Information and Communication Technology (ICT) Investment in the Kingdom of Saudi Arabia: Assessing Strengths and Weaknesses

Nowadays, Information and Communication Technology (ICT) is a vital factor in strengthening the growth (and addressing inconsistencies) in all countries. Investment in infrastructure (physical capital) is particularly important for growth; this also entails expenditure on renewing the capital stock, thereby enabling new technologies to benefit production processes.

This paper is structured as follows. The next section reviews the background to the educational system (and IT education) in Saudi Arabia. Section 3 presents a review of IT usage and investment in Saudi organizations.

Background to Educational Systems in Saudi Arabia

The aims of the Saudi educational policy are to ensure that education becomes more efficient, to meet the religious, economic and social needs of the country and to eliminate illiteracy among Saudi adults. There are several government agencies involved with planning, administrating and implementing the overall governmental educational policy in Saudi Arabia.

The Ministry of Education (MoE) sets the overall standards for the country’s educational system (public and private) and also oversees special education for physically challenged students.

The General Organization for Technical Education and Vocational Training (GOTEVT) was established in 1980 to coordinate and implement the manpower development plans and supervise all related training centers and institutes in the Kingdom.

The Ministry of Higher Education (MHE) was established in 1975 to implement the Kingdom’s higher education policy in the rapidly expanding sphere of post-secondary education. Prior to 1975, higher education was under the supervision and administration of the MoE.

The various responsibilities of the MHE are to:

a)    Provide support and services for the Kingdom’s universities and colleges.

b)    Supervise, coordinate and follow-up post- secondary programs and to connect them with the national development            programs (in all the various fields); the MHE also provides the various sectors with the necessary technical and                administrative manpower.

c)    Supervise awarding scholarships to Saudi students studying abroad, coordinate international inter-university relations,        and oversee the educational and cultural mission offices in all countries around the world.

Information Technology Education in Saudi Arabia

Currently, the Saudi government supports all aspects of education; however, in the past the educational system did not provide a comprehensive modern education, and some fields, such as mathematics, technology, science and engineering, were found to be inadequate [23].

According to Behary [15], IT in Saudi Arabia is concentrated in three major centres: Riyadh, the capital in the centre of the country, Dammam on the east coast, and Jeddah on the west coast. Riyadh is perhaps the most important, as many multi-national companies are located there, along with the headquarters of many national organizations.

Also, according to Behary [15], Saudi IT labor is sourced both locally and globally, and the local source is through college graduates with degrees in IT or computing sciences from Saudi universities.

Behary [15] further states that private institutions and organizations provide the remainder of the local supply, and they offer a variety of programs that aid individuals to be more computer literate. Another source of IT-skilled labor is the global market, which has historically been the major source of such labor for the country.

IT Usage in Saudi Organizations

Computerized systems are becoming increasingly common in many developing countries, to enhance organizational performance. IT systems are considered to be able to provide a very important advantage for organizations, regardless of their size, and as a fundamental tool for national economic growth and development [22].

In Saudi Arabia, the changing economic environment has led to an increasing interest in improving organizational processes to enhance business performance.

Over the past few decades, the population of Saudi Arabia has expanded enormously and the economy has developed at an unprecedented rate. It is now generally accepted that in order to meet the future needs of this growing population, and in order to further develop into a modern knowledge-based economy, Saudi commerce must fully use IT.

Although the Saudi government has been directly stimulating the IT sector through education and other Ministry-sponsored projects, it has also encouraged the private sector to establish itself locally in the field, and to form partnerships with foreign companies.

Saudi Arabia offers a growing home market and rapidly increasing small business market to computer manufacturers. Throughout the country, local businesses are upgrading their computer systems, and many companies now use the latest technology.

As per the information supplied by the Saudi government, Internet access has been spread all across the Kingdom, with the percentage of Saudi citizens using it increasing from 5% in 2001 to about 41% by 2010, i.e. the number of Internet users grew from around 1 million in 2001 to an estimated 9.8 million at the end of 2009 [18].

IT Investment in Saudi Arabia

Developments in the global ICT industry are continuing to accelerate, introducing a great variety of new services. In Saudi Arabia, a significant market for networking and related software has evolved as well as for computer hardware and software products [30].

Saudi Arabia is currently the largest computer market in the Gulf region. The Gulf region has an annual turnover of approximately $1.2 billion, and Saudi Arabia accounts for about 40% of this. Recent price wars between the world’s largest PC producers are expected to fuel the Kingdom’s ever-growing computer market [15].

