February 2014, IDC #CEMA20788

Top 10 Predictions

North Africa ICT Market 2014 Top 10 Predictions

Kanza Alaoui Imane Belhabes

Azzedine Kabli Ouafa Kathir

PREDICTIONS

1. The consumer and finance sectors will drive ICT spending growth.

2. CIOs will continue to regard IT security as a top priority.

3. Transformational technologies such as Big Data and analytics will impact CIO ICT

strategies in 2014.

4. Demand for public and private cloud services will increasingly be driven by large

enterprises.

5. ICT skills will remain one of the biggest challenges facing CIOs in 2014.

6. Operators will be forced to update their network infrastructure to accommodate increased

demand for broadband.

7. Mobile operators will focus on customer-retention strategies to offset high churn rates.

8. Operators will invest in the development of app ecosystems.

9. Government cybersecurity initiatives will drive IT security spending in both the public and

private sectors.

10. Consumer spending will continue to shift toward tablet devices.

2014 IDC #CEMA20788 1

IN THIS STUDY

This study presents IDC's predictions for the North African ICT services market in 2014, and is the

result of several ongoing tracking activities in this market. The predictions and trends in this study

are determined by senior analysts across the African continent, and are based on research the

analysts continually conduct with technology buyers in specific industries. This study focuses on

the transformation of major business processes in North Africa, and seeks to identify the exact

roles that IT plays in these transformations.

The predictions outlined herein focus on the year 2014, but may have a longer-term impact.

SITUATION OVERVIEW

The growing North African ICT market is set for further expansion in the coming years. The

market's previous growth was primarily driven by large-scale government, telecommunications,

and banking infrastructure projects. In 2014, it is anticipated that next-generation integrated ICT

services that utilize this large-scale installed infrastructure will grow in order to meet increasing

demand from businesses that prioritize quality and efficiency of services.

At the same time, a number of political, economic, social, technological, and legal factors are

influencing the ICT development of North African countries. As a result, ICT development will take

place at different rates throughout the region.

IDC predicts that the growth of the North African ICT market over the coming few years will be

linked to how well organizations in the region deal with the disruption caused by the 3rd Platform,

as the adoption of mobility, cloud computing, and Big Data continues to accelerate. North African

organizations will increasingly invest in modernization projects in order to better tackle challenges

around skills, costs, and the increasingly complex threat landscape.

FUTURE OUTLOOK

1. The Consumer and Finance Sectors Will Drive ICT Spending Growth

The year 2014 will be characterized by a growing awareness of the importance of IT investments

among all market players in North Africa, especially CIOs. In fact, IDC predicts that IT investments

will register extensive growth in three particular countries Algeria is expected to grow year on

year by 8.7% in 2014, Morocco is expected to grow 8.0%, and Tunisia, which has slowly been

recovering from political upheaval, is anticipated to register a growth rate of 5.6%.

The software and services markets are still far from saturation, and given the increasing

importance of these technologies among end users, IDC predicts faster growth in these markets

across the above three countries in 2014, especially in comparison to IT hardware. In Algeria,

software is expected to register 13.6% growth year on year, services are expected to register

12.5% growth, and hardware is expected to grow 8.0%. In Morocco, software is expected to

register 13.5% growth, services are expected to register 10% growth, and hardware is expected to

2014 IDC #CEMA20788 2

register 7.0% growth. Finally, in Tunisia, software and services are expected to grow 14.6% and

13.9%, respectively, while hardware is set to experience a 2.9% decline.

In terms of verticals, IDC predicts that IT investments in North Africa will be driven mostly by the

consumer and finance sectors, which are expected to be the largest verticals in 2014.

In Morocco, banking is projected to be the biggest local IT spender in 2014, as a large share of

spending will be devoted to software and IT services such as managed services. The integration of

new technologies such as mobility and Big Data in financial transactions will dampen the emphasis

on physical infrastructure in banking institutions.

Algerian and Tunisian financial institutions will similarly be the biggest IT spenders in 2014 in their

respective markets. In fact, all Algerian banks are in the process of consolidating and virtualizing

their infrastructures, which will push big project initiatives in the country. At the same time,

government discussions around the re-establishment of consumer credit in 2014 are at an

advanced stage, which will definitely boost IT consumption by enabling customers with lower

purchasing power to buy more IT devices through credit.

2. CIOs Will Continue to Regard IT Security as a Top Priority

North African CIOs will continue to consider IT security as one of their top priorities in 2014. In fact,

reinforcing and maintaining IT security within their organizations will be their main focus.

