A latest industry report shows that information technology (IT) spending in the Middle East and North Africa (MENA) is expected to reach $193.7 billion this year, a year-on-year increase of 5.2%.

According to the latest MENA IT spending forecast report from American consulting firm Gartner, while IT industry spending in the region is expected to continue to increase, the growth rate will be lower than last year's 6.6% annual growth rate.

In the first quarter of this year, tech startups in the region raised $429 million. In addition, the MENA region received about $1 billion in technology investment commitments in the first half of this year.

Earlier this year, global investment management company Investcorp invested $500 million in growth-stage technology companies in the region, while venture capital firms Singapore's Golden Gate and UAE's Polynome Group invested $100 million each in technology companies in the region.

Analyst Miriam Burt, executive vice president of Gartner, pointed out that the slowdown in IT industry spending in the region was caused by factors other than the industry itself.

She said:"Although inflation in the region has eased, companies in the Middle East are still facing challenges due to the sustained uncertainty caused by oil cuts, the economic downturn risks brought about by the geopolitical tension, and the supply chain interruption of major shipping routes. Therefore, local businesses will become more cautious in IT spending."

Data center system spending in the Middle East and North Africa is declining.

The report pointed out that data center system spending in the Middle East and North Africa will decrease from $4.83 billion in 2023 to $4.81 billion in 2024, due to the reduction in spending on external controller-based (ECB) storage by companies in the region.

Burt said,"This is because the demand for alternative SDS, HCIS and StaaS models, among others, is increasing due to external factors."

The report also predicts that IT service spending in the Middle East and North Africa region will grow by 9.6% this year, reaching $19 billion, higher than last year's $17.3 billion.

Burt said,"IT leaders in the Middle East and North Africa will invest more in professional and consulting services to prepare for cloud migration, AI, generative AI, and IoT implementation. In addition, they will also leverage the data monetization opportunities brought by these technology integrations."

In addition, because different countries in the Middle East and North Africa have uneven demands for new devices such as cell phones, equipment spending is expected to decline by 4.5% in 2024.

Generative AI will not have a direct impact.

Eyad Tachwali, senior consulting director of Gartner, said,"CIOs in the Middle East and North Africa region are expected to increase spending on cloud services. Although AI or generative AI will have some impact on cloud service spending, it is not expected to have a direct and significant impact on the region's IT spending level this year."

He added:"At present, CIOs in the region are mainly focused on daily low-cost use cases rather than expensive AI."

In addition, the report pointed out that global large-scale enterprises can provide extensive storage and computing facilities for AI and generative AI, and are accelerating investment in domestic data centers, especially world-class green data centers.

Burt said:"Some companies have launched sovereign cloud services tailored to specific Gulf Cooperation Council markets."

Some analysts have pointed out that Saudi Arabia is the fastest-growing IT market in the Middle East, Turkey and Africa, with technology spending growing at double-digit rates each year.