According to a Saudi Arabian IT report [32], the Kingdom has the largest IT market in the Gulf region, with a value of US$ 3.4bn in 2008, and it is expected to rise to US$ 5.6bn by the end of 2013, a CAGR of 11%.

The ability to manufacture computers within Saudi Arabia was facilitated in 2000 through a joint venture between Al-Faisaliah Group with both Microsoft and Intel, creating a new computer brand called ZAI. The initial investment in this venture, as reported by the headquarters in Riyadh, was $3.2 million [33].

According to Behery [15], Saudi Arabia is encouraging the growing home market in IT. In addition, there is a growing awareness in the small business market of local computer manufacturers. Throughout the country, local businesses are upgrading their computer systems [15], and increasing numbers of organizations are using the latest technology. A few years ago, e-mail and networking were not available for most organizations; however, they are now common features in small- and medium-sized ones in Saudi Arabia.

According to the report of the Arabian Gazette [13; 31], Saudi Arabia has the fastest growing IT market in the Middle East and accounted for nearly 50% of all ICT investments in the GCC between 2010 and 2012.

Saudi Government Efforts and Policies

The Saudi government has made significant strides to promote and develop the IT environment. The main objective in so doing is to establish a strong IT infrastructure in order to facilitate and improve the efficiency and effectiveness of the operations of all organizations, both in the public and private sectors.

The Saudi government has established several guidelines pertaining to IT development, which focus on constructing a strong IT infrastructure as well as advancing the computerization process, which in turn involve planning, implementation and measuring effectiveness.

The five-year development plans mentioned above address the issue of technology and the need to implement a specific strategy for developing the IT sector.

The Five-Year Development Plans

The overall development process in Saudi Arabia is based on five-year plans, and since the early days of these plans, the government has utilized all available resources and accessible tools to implement them, and to meet the objectives that form the essence of these plans, in order to achieve the desired progress and growth of the economy.

During the fourth and fifth plans (1985-1995), it was noted that there had been a rapid trend toward utilizing new IT systems in the private sector [24].

a)    Establishing a new long-term plan to support technology and the sciences;

b)    Ensuring coordination between government organizations to achieve active cooperation with the private sector in this         regard;

c)    Increasing or upgrading programs and curricula related to science and technology at all educational levels (primary            school to university);

d)    Raising public awareness of the important worldwide role played by the sciences and technology, through the media,        symposiums and exhibitions;

e)    Subsidizing and improving support services related to science and technology, such as information services and                patents;

f)    Encouraging research and development activities in both the public and private sectors.

However, the number of Saudis with technology skills, and the level of such skills, is still insufficient to fulfill the rapid and dynamic changes that are taking place in technology [11]. It was recognized that keeping up to date with technology needs yet more human resources, money and time.

The need for development in technology and the importance of IS continued to be emphasized in the sixth development plan (1995-1999) [24].

The seventh development plan (2000-2004) aimed to identify scientific and technological development trends in Saudi Arabia [27], and various Saudi government departments were charged with playing a key role in industrial and economic development. According to [32], the Ministry of Planning played a crucial role in formulating all the five-year development plans that set the long-term economic goals.

The Saudi National Plan for Science and Technology

The seventh development plan (2000-2004) emphasized that every effort should be made to develop science and technology, enhance public awareness, and support scientific research and technological development.

According to the Ministry of Planning [27], the seventh development plan emphasized the need to work on developing the Kingdom’s IT systems throughout the period of the plan (2000-2004).

a)    Improve the technological sector in the Kingdom by encouraging research and development activities in the various            technological areas, and by improving the nation’s skills in all technical areas.

b)    Provide educational techniques to develop human resources in order to deal with advanced technologies.

c)    Develop the national IT industry.

d)    Provide a master reference for all development and activities in science and IT.

e)    Provide a high level of human resources skilled in science and IT, and to ensure that this is achieved in terms of both        quantity and quality.

f)     Support scientific research at all levels.

g)    Continue to promote science and IT-based organizations and to improve the level of cooperation, integration and                interaction among them.

h)    Enhance the level of cooperation with other countries in the area of science and technology and to open wider                 channels of communication in order to cope with current and future international developments, while still maintaining        a strong national identity and set of values.

i)    Reinforce activities that have a direct effect on science and technology, such as information services and standards,         piracy authorities, engineering consultant offices and scientific societies, including efforts by both public and private           actors.

j)    Ensure sustainable technological development and the protection of natural resources.

k)    Promote national awareness of the importance of science and technology and the role citizens can play in the                  national interest, and to promote the ongoing development and investment in this important field.

l)    Encourage the use of IT systems by incorporating them in education and training at all levels and in all sectors.