Furthermore, factors such as data explosion, the proliferation of mobile workers in the majority of

companies, and the adoption of both public and private clouds will raise the issue of system

fragility and will push IT stakeholders to concentrate more on the security aspects of their 2014 IT

strategies.

IDC predicts that North African CIOs will invest in security equipment such as firewalls (physical

and virtual), encryption, and other devices. In Algeria, firms in the oil and gas verticals are

expected to invest heavily in industrial security programs.

CIOs will also focus on training staff and increasing their levels of awareness around the

importance of security.

3. Transformational Technologies Such As Big Data and Analytics Will

Impact CIO ICT Strategies in 2014

Morocco is expected to lead the adoption in North Africa of transformational technologies such as

Big Data and analytics, as CIOs become increasingly aware of the importance of these

technologies as development and decision-making tools. In fact, with the growth of IT

consumerism in cloud applications, mobile platforms, and social media tools, the content that

systems have to gather and analyze to aid decision making is getting much larger. As a result,

banks and local operators will seek to take advantage of the data available to them in order to

make better decisions, pushing CIOs to incorporate Big Data and analytics into their IT strategies

for 2014.

In addition, IT consumerism will drive growth in investments across the other 3rd Platform

technologies of cloud, mobile platforms, and social media. In fact, there is growing interest among

CIOs in investing in alternative business models such as mobile payment and social media

2014 IDC #CEMA20788 3

channels, as well as IT and cloud services. Such investments will naturally vary according to the

level of maturity of each market, with Morocco recognized as being the most mature.

On a more cautionary note, IDC also believes that end users will face some challenges relating to

the cost of these solutions, the difficulty in measuring the ROI of such big investments, and the lack

of data digitization in certain fields, including public administration.

4. Demand for Public and Private Cloud Services Will Increasingly Be

Driven by Large Enterprises

Cloud computing continues to make headlines in North Africa and around the world, and as a

result businesses and organizations are starting to assess various methods for integrating it into

their operations. In part, this recent growth in interest in the cloud computing concept can be

attributed to its cost effectiveness and agility.

Adoption by governments and large corporations is pushing cloud computing closer to the

mainstream in the North Africa region. A significant number of organizations are now utilizing

virtualization techniques in their applications and aiming to move their services to the cloud.

Entities in both the public and private sectors will seek more customized offerings as they take time

to assess their internal needs, constraints, and the competing offers available. As such, IDC

expects cloud service providers to put a higher priority on more diversified and adaptable cloud

services. Cloud providers will also develop attractive offers to capture the small and medium-sized

business (SMB) segment, which is a major part of the regional economical structure. Currently,

private cloud services are more prevalent than public cloud; however, IDC expects public cloud

services to catch up with and overtake private cloud services as the concept matures over time.

One of the main concerns generally raised about migrating to the cloud is data security. The

location of stored data, coupled with the diverse locations in which transactions take place, also

raises legal compliance issues for organizations. As a result, private cloud computing may be the

preferred option for organizations that are particularly concerned about data privacy and security.

While the growing interest in adopting cloud is clear to see in North Africa, availability remains a

key obstacle. Despite the great strides made by regional companies such as Maroc Telecom,

Tunisia Telecom, and INWI, IDC believes that the region's telecommunications companies need to

do more to improve Internet connections beyond the major cities.

5. ICT Skills Will Remain One of the Biggest Challenges Facing CIOs in

2014

The North African market will continue to massively adopt new technologies across all verticals,

which will boost the need for higher levels of IT expertise. CIOs across the region will face IT

staffing issues (in relation to the recruitment, retention, and development of IT staff) more acutely

as new technologies and roles emerge. IDC believes that this shortage will cause CIOs to be more

dependent on vendors' expertise and will push them to invest more in staff training.

On a macroeconomic level, IDC expects the numerous training initiatives undertaken by IT vendors

and IT specialists, along with national education projects, to counter the shortage of skilled IT staff

across the region. There are several such examples in the Moroccan market, including a project

that involves the creation of 100 new Microsoft IT academies across Morocco. This project is

2014 IDC #CEMA20788 4

spearheaded by the Office of Vocational Training and Employment Promotion (OFPPT), which is a

public training institution that offers vocational education across Morocco. Another prime training

example is the establishment of a certification process for ICT skills, which aims to create and

develop new synergies between training organizations, economic actors, and research structures.

This certification drive is part of the Innov'Talent program established by Morocco Numeric Cluster.

Moreover, the objective of the Moroccan government to qualify more than 15,000 engineers (or

equivalent) per year by 2015 and at least 25,000 by 2020 will also go a long way to countering

skills shortages.

IDC believes that such initiatives will be sufficient in covering the big gap between market needs

and the available workforce.

