend $34.6 billion and $20 billion — first and third in the Middle East, Turkey and Africa, respectively — to be among the leaders in the region's digital economic transformation, the US research firm said at its Directions conference in Dubai on Wednesday.
South Africa would be second with $28.6 billion, a study by IDC showed. Turkey and Nigeria are the only other countries expected to post double-digit spending, with $18.6 billion and $12.6 billion, respectively.
Information technology spend in the Middle East, Turkey and Africa region, in particular, is expected to grow 4.3 per cent year-on-year to $99.9 billion this year, the first time it would come close to breaking the $00 billion mark.
"What makes the UAE and Saudi Arabia stand out is their leadership of the public sector and the overall government," Jyoti Lalchandani, the IDC's group vice president and regional managing director for Middle East, Turkey and Africa, told The National.
"There is a conscious plan to diversify their economies and attract more foreign investment to modernise infrastructure and the industrial space to make it more attractive," he said.
Enterprises and governments have lauded the critical role that digital transformation plays in the economy and society, as the world prepares for a future powered by technology.
Saudi Arabia and the UAE have rolled out several initiatives to promote the use of technology in daily activities and transactions.
The kingdom benefits from being a large country undergoing massive transformation at every level, including in infrastructure, society and regulations, Mr Lalchandani said.
The Emirates, meanwhile, has two broad strategies that will boost its digital ambitions, he said.
These are the Dubai Economic Agenda (D33), which aims to double the size of the Emirate's economy with a target of Dh32 trillion ($8.71 trillion) over the next decade, and Operation 300bn, another 10-year strategy that seeks to increase the industrial sector's contribution to gross domestic product to Dh300 billion.
The UAE has the highest degree of digitalisation, with 99 per cent of the population having access to the internet, while Saudi Arabia is at 90 per cent, McKinsey said in a study last month.
"The pace and speed of the transformation in these countries are in sharp contrast compared to any other developed market in the world," Mr Lalchandani said.
The IDC had previously said that spending on digital transformation in Middle East, Turkey and Africa is projected to hit $74 billion by 2026 from about $49 billion this year, growing at a compound annual rate of 16 per cent.
That growth rate would be more than double during 2021-2026. More notably, digital transformation investments by organisations would grow eight times more than the overall economy in 2023.
Enterprises, meanwhile, are facing the challenges of macroeconomic factors such as high inflation, interest rates and the effects of the Russia-Ukraine war, among others, which hinder their ability to spend more on innovation.
Companies would be able to navigate through these by shifting to a digital-first approach by moving away from traditional infrastructure that is inefficient, inflexible and difficult, to those that have scale, are highly responsive, resilient and adaptable, Mr Lalchandani said.
"Companies are impacted in different ways. They are concerned with inflation and higher costs and supply chain disruptions," he said.
"What they should do and are doing is using technology to become more efficient to deliver products and services through digital channels."
Among the industries that have become efficient with the delivery of services through digital means is the public sector, with the UAE and Saudi Arabia taking the lead, Mr Lalchandani said.
"Sectors that are seeing high investment and are the fastest growing are health care and education," he said.
"Retail and transport, meanwhile, would generate a lot of their revenue from new digital models compared to the old ones."
Spending on public cloud services will grow by a quarter annually to top $10.4 billion in 2023, while cloud managed services will grow more than 16.1 per cent to surpass $1 billion this year and $1.4 billion by 2025, the IDC report said.
Spending on big data analytics is projected to grow 11.4 per cent year-on-year to more than $4.1 billion, while artificial intelligence spending is seen to grow more than 16 per cent to about $8 billion, it said.