The Cloud and Data Center industry is booming in the Middle East and North Africa (MENA), and the Kingdom of Saudi Arabia (KSA) has emerged as one of the most attractive destinations for global players who want to build and operate Cloud and Data Center facilities in the region.
In fact, according to a recent report by Knight Frank, a leading global independent property consultancy, Saudi Arabia is the fastest growing data center market in MENA. It says that KSA’s live IT capacity has risen by 29.7 per cent to 109 MW, since the turn of the year!
Saudi Arabia’s Data Center market
Today, Saudi Arabia has close to two dozen data centers established and operated by major global and regional players such as Gulf Data Hub, GO Datacenter (Etihad Atheeb Telecom), NourNET, Mobily, etc. Recently, Google launched a new Saudi Cloud Region, and Microsoft that announced in February 2023 that it was planning a Cloud Region in KSA.
A recent report titled Saudi Arabia Data Center Market Competition Forecast and Opportunities 2028, by ResearchandMarkets.com, a globally renowned research agency, has revealed that the region’s data center market could double in size over the next four years. The research agency had valued the Saudi DC market size at US$ 1.02 Billion in 2022. It now projects that the market could grow to US$ 2.17 Billion by 2028 at a Compounded Average Growth Rate (CAGR) of 13.5 percent.
Previously, Arizton Advisory and Research valued the KSA DC market at US$ 1.31 Billion in 2022, and expects it to grow to US$ 2.08 Billion by 2028 at a CAGR of 7.98 per cent. However, Mordor Intelligence is more optimistic. According to its research, the Saudi Arabia Data Center Market is projected to register a CAGR of 17.55 per cent. It says that the IT load capacity of the data center market in Saudi Arabia will have steady growth and is expected to reach 855 MW by 2029. Further, it finds that the number of installed racks is expected to reach 170,963 units by 2029. Riyadh is expected to house the maximum number of racks by 2029.
Let us take a closer look at factors that have contributed to the growth of Saudi Arabia’s Data Center market.
Historical and Geographical Factors
Saudi Arabia has been a hub of trade and transport for centuries due to its location at the crossroads of Europe, Africa and Asia. It also has the Red Sea to the West and the Persian Gulf to the east, thus enabling the development of ports. In fact, the Incense Route that ran parallel to the Red Sea along Saudi Arabia’s west coast is more than 4000 years old!
All these factors put the region on the routes of international merchants and traders dealing in frankincense, myrrh, silk, precious stones and spices such as cardamom, cinnamon, ginger, nutmeg, pepper and turmeric, often brought by boats from as far as India.
The discovery of oil in 1938 generated more wealth, and the economy grew. Gradually, other sectors like banking and financial services, technology, real estate and infrastructure, began to thrive in Saudi Arabia, drawing investors and workers from across the world. A growing economy needed to embrace technological advancements to survive, and thus began a journey of digital transformation, leading to the birth of Saudi Arabia’s data center market.
The aforementioned Knight Frank report traces the growth of Saudi Arabia’s data center industry saying, “The first significant growth of the data centre sector emerged in the mid-2000s, with early data centres primarily servicing the telecommunications and financial industries. Subsequent years have seen foreign and domestic investment expand the market, leading to the construction of Tier-III and Tier-IV certified data centres.” The report says, “The data centre market is split between three main hubs – Riyadh, Jeddah, and Dammam – which host 80 per cent of live IT supply, or 40MW, 29MW and 19MW each, respectively.”
Saudi Arabia’s economic growth and digital evolution are compounded by the advent of several cutting-edge technologies such as Cloud Computing, Artificial Intelligence (AI), Machine Learning (ML) and Internet of Things (IoT). As an increasing number of industries including those involved in construction and infrastructure development, manufacturing, retail etc. are rapidly adopting these new technologies, there is a surge in the amount of data generated and analysed, which in turn, exponentially increases the demand for Cloud services as well as data centers.
Therefore, Saudi Arabia is hungry for reliable and robust digital infrastructure to keep up with the needs of its swiftly modernising and growing economy.
Saudi Vision 2030: Sustainability and Infrastructure Development
But with growing consciousness surrounding climate change, a need was felt to diversify the economy to make it both robust and sustainable. Thus was born Saudi Vision 2030, which is an ambitious plan for economic diversification, attracting foreign investment, developing high tech modern infrastructure in exclusive business and leisure zones, as well as building futuristic cities such as NEOM. After the program was first announced in 2016, it was followed up with the Saudi Green Initiative that was inaugurated in 2021. Saudi Arabia’s Public Investment Fund (PIF) is a sovereign fund that is now increasingly investing in green energy and sustainable development projects. Riyadh plans to become Net Zero by 2060.
The desert is blessed with sunshine, and thus Saudi Arabia is investing in solar power plants. In 2023, it announced the plan to build a 2.6 GW solar power plant in Al Shuaibah with investments worth US$ 2.2 Billion. The plant is being built by ACWA Power (a Saudi listed company), the Water and Electricity Holding Company (Badeel), which is wholly owned by PIF, and Saudi Aramco Power Company (SAPCO), a wholly owned subsidiary of Aramco.
Proximity to the sea also helped Saudi Arabia build and benefit from a robust subsea cable infrastructure. Today, Saudi Arabia has cable landing stations in Jeddah, Al Khobar, Haql, Yanbu, and Duba, and in May 2023, also got connected to the world’s longest subsea cable, the 45,000 km fiber-optic 2Africa network, when it landed in Jeddah and Yanbu. Then there is the 1,600 km long Saudi Vision cable connecting Jeddah, Yanbu, Dibba and Haql.
W.Media’s Saudi Cloud & Datacenter Convention
W.Media recognises Saudi Arabia’s Data Center market potential, and this December we are coming to the Kingdon’s capital city of Riyadh to hold the maiden edition of Saudi Cloud & Datacenter Convention. The event will be held between 8 A.M and 1 P.M at the Hyatt Regency, Riyadh Olaya on December 19, 2023. It will see participation from over 100 delegates and dignitaries from the Middle East’s thriving Cloud and Data Center industry, including C-level executives, end users, buyers and key decision makers. To learn more about the conference agenda and to register, please Click here.