Saudi Arabia ended 2023 as the fastest growing data center market in the Middle East and North Africa (MENA). Today, it has close to two dozen data centers established and operated by major global and regional players such as Gulf Data Hub (GDH), GO Datacenter (Etihad Atheeb Telecom), NourNET, Mobily, etc.
According to Mordor Intelligence, “The Saudi Arabia Data Center Market size is estimated at 345.31 MW in 2024, and is expected to reach 854.81 MW by 2029, growing at a CAGR of 19.88% during the forecast period (2024-2029).”
Saudi Arabia has already seen huge investments in 2023 by technology giants such as Oracle, Google, Microsoft, Huawei and many more. Given the government’s digital push via Saudi Vision 2030 as well as its Cloud First Policy, it appears that 2024 will also be a bright year for the kingdom’s data center industry.
What to expect in 2024?
“The Saudi Arabian Data Center market is poised for substantial growth in 2024. We anticipate a significant surge in demand driven by the digital transformation initiatives under Vision 2030,” says Himmath Mohammed (Chief Information Office, Gulf Data Hub), adding “We foresee a compound annual growth rate (CAGR) of around 15-20% in the data center market, with new players likely to enter the market and existing ones expanding their capacities.”
Moaz Al-Sibaai (General Manager, Digital Advisory and Strategic Programs, Alibaba Cloud) concurs with this and says, “Vision 2030 and continued government investment to modernize industries, digitize government services and transform citizens experience” as well as “Increasing cloud adoption and increased portfolio of companies offering new cloud services in Saudi Arabia” are two main factors contributing to this growth.
Saudi Vision 2030 is the Kingdom’s 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.
Both Mohammed and Al-Sibaai also attribute the growth to a virtual explosion of emerging technologies like Artificial Intelligence (AI), Machine Learning (ML) and Internet of Things (IoT) that are generating huge amounts of data. “The integration of advanced technologies like AI, IoT, and big data analytics, coupled with the increasing need for data localization and secure data storage, is catalyzing this growth,” says Mohammed.
Cloud in the Desert
Saudi Arabia also has a Cloud First policy which will fuel the growth of Cloud in the Middle Eastern Kingdom. The policy launched in 2020 mandates, “For any new IT investment, civilian government entities should consider Cloud solutions as opposed to internal / traditional solutions.”
The policy document further explains, “Cloud computing will help rationalize Government IT spend. Currently, KSA Government entities have a fragmented IT infrastructure with >400 data centers spread across entities, with a relatively low utilization. Cloud computing will enable a more centralized infrastructure with mega data centers serving all Governmental entities that are highly utilized and more efficient. Entities are now facing major challenges when it comes to procuring IT services (e.g. long procurement cycles). Cloud computing will help reduce the time to market significantly through streamlining the procurement process and adopting a “marketplace” for Cloud services.”
“The government’s push for cloud adoption in public services is creating a ripple effect across sectors,” says Al-Sibaai adding, “Cloud solutions offer cost advantages over traditional IT infrastructure, attracting businesses.” He also says, “Hybrid cloud solutions are expected to be particularly popular, offering flexibility and control over data.”
Mohammed agrees and points to the “rising adoption of cloud services among small and medium sized enterprises (SMEs) and large enterprises.” He says, “The market is diversifying beyond just cloud storage, encompassing SaaS, PaaS, and IaaS offerings. We anticipate a high adoption rate of hybrid and multi-cloud environments. This growth is further augmented by the increasing internet penetration and mobile usage in the region.”
Concerns that need to be addressed
While the demand for digital infrastructure has increased exponentially, there are certain key areas where Saudi Arabia needs to pay close attention, if it is to become the thriving digital nerve center of the Middle East.
“The primary challenge for KSA’s Cloud and Data Center market is the development of a skilled workforce,” says GDH’s Himmath Mohammed. “As the market grows, there is a critical need for skilled IT professionals, adept in the latest cloud and data center technologies. Bridging this talent gap is essential for sustaining growth and innovation in the sector,” he explains.
Meanwhile, according to Alibaba Cloud’s Al-Sibaai, there is a need to make necessary provisions for “data security and data sovereignty.” While the first pertains to more traditional concerns surrounding cyber security, the other has more to do with data sovereignty i.e data of a country’s citizens should not leave its territory. Mohammed also agrees and says, “Continual investment in infrastructure and adherence to international standards for data security and privacy are crucial for the market’s long-term success.”
Sustainability is another challenge for the power guzzling industry data center industry, especially with respect to cooling needs amidst one of the hottest geographies on the planet. But here too, the government has a plan. In 2021, it launched the Saudi Green Initiative. Moreover, Saudi Arabia’s Public Investment Fund (PIF), which is a sovereign fund, is now increasingly investing in green energy and sustainable development projects. In fact, the Kingdom’s capital city of Riyadh plans to become Net Zero by 2060.