Evaluation is not specifically mentioned in the above but each step in systems development does require evaluation. This ambitious plan, if fully realized, is likely to have a dramatic effect on Saudi Arabia’s IT/IS capability. 

The IT Industry

Saudi Arabia has made rapid advances in IT development, largely due to the huge revenues from oil, although efforts are now being made to diversify the economy in order to reduce dependence on this single resource.

The importance of employing up-to-date IT in public and private organizations lies in the evidence that this improves performance.

Hardware Development

In terms of hardware development and production, most of the components being manufactured in Saudi Arabia were developed by foreign multinational companies, and represent transferred technology; however, the Kingdom is lacking in terms of human resources and technology, contributing to inadequate levels of hardware production [15]. Nevertheless, many local firms are playing a significant role in addressing this in the short run and possibly in the long run in the region as well.

In addition, one of the largest companies in Saudi Arabia is the Saudi Cable Company (SCC), which is involved in all the most important projects and operations across the country. SCC has established itself as a market leader with a reputation for technical excellence and uncompromising product quality.

Software Development

The development of software receives a great deal of attention amongst economists in the country, as it is an important growth area.

Several firms have the opportunity to gain market share by providing solutions to the many problems entailed in developing or upgrading IT systems. According to Behery [15], increasing numbers of Saudi firms are able to provide a variety of services to the local and regional markets. As there is a growing demand in the IT market and in order to meet that demand, all sorts of applications are being developed.

IT Strengths and Weaknesses

When assessing IT in Saudi Arabia, no competitive advantages from IT could be identified by Behery [15], who stated that the country had fallen behind in terms of IT when compared with its neighbors in the region.

Many firms in the country have developed and produced a great deal of their own IT software. This supports the indigenous software industry and, to some extent, the hardware industry. Nevertheless, a large market exists for the purchase and sale of hardware technology and some Saudi companies have endeavored to meet this demand by establishing a local manufacturing base.

With regard to IT weaknesses, Behery addressed the main reasons why Saudi Arabia is behind in the area of IT [15]. These reasons are listed as:

a)    Computer illiteracy of the end-users;

b)    Lack of government incentives to attract businesses (free-trade zones/subsidies);

c)    Absence of adequate infrastructure to support industry;

d)    Poor enforcement of intellectual property and copyright laws, and lack of resources.

Despite these difficulties, if the national plans proposed by the government are fully realized, then the future prospects for the Saudi IT industry as a regional player ought to be good.

IT Barriers and Problems in Saudi Arabia

Technology development in Saudi Arabia faces many barriers that can also be said to influence the implementation, development and performance of IS more generally.

According to Al-Sudairy [10], cultural differences can result in limitations for IT development. For example, different ideas of logic and reasoning, the prioritizing of religion, and the limitations of languages can create barriers to effective communication and understanding.

According to the literature [e.g., 4; 6; 10; 11; 28], there is some evidence that IT development in Saudi Arabia faces many difficulties, which are not only scientific and technical, but also, and possibly more importantly, educational, economic, political, social and cultural.

Abdul-Gader [4] stated that the inadequate infrastructure, lack of technology education, lack of skills, and lack of local vendor support are the most apparent problems facing IT/IS development and implementation in Saudi Arabia. [4] asserts that some of the difficulties constraining implementation in Saudi Arabia are, for example, resistance to change, organizational policy, and hardware and software availability.

Saudi researchers attribute most of these problems to socio cultural and technical factors. These include lack of IT-skilled Saudi manpower, shortcomings in the national IT infrastructure, and lack of national IT policies [10; 11].

[4, 6. 10, and 11] identified the factors that hinder IS development in Saudi Arabia, and these are:

a)    Lack of knowledge and experience to use and maintain IT systems;

b)    Lack of organizational IT infrastructure, resulting in inadequate maintenance;

c)    Lack of IT planning;

d)    Lack of quality training programs;
   
e)    Lack of top management support;

f)    Lack of technical support;

g)    Lack of suitably qualified and skilled Saudi human resources;

h)    Shortage of IT training, resulting in inadequate IT skills.

This list indicates how significantly organizational, social and cultural factors in Saudi Arabia are affecting the IS development effort. It must be emphasized that Saudi Arabia is not alone in having such problems, as some of the above issues are faced by organizations worldwide.