6. Operators Will Be Forced to Update Their Network Infrastructures to

Accommodate Increased Demand for Broadband

The year 2014 will see major investments in network infrastructure from North African operators.

The growing adoption of smart devices and increased demand for faster mobile internet will prompt

telcos in the region to upgrade their existing 3G networks.

Moroccan operators began introducing speed caps on their mobile data offerings in 2012. In June

2013, Maroc Telecom introduced data caps on all its plans, compelling mobile users to pay extra

for additional data consumption. The most obvious reason for this move is that data in Morocco

represents a significant source of revenue. Furthermore, such usage limits enable operators to

better manage bandwidth and improve the quality of service they offer.

However, due to the high price of buying additional data (at MAD 50 for 1Gb), IDC believes that

this data-capping strategy will not be very successful, and expects that data usage in Morocco

(mainly driven by 3G) will have fallen significantly over the second half of 2013, negatively

impacting operator revenues. This move will compel operators to decrease the prices of additional

data usage to a more affordable level (probably around MAD 20 for 1GB) and upgrade 3G network

to improve bandwidth to HSPA+ 21.1Mbps.

Meanwhile, the Algerian government recently awarded 3G licenses to all three operators in the

country in a move that will lead to major network upgrades from 2G to 3G.

7. Mobile Operators Will Focus On Customer Retention Strategies to

Offset High Churn Rates

The mobile penetration rate in North Africa is steadily slowing, which signals a level of market

maturity. As a result, operators will find it increasingly difficult to acquire new customers, and will

need to retain existing ones by locking them into contracts. Currently, operators in the region offer

subsidies for smartphones with the purchase of 12-month and 24-month subscriptions. However,

these subsidies are mostly for high-end devices with relatively high monthly charges. This limits

the success of postpaid subscriptions in the region to some extent.

IDC believes that operators will begin to offer low-end smartphones with cheaper bundles. These

bundles are likely to be tailored to the youth segment, which presently cannot afford the existing

bundles.

2014 IDC #CEMA20788 5

8. Operators Will Invest in the Development of App Ecosystems

The rapid increase in smartphone adoption in North Africa indicates the readiness of the region to

support mobile app ecosystems. For example, smartphone penetration in Morocco reached 21.5%

in Q1 2013, up from 16.0% in the corresponding quarter in 2012. Consequently, IDC believes that

operators will invest in developing local content and building their own app stores as a way of

differentiating themselves from their competitors. The lack of localized content is a major challenge

facing North African operators at the moment.

9. Government Cybersecurity Initiatives Will Boost IT Security Spending

in Both the Public and Private Sectors

In order to strengthen its fight against cyberattacks, the Moroccan Government recently adopted a

new bill to approve the International Convention on Cybercrime. In addition, a digital evidence

laboratory, located at the police headquarters in Marrakech, began operations in 2013 to

complement the country's fight against cybercrime. This laboratory, which is tasked with analyzing

digital traces, reading different media on seized computers, and providing technical assistance to

investigators, is an addition to the central laboratories located in Rabat, Casablanca, and Fez.

Furthermore, the Moroccan Academic Computer Emergency Response Team (ma-CERT) was

created as part of the implementation of the 'Digital Trust' program under the 'Maroc Numeric 2013'

national strategy,

Similarly, in Tunisia, the National Agency for Computer Security examines the technical aspects of

security breaches, while emergencies are handled by a special group of the agency namely the

Tunisian Computer Emergency Response Team (tunCERT). However, legal pursuits are taken

care of by other bodies of the government.

The Algerian government is also demonstrating an increased awareness of cybersecurity issues,

but its existing capability to deter, monitor, or pursue cybersecurity breaches is relatively low.

Altogether, IDC considers these as crucial initiatives needed to better handle cybercriminality

within the region. IDC also expects private and public institutions to join efforts to address the

cyber threat landscape. Indeed, any increase in breaches will require security vendors,

enterprises, and governments to work together. It will become increasingly important for

organizations to collaborate and establish partnerships in order to combat cybercriminals more

effectively.

10. Consumer Spending Will Continue to Shift Toward Tablet Devices

Tablet adoption in the North African market will steadily expand as a result of the launch of 3G in

Algeria and 4G in Morocco, more diversified and affordable offers from tablet vendors, and a

robust consumer segment that is driven by more technologically savvy consumers. As tablets

adequately fit their basic computing, connectivity, and mobility needs, consumers across the region

will begin to consider these devices as their primary electronic tool of choice.

IDC expects to see intense competition in the North African tablet market in 2014, as local vendors

will be more aggressive in their marketing and promotion campaigns. The tablet market will also

endure the development of more local brands (either from local vendors or well-established local

2014 IDC #CEMA20788 6

channels) that will compete against other low-end tablets that are heavily represented in the price

sensitive North African market.

