How Saudi Arabia is using cloud to navigate the Covid-19 downturn

Saudi Arabia is battling a brutal double whammy of record low oil prices and the fallout of the Covid-19 pandemic.

The country has already unleashed a series of emergency fiscal measures to buoy its economy, such as tripling its VAT rate to 15%. But experts say technology will be the real saving grace in leading the Gulf state out of crisis.

According to Uzair Mujtaba, programme manager, IT services at IDC Saudi Arabia, local CIO priorities have shifted dramatically because of the coronavirus. He said this change in outlook will ultimately affect the way technology is consumed and how much enterprises are expected to spend on IT services.

Before the pandemic, overall spending on ICT in Saudi Arabia was set to reach $37bn this year, up 2.4% on 2019, according to predictions by IDC in February. Spending on IT services was set to reach $3.9bn in 2020, while software spending was forecast to reach $1.4bn.

Given the rapidly evolving and unpredictable effects of Covid-19 on the national economy, Mujtaba said these optimistic figures are likely to be dampened, but the rise of cloud computing will provide some buffer against the downturn.

Mujtaba said businesses are now focusing more on “sustaining operations” and are using cloud computing to do so.

“Flexible, scalable cloud services are among the few technology segments expected to continue clocking positive double-digit growth across SaaS, IaaS and PaaS [software, infrastructure and platform as a service] in 2020,” he said.

According to Saudi Arabian government statistics, more than 99% of active national organisations are small and medium-sized enterprises (SMEs), but these types of businesses contribute to less than a quarter of the IT spending in Saudi Arabia, IDC noted. Most large spending still originates from mass-scale government projects.

“On-premise deployments, associated with highly critical government-owned national infrastructure programmes, continue to be delivered,” said Mujtaba. “However, several other large-scale government projects are being delayed or canceled altogether.”

SMEs will also see slimmed-down overall IT spending in 2020, IDC predicted.

“Revenues, especially in the SME segment, are under relentless pressure due to Covid-19, which is forcing businesses to adopt super-optimised, ultra-efficient operational models,” said Mujtaba.

Saudi SMEs were already on a road to higher cloud adoption, and the Covid-19 crisis will further accelerate this trend. More than 25% of enterprises in the kingdom have plans in place to deploy a mix of on-premise/dedicated private clouds, multiple public clouds and legacy platforms to meet their infrastructure needs, according to the latest IDC annual Saudi Arabia CIO survey.

“Covid-19 will essentially force SMEs to reconsider their IT purchase decisions and push some of the curtailed IT spending towards making consumption more efficient and economical,” said Mujtaba.

Fax and voice are likely to be permanently replaced by email and collaboration, physical document approvals by digital signatures, and on-premise application roll-outs by simple, SaaS-led engagements, he added.

Mujtaba said digital transformation might slow down across some IT segments, but will accelerate across other aspects, such as operational transformation, employee experience and customer experience.

Richard Botley, cyber resilience strategist at IT security firm Mimecast, predicted that Saudi cloud adoption will accelerate this year as Covid-19 and oil-price pressures push organisations to make “pragmatic” decisions about business transformation, cost and risk.

Given the recent launch of Amazon Web Services (AWS) outposts in Saudi Arabia and the UAE, hybrid cloud models are likely to proliferate too, said Botley.

“Globally, the Covid-19 pandemic is causing radical rethinking of how businesses, large or small, operate,” he said. “We are seeing this trend in the kingdom too, and many employees are working from home, often for the first time, in some industries. Cloud tools are often an affordable and ready-made option for companies, as they seek new virtual and streamlined physical ways to service their customers.”

Botley said the financial incentives of cloud were also highlighted in the 2008-9 downturn, as organisations moved en masse to SaaS suppliers.

“All kinds of SaaS offerings are being used by businesses across Saudi Arabia,” he said. “Some of the most common are marketing, communication and productivity tools, such as CRM [customer relationship management], videoconferencing, email and team collaboration. The demand for cyber security services designed to protect these remote and mobile workforces are growing in parallel.”

In the global downturn, organisations are welcoming the per-user model pricing, alongside a range of Covid-19 support packages offered by suppliers. These are designed to offer free services for an extended time in the hope that customers stick when business begins to recover.

Botley added: “The global behemoths, Microsoft, Google and AWS, are yet to add local cloud regions to Saudi Arabia, but while rumours continue, some organisations are making pragmatic use of their extra-territorial offerings, such as Office 365 or G Suite. Organisations in all sectors are now using cloud in one way or another.”

According to Mohammed Al Khotani, managing director at SAP Saudi Arabia, local organisations will need to adopt real-time technology solutions to redesign supply chains and procurement, travel, health pre-screening, and remote working to maintain business continuity in the wake of the coronavirus.

“The front-line industries of healthcare, pharmaceuticals, research and public security need to access information, address citizen sentiment and accelerate reaction time,” he said. “Retail, banking, education, insurance and entertainment need to enable digital channels. Wholesale distribution, retail, consumer, and oil and gas need to provide supply chain flexibility, ensure last-mile delivery and access to sources of supply and finance.

“For fields hit directly, such as sports, entertainment, travel, transportation, events and construction, and for companies experiencing demand spikes, such as telco and gaming, they need to evaluate viability.”