Typically, most of these problems appear to revolve around certain technical issues but also around the non-technical issues of the shortage of Saudi manpower with the necessary expertise, the apparent lack of clear vision and planning, and the lack of management support.

Previous Studies on IT in Saudi Arabia

Relatively little research has been done to investigate IT barriers and problems in Saudi Arabia. Most of the research conducted is primarily concerned with the impact of IT, IT/IS development, and the implementation of IT/IS. Recent research in IT in Saudi Arabia indicates a growing interest in finding suitable solutions for IT/IS problems in Saudi private organizations [6].

Abdul-Gader [3] conducted a study to investigate IS strategies for multinational companies in Arab Gulf countries. The author found that various factors hinder IT/IS implementation and development, in particular, lack of IT planning and lack of IT infrastructure.

Abdul Gader [4] conducted a study on the management of computer-based IS (CBIS) in developing countries (including Saudi Arabia) from a cultural perspective. He reported that among the reasons for the failure to use IT were: lack of communication, inadequate infrastructure, severe multidirectional pressure on monetary exchanges, lack of technology education, expertise and skills, and lack of local vendor support; these represent the most apparent problems facing CBIS development and implementation in developing countries.

Al-Ghobiri [6] investigated the IS implementation process as an important element in IS success. He focused on identifying the procedures involved in the implementation process, rather than how CBIS should be implemented.

Discussion

The concept of the private sector is based on the private ownership of establishments that engage in¬ various industrial, agricultural and commercial activities with the aim of realizing profits.

The private organizations are encouraged and supported financially and legally by the government. This special treatment from the Saudi government to the private sector stems from the significant role that the government is preparing for this sector to play in its attempts to diversify and strengthen the national economy.

In recent years, the private organizations have begun to take the lead and assume responsibility in providing many services in a range of different sectors of the Saudi economy that used to be provided by the government. This is due to the Saudi government’s privatization program that was announced in 1994.

In 2003, the government established a new Ministry for IT in order to develop the IT sector, which will increase the use and development of IT/IS throughout the country in both the public and private sectors. This move by the Saudi government was seen as a very important step in improving the long-term economic conditions of the country.

In order to transfer technology and expand the operations of the private sector, the government provides various incentives to foreign companies that enter into joint ventures with Saudi firms [32]. The combination of loans, incentives, subsidies and information, and the government emphasis on strengthening the role of the private sector, particularly during the course of the fifth and sixth development plans (1990-94 and 1995-99), and now under the seventh plan (2000-2004), have had the desired result [32].

In Saudi Arabia, expenditure on computer and related accessories continues to be the highest in the Middle East [15; 32; 33]. Together with the increase in expenditure, a crucial question arises as to whether an organization is getting value for the investment made.

The IS literature suggests that there is a variety of factors affecting an IT investment; these include organizational, technical and human factors [19; 20; 34]. In addition, reviewing the literature on IT in Saudi Arabia has led some researchers to identify a number of factors that may affect the decision and process of IT investment.

The general findings indicate that there is a need to focus on IT investment in Saudi organizations, which, as the literature indicates, has not been adequately studied. The important issues are why and how Saudi organizations decide to invest in IT, and the factors that influence the IT investment process.

Conclusion

This research paper has been reviewed and provided a description of the current IT environment in Saudi Arabia. It has discussed its impact on various social, economic and administrative areas so that the implications and consequences of introducing this technology into Saudi Arabia could be more fully understood.

The following recommendations are intended to serve as policy guidelines on which attention needs to be focused by the Saudi Arabian authorities. Should the factors hindering advances in ICT in the Kingdom be addressed, and should these recommendations be implemented, then Saudi Arabia could develop into a key player in this field both in the region and more widely.

a)    More attention should be given to the availability of information on ICT in Saudi Arabia and to its equitable distribution.

b)    In giving higher priority to science and technology, it is recommended that the government increase the use of ICT in          modernized educational plans and programs.

c)    To strengthen the role of higher educational institutions in delivering ICT education, the government should enhance          their capacity and capability in order that they may develop high quality science and technology education based on         further research, and to do so in a manner that meets international standards.

d)    To ensure and secure appropriate financial resources in financing investment in ICT-related infrastructures, the Saudi        government should develop its financial markets in order to create new opportunities in the field of ICT.

e)    The government should continue to support the public and private sectors (or through joint stock companies) to                increase the use of ICT in order to raise levels of efficiency in production and administration throughout the economy,        and should endeavor to improve the ICT infrastructure to the level of fully developed countries.

References