Saudi IT sector: Key Driver of Economic Growth and Competitiveness

With Saudi Arabia accelerating its digital transformation, its IT sector is undergoing massive developments, providing a plethora of opportunities for international and regional companies to expand to the Kingdom.

Amid its ongoing digital transformation push, Saudi Arabia is becoming the land of opportunities for tech innovators worldwide, shaped by a positive investment climate, progressive regulations, fast technological advancements, and rapid digitization of public services. The Kingdom's commitment to digital inclusivity is best seen through its aim to bring 97.6% of its population online by 2026, supported by substantial investments in broadband networks.

Outpacing the global average by about 250%, Saudi Arabia now ranks sixth internationally and second among the G20 nations in the ICT Development Index. The Index measures the progress of 169 countries in ICT services against two main pillars: universal connectivity and meaningful connectivity, and is based on a host of factors such as providing a high-quality tech infrastructure and safe and secure internet.

The foundation of Saudi’s vision to become a digital-first nation borders on substantial support for digital infrastructure and skills development, creating future opportunities by nurturing sought-after digital skills among its youth and technical expertise such as statistical analysis, data mining, middleware, and integration software skills.

Global Leaders Driving the Progress of Saudi's Digital Ambition

Saudi Arabia's ascendancy in the IT domain is multifaceted. Apart from the favorable policies and governmental support, the market leaders and innovators who took the plunge and joined the Kingdom’s ecosystem play a pivotal role in establishing a dynamic and competitive IT sector.

Many companies, guided by local market entry partners like AstroLabs, have already secured new projects, recording major accomplishments.

Systems Limited, with nearly half a century of collective experience and a remarkable footprint across global markets, including Asia Pacific and MENA, recognized the opportunity in Saudi Arabia’s IT landscape. Hailed as Pakistan's first tech company to surpass a market capitalization of $1.2 billion, Systems Limited's expansion to Saudi Arabia continues the company’s dedication to pioneering advancements that reshape industries.

Their Saudi subsidiary, which goes by the name of Systems Arabia, offers state-of-the-art professional services and offerings in the technology sector.“Systems Arabia has undertaken landmark projects in Saudi Arabia, many of which impact the daily lives of residents and citizens. Core ministries are being digitally transformed with Systems Arabia as a key transformation partner, setting a precedent for future technological endeavors in the region,” said Rao Hamid, general manager at Systems Arabia and Bahrain. The company’s work, especially in digitizing the operations of Saudi ministries, telecom giants, and entities within the energy and utilities sectors, has been instrumental in driving the sector forward.

Their successful expansion was facilitated by market entry partners like AstroLabs. Hamid highlighted that AstroLabs’ support in setting up Systems Arabia’s operations has been “paramount” in enabling the company to establish a strong foothold in the country.

A standout development in Saudi Arabia's IT landscape is the emphasis on artificial intelligence (AI), projected to add $135 billion to the Saudi economy by 2030. With AI's contribution to GDP expected to reach 12.4%, the Kingdom is setting the stage for becoming the largest beneficiary of AI in the Middle East and globally.

This move has brought another market leader to the country that wants to be part of the Kingdom’s AI-powered economy. Artefact, a global data and digital agency, has recently decided to expand its operations and open offices in Saudi Arabia.

The company's expansion into Saudi Arabia is propelled by the government's push towards an innovation-led economy, emphasizing AI and data analytics. This has allowed Artefact to contribute significantly to the digital transformation of various sectors, enhancing operational efficiencies and customer experiences through data-driven solutions.

Rahul Arya, CEO and managing partner of Artefact MENA, highlighted the positive market momentum in the country and opened the door to fresh opportunities. “The market strongly demands advanced technological solutions across various sectors. Supportive government policies and infrastructure investments provided a conducive landscape for Artefact to establish a presence and make meaningful contributions to the digital transformation journey of Saudi businesses,” Arya explained.The company is already involved in several massive projects, including projects with governmental entities and mega projects like the Digital Transformation Strategy of Saudi Electricity Company and AI-driven initiatives for AlUla.

Upcoming new developments and initiatives are expected to attract a larger influx of international and regional firms looking to find a niche for themselves in the IT sector and leverage the fast-growing capabilities of AI.

Emerging IT Trends in Saudi Arabia Are Unlocking Business Opportunities

Continuous investments in the digital space have caused the emergence of new sectors that are becoming integral to the country’s transition to a digital economy.

One subsector expected to rise is climate tech, fueled by Saudi Arabia’s commitment to renewable energy. Point in case, almost 75% of Middle East investments towards climate tech start-ups come from Saudi-based investors who want to support homegrown climate tech innovations. These investments are part of the circular carbon economy framework, that aims to reduce emissions while promoting socio-economic development.

The digital entertainment and e-sports sectors are on the rise, too. This growth is driven by Saudi Arabia’s young, tech-savvy population. And, with the country’s efforts to raise digital literacy, the sectors will continue to expand within the following years. Moreover, recent investments, like the $55 million Series A funding round for HyperSpace, a company that invents, builds, and operates next-gen attractions connected to digital lifestyles, underpin the country’s appetite for digital entertainment parks and e-sports ventures. These sectors’ expansion offers a unique opportunity for international companies in gaming, virtual reality (VR), and entertainment technologies to tap into a vibrant new market​​.

Re-affirming its position as a global tech hub, Saudi Arabia organized LEAP 2024 earlier this year, bringing together over 600 startups, 1,800 global tech exhibitors, and more than 172,000 visitors. Events of such scale provide a platform for international tech firms to showcase their innovations, network with industry leaders, and form partnerships.

With many other events, initiatives, and investments to follow, tech companies have a unique chance to scale their businesses by entering the Saudi IT sector, which fuels a large portion of the Saudi economy and is a telling measure of its resilience and competitiveness.

The entry of more global and regional tech innovators into Saudi will unequivocally drive the growth of its IT sector, playing an important role in pulling the entire economy towards prosperity.