The Middle East and Africa (MEA) enterprise infrastructure market, which covers servers and external storage, suffered a 7% year-on-year decline in value to total $581-million in Q3 2016.
According to the latest Quarterly Server and Disk Storage Systems Tracker from International Data Corporation (IDC), the decline is in line with IDC’s previous forecast, which factored in the unstable political and economic environment currently characterizing the MEA region.
“With the Middle East being hampered by low oil prices, and Africa struggling with the effects of currency depreciation, we expect this declining trend to continue for the next few quarters,” says Victoria Mendes, a senior research analyst at IDC. “However, we do forecast a slight recovery by the end of 2017. Given the current outlook, IDC is expecting the enterprise market to close at $2.45 billion for 2016 as a whole, which represents a 10% decline on the revenues recorded in 2015.
“We are witnessing a shift of purchase patterns across the region,” Mendes adds. “Within the server market, we are seeing more interest in high-end servers and a corresponding focus from vendors on these machines rather than on traditional low-end volume servers. As such, the decline in the market’s overall value is slower than the decline in units.
“In an effort to push these high-end servers, vendors are moving away from the traditional product-based approach, choosing instead to employ a more solution-based strategy. These servers are mostly being procured by organizations looking to build their datacentres and in turn become cloud-ready.”
Within the storage market, IDC is seeing a lot of interest around storage virtualization; however, this has not yet translated into large-scale uptake. Converged infrastructure is also creating a lot of buzz across the region, with the concept being embraced by both the vendor and end-user communities as a means of consolidating and optimizing resources in these tough economic times.
Looking at the Middle East in isolation, IDC expects the Saudi enterprise infrastructure market to suffer the biggest decline in 2016, with revenues falling by more than 30% year on year. However, 2017 should see some recovery as a number projects are expected to materialize in the kingdom’s all-important government and oil & gas sectors. A number of extremely large projects in the telecommunications, banking, and aviation industries have helped keep the UAE afloat in this drowning market, with enterprise infrastructure revenues for 2016 expected to be up 3% year on year.
IDC forecasts a decline of 25% for the combined OGCC region (Bahrain, Kuwait, Oman and Qatar) in 2016, as all major projects have been put on hold; IDC believes there is little prospect of any traction even as preparations gear up for World Cup 2022 in Qatar.
In Africa, the enterprise infrastructure market is experiencing declines in almost all countries due to various economic and political reasons. The exception is East Africa, which is still seeing decent growth because of some large-scale government and education projects. West Africa and South Africa are both encountering severe currency issues, while North Africa is experiencing considerable political instability.
There have been a number of changes in the vendor landscapes of both the MEA server and storage markets. In the server market, vendors such as Huawei, Inspur, and Lenovo have been grabbing share from the top vendors. These vendors are very project focused, which has been a key factor in their ability to grow their share of the market. Meanwhile, the storage space is also seeing considerable changes in terms of vendor share with Dell’s takeover of EMC.
“Following a tough 2016, we are expecting the MEA enterprise market to grow very slightly in 2017,” says Mendes. “The rate of growth will be limited to just 3% as the recovery will only get underway towards the end of the year. The external storage market is expected to grow more than the server market as enterprises focus on increasing their storage capacities to accommodate the huge amounts of data being generated through the adoption of 3rd Platform technologies.”
“Given the current economic situation, organisations across the region are trying to rationalise their purchases in line with reduced budgets for IT procurement,” continues Mendes. “As such, we will see a greater shift towards consolidation and optimisation through the virtualisation of enterprise hardware, a move towards converged offerings, and greater adoption of cloud.”