ERP Market in Saudi Arabia

Large Scale Implementations across Verticals Driving Growth

Opportunities for ERP

P560-72
November 2012
 Contents

Slide
Section Numbers

Executive Summary 3

Definitions and Research Methodology 5

ERP Market Analysis–Saudi Arabia 10

Demand Analysis 19

Competitive Analysis 26

Market Trends 37

The Frost & Sullivan Story 41

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 Executive Summary

• The Enterprise Resource Planning market in Saudi Arabia is estimated at $ million for the year 2010. ERP & CRM
forms a significant portion of the total enterprise application market in the region. The need to automate and integrate
enterprise wide resources has lead to higher adoption of ERP in Saudi Arabia.

• For year 2010, ERP market was primarily driven by Government, Manufacturing, Retail & Distribution, Telecom signing in for
large scale implementation, which contributed to over per cent of the total ERP revenue. These sectors have become
highly competitive which has lead to higher ERP adoption to optimize resources and provide better services to their
customers.

• Large enterprise contributed around per cent of the revenue in the region. Most of the large enterprise have migrated to
full suite applications. Regular upgrades and updates, installation of more modules to enhance functionality continue to drive
the revenue from the segment. The contribution from this segment is expected to reduce due to near saturation in large
enterprise.

• The market is presently dominated by ORACLE, SAP and Microsoft ERP products which contributed over per cent of
the total ERP revenue in Saudi Arabia.

• Emerging software deployment model, achieve competitive advantage by maximizing operational efficiency, and increasing
spend by Small & Medium Enterprise (SME) led to higher ERP adoption.

• ERP requiring higher up gradation and maintenance cost, lack of business process standardization and saturation in large
enterprise act as restraints for the fast growing ERP market. However the ERP market is expected to grow at a CAGR of
about per cent to reach revenues of $ million by 2017.
Source: Frost & Sullivan analysis.

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 Market Overview

• The Kingdom of Saudi Arabia commonly known as Saudi Arabia is the third-largest country in the Middle East by land area.
Saudi Arabia is an absolute monarchy, the country has an estimated population of million in 2010.

• The country’s GDP is estimated at $ billion, it is one of the largest and key markets in the middle east. The country
possesses per cent of the world's proven petroleum reserves, and is ranked as the largest exporter of petroleum, it
plays a leading role in OPEC.

• Oil accounts for more than per cent of exports, per cent of government revenues and per cent of the regions
GDP. per cent of GDP is contributed from the private sector. The government is encouraging private sector growth to
lessen the kingdom's dependence on oil and increase employment opportunities for the swelling Saudi population.

• The government has begun to permit private sector and foreign investor participation in the power generation and telecom
sectors. As part of its effort to attract foreign investment, diversify the economy and reduced dependence on Oil & Gas.

• Increased investments from Government in ICT to offer e-centric citizen and business services has resulted in enhancing
efficiencies of Government processes and increase customer satisfaction. The country is expected to spend around $
billion on ICT by 2012, making it the largest ICT spender among GCC states.

• The ICT investments have been channelized to develop world class information and communication technology
infrastructure. Government, telecom, oil & gas and utilities are the key verticals investing heavily on ICT in the region. This
has resulted in increase in number of software package vendors and system integrators in the region.

• Increasing competition among vendors and system integrators to tap the largest market in GCC, will allow customers to
select best products and services at competitive price. Source: Frost & Sullivan analysis.

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 Market Segmentation

Market Segmentation

Horizontal Segmentation Vertical Segmentation

Large Enterprise Government

>500 employees Manufacturing
Retail & Distribution
Small and Medium Telecom
Enterprise Oil & Gas
≤500 employees Education
BFSI
Other verticals like ITeS, Utility,
Construction, Real estate,
Transportation & Logistics and
Healthcare

Source: Frost & Sullivan analysis.

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 Market Engineering Measurement Analysis

ERP Market: Market Engineering Measurements, Saudi Arabia, 2010

MEASUREMENT NAME MEASUREMENT TREND

Market age Growth stage Stable

Revenues $ million
Potential revenues (2017) $ million

Base Year Market Growth Rate (2010) %

Compound Annual Growth Rate (2010-2017) %

Version Upgrades (average period of ERP version upgrade) - years

Price sensitivity

Degree of competition

Degree of Technical Change (scale of 1 to 10, Low to High)

Market concentration (per cent of base year market controlled by top

%
three competitors)

Only software licenses revenues have been considered.

Note: All figures are rounded. The base year is 2010. Source: Frost & Sullivan analysis.

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 Market Drivers

ERP Market: Market Drivers, Saudi Arabia, 2011-2017

Drivers

1-2 Years 3-4 Years 5-7 Years

Government spend on ICT

Increasing spend by small and medium enterprise

Operational efficiency enabling competitive advantage

Continued investments from existing customers

Global compliance requirements

Source: Frost & Sullivan analysis.

High Medium Low

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 Market Drivers—Explained

Factors Driving ERP Adoption

The Government of Saudi Arabia is planning to increase its ICT
investment to $ billion by 2012. Significant investments have
Government Spend on ICT been channelized for education and hospital verticals. Government
projects to integrate hospitals on single platform will increase
investments in enterprise applications.

Increasing Spend by Small and Increasing number and spend by small and medium enterprise to
Medium Enterprise transition from manual environment to full automation of back-
office systems with aims to boost efficiencies.

Retail and distribution enterprises in the region are focusing on

Operational Efficiency Enabling making operations more efficient and optimize business
Competitive Advantage processes. To gain competitive advantage through ERP adoption,
this will remain one of the major drivers for growth in the region.

Existing ERP customers need to upgrade enterprise application to

Continued Investments From Existing improve performance and enhance capabilities. Around to
Customers per cent of license cost is invested on year-on-year
maintenance for updates, patches and bug fixes.

As companies in Saudi Arabia grow and expand overseas, there

Global Compliance Requirements will be a need to integrate global regulatory compliances into the
Enterprise Application Software package.

Source: Frost & Sullivan analysis.

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 Market Restraints

ERP Market: Market Restraints, Saudi Arabia, 2011-2017

Restraints

1-2 Years 3-4 Years 5-7 Years

Saturation in large enterprises

Aversion to technology change

Lack of business process standardization

High up-gradation and maintenance cost

Source: Frost & Sullivan analysis.

High Medium Low

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 Market Restraints—Explained

Restraints to ERP Adoption

ERP deployments in large enterprise include large number of

licenses and modules, resulting in large size deals. High
Saturation in Large Enterprises deployment rate will see a saturation of ERP solutions in the
large enterprise and will have an impact on the over all
revenues contributed by the segment.
Existing users of enterprise applications are not very
comfortable using new applications. The users may not be
Aversion to Technology Change technology savvy and Initial aversion among users to ERP has
impacted current ERP adoption. The impact will reduce in
future with more training and usage.

Implementation complexities arise due to lack of

Lack of Business Process Standardization standardization in business processes. This factor will reduce
in impact with more standardized packages in future.

Installations with on-premise ERP has witnessed high

High Up-gradation and Maintenance Cost maintenance costs. But with increased software on-demand,
adoption the impact of this growth restraint will reduce.

Source: Frost & Sullivan analysis.

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