Middle East Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Middle East Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Middle East Data Center Market is expected to register a CAGR of 3.15% during the period of 2021-2026. The Middle East Data Center Market is expected to double its capacity in the upcoming years, which is driven by strong digitalization and an increase in cloud adoption. The region’s data center footprint is mostly concentrated in demand zones, such as the United Arab Emirates and Saudi Arabia.

Key Highlights

• In the current scenario, businesses and organizations present in the Middle East are more inclined toward utilizing advanced technologies to simplify their day-to-day operations. Due to the rapid increase in technological advancements, high-speed internet-enabled intelligent devices enhance the demand for data access anytime, from anywhere. Moreover, a considerable amount of data is generated continuously due to richer internet connectivity, rising adoption of social networking platforms, and the availability of smart devices.
• An increase in cloud adoption, data localization, and adoption of new technologies such as 5G and IoT is driving the data center demand in Middle East Region. Additionally, the growing use of SaaS cloud solutions has generated prosperous market expansion opportunities. Datacenter advancements have been significantly impacted by the move toward SaaS cloud solutions over the past decade. Hybrid and multi-cloud networks are becoming ever less common in private data Centers as companies are moving to colocation solutions.
• It is anticipated that the rising demand for hyperscale capacity from public cloud providers, OTT content, and media segments would increase demand for data center colocation services. Enterprises' adoption of digital technology is accelerating, which is raising demand for storage and computing power. The deployment of emerging technologies like artificial intelligence and machine learning also pushes service providers to invest in innovative data center designs to increase efficiencies. Data center providers invest substantially to develop new capacity to meet demand.
• Data center security is a restraint for every modern organization. Regardless of where data is housed, businesses of all sizes need to discover strategies to protect it. An increasingly complex approach to data management and skyrocketing cybercrime activity is fueling organizational urgency to get adequate data center security measures. Data center security includes efforts to protect against and recover from physical data center infrastructure damage, including natural disasters and physical break-ins.
• Before the spread of the COVID-19 outbreak, the Middle East region was witnessing rapid growth and uptake of data center services. According to the Khaleej Times, over 50% of Emirati and Saudi residents believe the pandemic would have a long-term and far-reaching negative impact on their economies. Despite the downturn the data centers witnessed demand increase primarily as a result of the shift towards home and remote working.

Key Market TrendsIT & Telecom to Hold a Dominant Position in Middle East Data Center Market

• The IT and telecom sector is a significant market for Data centers in the Middle East countries due to the rapid adoption of advanced technologies, such as the internet of things (IoT), cloud computing, artificial intelligence (AI), and increased frequency of confirmation of the BYOD policy to make business operations much more comfortable and controllable, and increased need for high-end security due to the rapidly growing data among the organizations. Data Center services have become a popular demand for operators to address a complex and competitive environment in the region.
• Due to the increase in technologies, vast volumes of data are being generated. This data comes from mobile internet usage, personnel records, network equipment, server logs, billing activities, and social networks. Companies operating in the IT and telecom sectors rent such third-party spaces to store vast amounts of data. These solutions allow IT and telecom companies to securely manage and store large volumes of data and scale up the storage capacity per the requirements. Thus, the industry accounted for more than 50% of the revenue in this region for the studied market.
• In September 2022, Jordan's Telecommunications Regulatory Commission (TRC) signed an agreement with Zain to bring 5G services to the Middle-Eastern country. Jordan's telecom sector has invested JOD1.86 billion ($2.62bn) to drive Jordan's economic development, which boosts the demand for data centers in the middle east region.
• Blockchain and IoT technologies created new opportunities for regional data center providers. These service providers are increasingly acquiring essential skillsets for innovative technologies like AR, VR, and AI. Besides, an increasing number of organizations in the United Arab Emirates seek specialized IT service providers to manage their IT infrastructure, thus stressing the market growth.
• The growth of managed services in the region has also encouraged the development of data center services. For instance, ASPGulf is one of the oldest managed service providers in the United Arab Emirates. It provides security, hosting, and cloud services to organizations, thus, providing substantial cost-saving on infrastructure costs and IT skills. Due to its long-term partnership with Microsoft, it has become a Microsoft Solution Provider and supports organizations using MS cloud services, such as office 365 and Azure.

United Arab Emirates is expected to register a significant growth

• The United Arab Emirates is among the top data center markets in the Middle East. The country has the presence of local and global operators such as Equinix, Khazna Data Centers, Gulf Data Hub, and Etisalat, among others. The high internet and social media penetration across the country driven by COVID-19, deployment of 5G services, and better and improved inland connectivity make UAE an attractive market for investors.
• The rise of edge computing in coordination with 5G deployment is one of the significant factors for the increase in data centers. The UAE's vision – synonymous with innovation and ingenuity – has recognized the importance of 5G technology to support connected devices, drive industrial development, and enable intelligent city capabilities. Some other factors driving the data center investment in the UAE include increased government support for the digital economy, migration from on-premise infrastructure to colocation and managed services, and the growth in cloud adoption.
• Dubai is the primary location for data center investment in the UAE, followed by Abu Dhabi and other cities such as Fujairah. Introducing the Personal Data Protection Law in the country will protect the confidentiality of the citizens' data and further boost the country's market. Developing Special Economic Zones (SEZs), Free Trade Zones (FTZs), and smart city investments will also boost the data center market in UAE.
• The UAE includes about 14 unique third-party data center service providers operating over 20 facilities. In addition, UAE also possesses several on-premise data centers owned by the government and local enterprises and is currently witnessing investments in 13 facilities, which are expected to be operational in the next 2-3 years.
• In line with the UAE 2021 vision, the TDRA aims to be the main driver in launching the country's fifth generation of mobile commercial services. In 2022, Nokia and Etisalat UAE, from e&, launched 5G private wireless networks to support enterprise digital transformation. TDRA plans to cover the United Arab Emirates with 100% 5G network coverage by 2025 to become the technology of the network standard in the Middle East. For low latency applications to be successful, there is a need to process the application's data close to its sources using edge computing technologies like edge data centers.
• Artificial intelligence also drives data centers' adoption of new technologies. The deployment of machine learning, deep learning, and other AI technologies are now mainstream, and they power cloud services used daily, which boosts the need for data centers in this country. In August 2022, Amazon Web Services (AWS) Launched a cloud-based region in the UAE; similarly, Microsoft has middle eastern azure regions in Qatar that opened in July 2022.

Competitive Landscape

The Middle East Data Center Market is moderately competitive and consists of several major players. Few of these players currently dominate the market in terms of market share. Thus, market concentration is medium. Many firms in the market are constructing facilities that would support their businesses for a long time and are also creating a scope for future restoration. The market relies on the mechanical and electrical infrastructure approved by data center operators to construct new facilities and repair subsisting ones.

• In June 2022, e& and Etisalat- its subsidiary, opened a cable landing station and data center in Kalba, UAE. The new data center was developed to Tier III standards and provided disaster recovery services to the other SmartHub facilities in Dubai and Fujairah. The company has plans to make SmartHub the dream destination for Internet exchanges, cloud service providers, carriers, and firms looking for reliable carrier-grade data centers.
• In May 2022, GMT, The Singapore-based Crypto Mining company, had planned to invest heavily to develop a data center in UAE. The company would install Antminer S19 (95Th) and Bitmain Antminer S19 Pro (110Th) hardware in the UAE data center. In addition, up to 5,000 machines will be used in the facility’s immersion cooling systems.

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• The market estimate (ME) sheet in Excel format
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