Oracle to invest $1.5bn in Saudi Arabia to meet growing cloud computing demand

The Texas-based company says the money will be used to open a new cloud complex in Riyadh

Public cloud spending in Saudi Arabia is expected to reach $3.1 billion in 2026. EPA

US technology company Oracle plans to invest $1.5 billion in Saudi Arabia to boost the cloud computing capacity of the Arab world’s biggest economy.

On Monday, the Texas company said the new investment will be used to open a new cloud region in Riyadh and enhance its presence in the kingdom to meet the region's growing demand.

Riyadh Cloud Region, as its complex is known, will be Oracle’s third in the kingdom. In July 2020, Oracle opened its first cloud region in the Middle East, in Jeddah.

In October 2021, the company said it planned to open a second cloud region in Saudi Arabia’s coming futuristic city Neom but did not disclose the timeframe.

A cloud region is a complex that houses at least two data centres.

“Saudi Arabia is undoubtedly blazing the trail when it comes to the adoption of [the] latest cloud-led emerging technologies to accelerate its digital economy and diversify beyond its rich oil and natural resources,” Nick Redshaw, Oracle's senior vice president for technology cloud in the Middle East and Africa, told The National.

“Our investment of $1.5 billion is aimed towards helping achieve these objectives by directly boosting cloud capacity in the kingdom and help meet the rapidly growing demand for Oracle cloud,” Mr Redshaw said.

The investment is part of an agreement signed by the kingdom’s Ministry of Communications and Information Technology and Oracle during the visit of chief executive, Safra Catz, to Riyadh last year.

However, it was announced on Monday at the Leap technology conference in Riyadh, which runs until Thursday.

Public cloud spending in Saudi Arabia is expected to hit $3.1 billion in 2026, growing at a compound annual rate of 26.8 per cent, according to the International Data Corporation.

“Oracle’s decision to expand its cloud computing capacity in the kingdom will play a key role in unlocking the opportunities that rapid technological advancements are creating,” said Khalid Al-Falih, Saudi Arabia's Minister of Investment.

“[The ministry] will continue in its quest to enable the building of a robust digital infrastructure, by creating an attractive environment for these investments — for example, by establishing special economic zones that are tailored to particular industries such as cloud computing and digital transformation,” Mr Al-Falih said.

For businesses, moving to a cloud system hosted by a specialised company — such as Oracle, Amazon Web Services or SAP — is more economical than creating their own infrastructure of servers, hardware and security networks, industry experts said. It also brings down the overall cost of ownership.

In the cloud industry, businesses pay only for those selective services or resources they use over a period of time.

Oracle’s local clients include Saudi Railways, Neom, the Saudi Arabia Tourism Development Fund and the Saudi Arabia Mining Company.

In December, Oracle announced that its second-quarter revenue in the 2023 fiscal year jumped 18 per cent to about $12.3 billion.

Oracle announced an 18 per cent annual jump in its fiscal 2023 second-quarter revenue to almost $12.3 billion.

Cloud services and licence support revenue surged 14 per cent annually to about $8.6 billion, accounting for more than 70 per cent of the total sales.

“With Saudi Arabia set to be the fastest-growing economy worldwide in 2023, the opportunity it presents is unprecedented,” said Jyoti Lalchandani, group vice president and regional managing director for Middle East, Turkey and Africa at IDC.

“Technology spending in the kingdom is poised for strong growth. This growth will primarily be driven by the acceleration of digital transformation, with cloud computing, among other technologies, facilitating large-scale innovation and transformation across industries and economic sectors.”

Saudi Arabia's economy grew 8.7 per cent in 2022, boosted by a sharp increase in the kingdom's oil and non-oil sectors, according to initial government estimates.

Oracle currently operates 41 commercial and government cloud regions in 22 countries on five continents.

In the UAE, the company opened a cloud region in Dubai in October 2020 and another complex in Abu Dhabi in November 2021.

“Oracle’s investment will rapidly accelerate the cloud transformation across Saudi Arabia’s business and public sector,” said Richard Smith, Oracle's executive vice president of technology in Europe, the Middle East and Africa.

“Oracle cloud delivers pioneering innovation in technologies like AI [artificial intelligence], machine learning, and IoT [internet of things], and it will help fuel the economic growth and digital transformation that is an integral part of the Saudi Vision 2030.”