IDC further expects major tablet vendors to launch more affordable products in the market in order

to acquire a bigger market base. At the same time, major PC vendors that do not have a strong

presence in the tablet market will develop their own offerings to keep up with the current trends.

ESSENTIAL GUIDANCE

Despite the tough economic conditions and political instability that have characterized recent

years, the North African ICT market has been more resilient than certain other sectors (e.g., real

estate and banking). IDC believes that the North African region has entered an era of mobility,

digital connectivity, and new value-added services. Essentially, this means that the business scope

of telecommunications operators has broadened to include ventures that have traditionally been

well beyond their capabilities.

Telecommunications operators across the region will have to be swift in reducing their time to

market for digital media services. As an initial step, operators should forge partnerships with media

players, content aggregators, application developers, and other stakeholders to source content

and increase the number of apps in their own app stores. This will enable operators to monetize

content opportunities and benefit from increased mobile data usage.

The march toward the radically new 3rd Platform IT marketplace which is built on a whole new

set of foundation technologies, based on an entirely new economic model (higher volumes, lower

prices, faster cycle times), defined by the needs of a greatly expanded set of customers, developed

by new communities of developers/innovators, and brought to market through a service provider

community of both new and familiar faces will reach an unprecedented speed in 2014.

IDC's essential guidance for navigating this market transition in 2014 is very simple: to be

successful, any strategy in 2014 must address the four core dynamics of the marketplace, asking

and answering the following questions:

Are you escalating your commitments to the 3rd Platform marketplace by sufficiently

scaling up resources and competencies to the levels needed to be among the global

leaders?

Are you positioning your organization for a major role in one or more innovation

ecosystems?

Are you considered as an innovator/developer or as a platform for innovators, or both? The

hundreds of thousands of new solutions on the 3rd Platform will drive the bulk of the

industry's growth over the next 20 years, so understanding how to tap into the

development and/or deployment of those solutions will be the most important strategic

insight any firm can develop.

Are you fast enough to adapt to the value migration that will be a daily fact of life in the 3rd

Platform marketplace? One of the key benefits of the 3rd Platform is that it has

dramatically lowered the barrier for new innovations to be developed and brought to

market.

2014 IDC #CEMA20788 7

LEARN MORE

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January 2014)

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November 2013)

Assessment of Emerging IT Services and Software Markets in Sub-Saharan Africa

(Excluding South Africa) (IDC #CEMA20285, November 2013)

Enterprise Mobility Trends and Priorities in South Africa: 2013 Survey Results (IDC

#CEMA20296, November 2013)

Enterprise Mobility Trends and Priorities in Nigeria: 2013 Survey Results (IDC

#CEMA20217, November 2013)

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#ZGI07V, November 2013)

Africa, a More Connected Continent: The Impact of Undersea Cables on IT and Cloud

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Assessment of African Operators' LTE Strategies (IDC #CEMA20194, October 2013)

Shaping the CIO Agenda in 2013: African CIO Perspectives on IT and Cloud Services

(IDC #CEMA19874, June 2013)

Synopsis

This study provides a detailed overview of the top 10 themes that IDC believes will affect the ICT

markets of North Africa in 2014. The outlined themes and predictions are based on a wide range of

research, including surveys of IT decision makers, in-depth interviews with CIOs, vendor briefings,

and data from the IDC Worldwide IT Spending Guide. The report is designed to be useful for

business decision makers, technology vendors, and other market participants that want to

understand the latest ICT market trends within the North African region.

"The IT market in North Africa will face radical changes in terms of the adoption for new

technologies such as cloud computing, mobility, and Big Data. Most of the future investments will

focus on these key technologies as a way of ensuring an improved standard of competitiveness for

local companies. Morocco is leading this change, with the market seeing major investment around

cloud computing and Big Data. ICT growth in the country will continue to be driven by major

government projects and rising private investment, with improved investor confidence having a

positive impact on the overall business climate. IDC believes that 2014 will be critical year for both

IT providers and CIOs across the region as they move to the 3rd Platform and adapt their IT

strategies and roadmaps accordingly." Country Manager Ouafa Kathir, IDC Morocco.

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory

services, and events for the information technology, telecommunications and consumer technology

markets. IDC helps IT professionals, business executives, and the investment community make

fact-based decisions on technology purchases and business strategy. More than 1000 IDC

analysts provide global, regional, and local expertise on technology and industry opportunities and

trends in over 110 countries worldwide. For more than 48 years, IDC has provided strategic

insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the

world's leading technology media, research, and events company.

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