Hamza Naqshbandi Principal Analyst IDC Saudi Arabia

Trend 1: The Saudi ICT market is recovering and will show modest growth, reaching $33.80 billion in 2017 Key Drivers -5.1% 2.4% Stabilizing oil prices Continuing budgetary constraints National Transformation Program (NTP) Digital initiatives gaining momentum Relatively strong services growth CAGR (2015-2020) Hardware: 3.5% Software: 5.5% IT Services: 9.4% Communications: 1.3% Source: IDC, MEA Q2 BB 2016

Saudi IT spending will grow at 3.8% year on year in 2017 -17.0% 3.8% Source: IDC, MEA Q2 BB 2016

Middle East, Turkey, and Africa IT spending — Top markets Source: IDC MEA Blackbook Q2 2016. Note: Excludes Mobile phones. OGCC – Qatar, Kuwait, Bahrain, Oman; Spending in US$ Constant Currency 2015

High Growth Sectors (CAGR 2015-2020) IT spending by vertical in Saudi Arabia High Growth Sectors (CAGR 2015-2020) Healthcare: 9.4% Transportation: 8.7% Government: 8.2% Education: 7.7% Source: IDC MEA Industry and Company Size Spending Guide Q2 2016. Note: Consumer, Others (verticals) and Mobile phones (technology) excluded.

DX Priorities Under NTP Trend 2: NTP will advance Digital Transformation (DX) $11.2 Billion for National Transformation Program initiatives 29 Digital initiatives across verticals 5 Digital platforms for public entities DX Priorities Under NTP Improve the spread and quality of broadband connectivity Unify the government IT infrastructure for new eservices Integrate government data into an enhanced Saudi ePortal gateway Current DX Adoption Trends 27% 20% 41% 12% Accelerate modernization through DX subcommittees Develop unified national applications DX currently under way About to start DX No plans Planning DX efforts Enhance the payment ecosystem and channels A prime focus will be strengthening the governance of online services to improve the omni-experience of citizens and eliminate siloed public sector operations. Source: IDC KSA CIO Summit Survey 2016

Source: Govt Authority Survey Saudi Arabia 2016 Trend 3: Market dynamics will be impacted by the convergence of government and non-governmental entities in public-private partnerships (PPPs) Budget pressures will lead governments to increasingly look for investment partnerships with the private sector. Governments will build “value networks” of public sector organizations, telcos, and ICT providers to work on Smart Cities, ICT adoption by small and medium-sized enterprises (SMEs), ehealth, elearning, and other transformational projects. Vendors and providers may be concerned about a lack of public visibility of ultimate outcomes and payback (e.g., monetization, downstream businesses). Q: How is your organization collaborating with suppliers or partners on Smart City initiatives? Source: Govt Authority Survey Saudi Arabia 2016

Permitting and Licensing: mobile apps/forms and printing Trend 4: Smart City initiatives will focus on pragmatic approaches Public Safety and Emergency Response: connected officers, intelligent operation centers, acoustic sensors Environmental Monitoring: study of weather/atmosphere Permitting and Licensing: mobile apps/forms and printing Social Services: connected case workers, food bank inventory, one- touch emergency response Citizen Engagement: digital signs, mobile apps, iBeacons, mobile payments, smart waste management Transportation: fleet tracking, public transportation, smart parking, traffic management Energy: smart meters, smart/green buildings, connected lighting, smart street lights

Trend 5: Digital choices will shape reinvention opportunities for banks and telcos DX Priorities for Banks Offer an omni-channel customer experience Focus on differentiated experience using data and apps via software-defined platforms Transform bank branches to enhance quality of customer service Invest in cyber security to strengthen customer confidence Unify front and back offices for seamless customer experience $1.04 Billion 2017 Growth: 8.1% DX Priorities for Telcos $1.30 Billion Aggressively pursue digitization (both internally and externally) to capture opportunities in broader ecosystem Drive network investments through optimization and convergence Transform mobile data-driven services through conversion to LTE Advanced and 5G — technologies that will gain momentum Revamp go-to-market strategies, quality of service, and customer experience, as demanded by the new unified licensing system 2017 Growth: 4.3%

Source: IDC Security Research 2016; IDC KSA CIO Summit Survey 2016 Trend 6: The “digital bomb” threat will drive investments in advanced security solutions #1 CIO Challenge: Security Saudi Security Solution Spending Will Reach $359 million in 2017 Cyber security will no longer be seen solely as a technology problem Zero-day, targeted, and persistent cyberattacks will rise in 2017. Ransomware, cyber warfare, DDoS attacks, and hacktivism will drive a collective threat prevention strategy. The evolving nature of cyber threats will drive demand for endpoint identity and access management (IAM) and vulnerability management. The Internet of Things (IoT) will lead to expansion of the potential threat surface area. IoT protection, edge computing, and supervisory control and data acquisition (SCADA) systems will gain prominence. Risk management, robust controls, and generally increased vigilance will lead the cyber security agenda. Source: IDC Security Research 2016; IDC KSA CIO Summit Survey 2016

Trend 7: The NTP will shake up the cloud marketplace Saudi Arabia Public Cloud Spending ($M) Saudi Arabia Public Cloud Spending 2017 (F) $74.32M CAGR: 30% The national-level cloud directive will move from public consultation to implementation in 2017. The marketplace will remain fragmented, but local players will dominate. International players will expand their footprint by establishing local hosting capabilities. Increased competition among providers will lead to aggressive pricing and bundling and heightened customer service. Source: IDC Cloud Research 2016

A “cloud first” approach to many workloads will emerge Evolution To Hybrid Cloud Top Saudi Cloud Workloads 2017 (F) Saudi Arabia CIO Investment Priorities The “cloud first” push of global vendors will intensify adoption of selected cloud workloads. Industry-specific solutions will be regarded as mainstream alternatives in selected verticals. SMEs will present a tangible opportunity, though focused sales and awareness efforts will be required. Source: IDC KSA CIO Summit Survey 2016, IDC Cloud Research 2016

Trend 8: The IoT landscape will become more crowded and complex as use cases emerge across industries Saudi Arabia IoT Spending ($M) Top Saudi IoT Vertical Markets 2017 (F) $M Key IoT workloads will include freight monitoring, smart buildings, smart grid (electricity), manufacturing operations, and remote health monitoring. Interest will increase in cellular-based IoT networks. The relevance of IoT platforms will rise as third-party applications are integrated and confidence grows in security administration. Source: IDC IoT Spending Guide

Saudi Big Data and Analytics Solutions Market ($M) Trend 9: Big Data and advanced analytics solutions will drive personalized, citizen-centric services Governments will seek to provide personalized citizen experiences by integrating social and public data streams. Saudi Big Data and Analytics Solutions Market ($M) CAGR: 9.6% Governments will respond to calls for “open data” by reviewing data administration and security policies. Telecom operators will pursue opportunities for data monetization. Advanced data management will create value for the oil and gas, aviation, finance, and government sectors. Educational organizations will leverage high-performance computing (HPC) to support academics. Industry and LoB-specific functionalities will be in high demand. Shortcomings in data quality and employee skill sets may inhibit growth.

Trend 10: Early adoption of innovation accelerators will create a new wave of IT disruption Source: IDC

The Next Wave of ICT Development in Saudi Arabia Budget constraints will force organizations to do more with less. The Next Wave of ICT Development in Saudi Arabia The National Transformation Program (NTP) will drive innovation. Innovation will disrupt the traditional ICT mix. Technology will enable business outcomes.