A cloud-powered future: Accelerating digital transformation in the Middle East

The imperative for embracing cloud-enabled technology has become increasingly evident with the rapidly evolving business environment. We have moved beyond the stage where cloud adoption is merely advantageous – it is now essential for businesses as they navigate the modern digital economy.  

Businesses worldwide are adopting cloud-enabled technology at speed. The global cloud market, valued at US$626.46bn in 2023, is expected to reach US$1,266.4bn by 2028.¹ According to the research and consultancy firm Gartner, cloud computing is predicted to become the pervasive style of computing in the coming years.²

Cloud adoption rates in the Kingdom of Saudi Arabia (KSA) reflect this worldwide trend. Annual spending on public cloud services is expected to reach US$3.9bn in 2027, with an expected compound annual growth rate (CAGR) of 23.4%, as per the research by the International Data Corporation (IDC). KSA has created a CSP regulatory ecosystem to support this growth and there are now 29 government (Communications, Space and Technology Commission) registered cloud service providers currently in KSA. 

Cloud adoption worldwide is driven by a number of factors, including the shift towards remote working, the potential for enhanced data analysis and cybersecurity, and the need to create more efficient and resilient supply chains (cloud-based solutions provide the real-time insights needed to optimise inventory management, reduce costs and mitigate risks). As more and more businesses harness the power of artificial intelligence (AI), cloud technology will provide the foundation for scalable and cost-effective transformation.

The cloud provides the infrastructure for young companies to innovate at speed, and this is in turn driving the growth in cloud adoption. In the five years to 2022, the number of unicorns (privately owned, venture capital-backed companies valued at more than US$1bn) grew from 165 to 743, driven almost exclusively by emerging technology.³ These companies are using technology to actively disrupt and change consumer behavior in several key markets, including payments and healthcare.

What is driving cloud adoption in the Middle East?

Across the region, companies are rapidly turning to the cloud. Our EMEA Cloud Business Survey 2023 found that 68% of Middle East companies plan to migrate most of their operations to the cloud within the next two years.⁴

Cloud adoption in the Middle East is being driven by a combination of global, sector-specific, and local factors. Globally, some sectors have adopted the cloud more quickly than others. Cloud-based solutions are transforming the financial services sector, for example, bringing faster transactions and an improved customer experience. The expansion of e-commerce sparked by the Covid 19 pandemic is also a factor – the e-commerce market in KSA grew by almost 60% in 2020 and is expected to be worth SAR50bn by 2025.⁵

However there are also important drivers to cloud adoption that are unique to the Middle East. These include:

• National transformation initiatives and development of giga-projects. Countries in the Middle East have defined their national transformation visions, such as Saudi Vision 2030 and the UAE Centennial 2071. These strategic and ambitious visions have set clearly defined goals for technological advancement. Cloud services play a pivotal role in these initiatives, helping organisations streamline operations, improve efficiency and spark innovation. Additionally, the region is pioneering the development of smart and cognitive cities within its giga-projects, leveraging cloud technology to support the creation of smart infrastructure. This includes initiatives aimed at enhancing public services, implementing intelligent traffic management, and promoting enhanced connectivity.
  
• Digitisation of services. Across the region, governments, and organisations in key sectors, notably healthcare and education, are digitising to improve and create smart services. For example, Saudi Arabia has targeted to digitise 70% of patient activities by 2030 to reduce the human dependence and to automate many healthcare services.⁶ The cloud is an essential element and accelerator to achieve these objectives.
  
• Data localisation legislation. KSA and the UAE are among countries in the region that have introduced legislations that require certain categories of data to be stored within national borders. Local data centres, powered by the cloud, help companies meet their compliance obligations. Hyperscalers (large cloud service providers) are capitalising on this development by launching cloud data centres across the region. Google Cloud launched its Saudi Arabia Region in 2020, while Microsoft opened its Cloud Datacenter Region in Qatar in 2022 and in 2023 announced its intention to invest in a KSA cloud datacentre region.

The next stage of growth

While cloud adoption has been rapid, this is only the beginning – we are entering the next, vital stage of cloud adoption in the Middle East, where organisations start to find more and more innovative ways of using cloud technology. Our research found that around 90% of companies in the region have moved beyond the “lift and shift” strategy of moving existing applications to the cloud and are now modernising their applications and/or creating new, cloud-native solutions.⁷

This stage in the journey has significant potential to create more value and deliver a faster return on investment, as emerging trends shape the future of cloud adoption:

• Hybrid and multi-cloud adoption. Organisations are beginning to diversify their cloud portfolios, using multiple providers and combining on-premises infrastructure with public and private clouds. This allows them to optimise performance and security in a cost-efficient way.

• Industry clouds. The one-size-fits-all cloud approach is giving way to a more tailored approach as specialised digital ecosystems begin to emerge, which cater to the unique needs and regulatory requirements of sectors, including healthcare, finance, and manufacturing.

• Edge computing. Edge computing – which moves computer storage and processing to the edge of the network, as close as possible to data sources – will play a pivotal role in the future of cloud adoption as the Internet of Things (IoT) proliferates. Cloud platforms will increasingly integrate edge computing capabilities, unlocking the full potential of IoT applications.

• Quantum computing in the cloud. We expect to see cloud providers offer quantum computing services in the near future, democratising access to this cutting-edge technology. Integration of quantum computing into the cloud will give businesses access to unprecedented computational power.

• DevSecOps and App Modernisation. It is expected that use of cloud native tools, DevSecOps, microservices and serverless computing adoption will increase to allow developers to focus solely on code creation, reducing operational overheads and enhancing agility. This is expected to become the preferred model for deploying lightweight applications on the cloud, encouraging rapid innovation.

• AI and machine learning (ML) at scale. Cloud providers are already offering AI and ML services, but the scalability and accessibility of cloud platforms make them ideal for deploying large-scale AI and ML workloads, which will redefine business operations.

• Blockchain as a Service (BaaS). Cloud platforms will facilitate the deployment and management of blockchain networks, allowing businesses to implement secure and transparent de-centralised solutions.

• Metaverse and digital twin. The convergence of the metaverse and digital twin technologies, powered by cloud computing, holds immense promise for transforming the way we interact with virtual environments and replicate physical spaces in the digital realm.

These trends signify a paradigm shift in how businesses across the Middle East use cloud technology and solutions to drive growth and stay competitive in a rapidly changing world. The cloud promises to reshape industries and redefine the possibilities of the digital age. Our precise journey to the cloud will be dictated by technological advancement, regulation, and strategic imperatives, but the future promises to be one of innovation, scalability, and agility.

Read the following articles from the Cloud series  

1. Adopting Cloud FinOPs: Optimising the Cloud environment and resources for continuous improvement; maximising the value from cloud investments
   
2. Cloud Managed Services: Stay agile, efficient, and acquire capabilities to adapt to changing conditions and requirements

References:

_{[1] Gartner Forecasts Worldwide Public Cloud End-User Spending to Reach Nearly $600 Billion in 2023
[2] The Future of Cloud Computing in 2027: From Technology to Business Innovation (gartner.com)
[3] Unicorns in digital economy: 5 emerging trends (pwc.com)
[4] Cloud computing in the Middle East
[5] Saudi E-Commerce Market Value Forecasted to exceed SAR 50 Billion by 2025 (bcg.com)
[6] EMEA Cloud Business Survey 2023 | PwC
[7] EMEA Cloud Business Survey 2023 | PwC}