In the cloud: Data centres emerge in the push for localisation, as large-scale projects drive next-generation innovation


Managed services such as cloud computing have seen significant growth in Saudi Arabia in recent years. This was reflected in the Kingdom’s jump of 16 places in the ICT adoption pillar of the World Economic Forum’s 2019 global competitiveness index, with the country ranking 38th out of 141 countries, up from 54th in 2018. Both the public and private sector have a strong interest in managed services, as they can allow businesses and departments to outsource operations and reduce in-house operational costs. In turn, businesses and agencies are able to concentrate on the most important operations and growth prospects, rather than investing in in-house services, thus improving efficiency.

Demand for managed services will remain high as promising large-scale projects develop and require support for managing data. Additionally, the growth of the internet of things (IoT) is poised to serve emerging smart cities as the country sees growth in cloud services, new data centres and data localisation.


There are indications that major mobile operators are seeking to sell portions of their telecoms infrastructure, allowing other players to operate the assets in exchange for capital. Such a move would provide funds needed for investment in new technologies such as IoT, artificial intelligence (AI), cloud services and big data – innovative solutions that will be needed to compete in an evolving market. In 2019 Saudi Telecom Company (STC) transferred over 14,000 towers to its subsidiary, TAWAL, the largest such move in the MENA region at the time. However, in December of that year Zain terminated an agreement with IHS Holding to transfer 8100 mobile towers after it was rejected by the Communications and Information Technology Commission, which ruled the holding firm did not meet the regulatory requirements for the sale of the towers.

Cloud Computing

Cloud services such as data storage, data maintenance, and remote access to applications such as Microsoft’s Office 365 cloud-based subscription services and Google Docs, Sheets and Slides are in high demand. It is not only large international firms that are active in the segment, but local telecoms companies as well. In October 2019 Zain partnered with Whale Cloud, a subsidiary of China’s Alibaba Group, to launch a public cloud platform in the Kingdom. Under the three-year deal, Whale Cloud will assist Zain in establishing, operating and managing the service, with an overall aim of enhancing cloud computing in Saudi Arabia. STC and Integrated Telecom Company have also launched their own cloud offerings.

The government is similarly getting involved. Its Deem platform enables the better integration of government entities and flexibility in sharing data and information. The platform supports the goals outlined in the National Transformation Programme (NTP), which set a target of launching a governmental cloud computing service by 2020 to facilitate administrative integration.

Data Centres

Cloud services received a boost in recent years with the inauguration of data centres. There are plans for future expansion, with STC aiming to build 12 new facilities by 2022. In February 2020 Oracle launched a new cloud centre in Jeddah and has plans to launch another in the country within a year. The company cited the Kingdom as having one of the fastest-growing cloud adoption rates in the region, and expects the new centres will boost usage further. Data centres are also part of the NTP, with plans to build health care, municipal and e-government centres. “Increasing data centre capacity is key to developing new services and technologies such as cloud computing,” Ahmed Sindi, CEO of Dawiyat Integrated Telecommunications & Information Technology Company, told OBG. “In fact, Saudi Arabia is building the largest data centre in the Middle East, and retaining data locally is crucial to deterring potential cyberthreats.”

Localisation & Consolidation

Saudi Arabia is pushing for data centres and user data to be kept and stored in the country to increase security and ensure data ownership. “The market for data centres is substantial, especially with regards to hosting services,” Faisal Al Faisal, CEO of Integrated Networks Company, told OBG. “One of the challenges, however, has been localising information and sensitive data in-country.” Oracle’s data centres will work towards this end, helping to keep data in Saudi Arabia and secure. Depending on data sensitivity and classification, there will be a need for further data localisation as managed services develop. As such, it is expected that greater data centre capacity will be needed in the short to medium term.

In addition to a push for localisation, the NTP seeks to consolidate data centres into a unified centre for the municipalities. The aim is to replace older devices with higher-performance ones and introduce efficient procedures managed by dedicated teams.

At the same time, the e-government programme Yesser has been pushing to roll out government-wide data centre consolidation. This would reduce the number of data centres by shutting unused and underutilised ones. The initiative has been in the works for years and Yesser was in discussions with related ministries and other agencies about the project as of early 2020.


As data centres expand and information becomes localised, there will be greater demand for IoT to provide solutions for cybersecurity, smart infrastructure and smart cities, as well as to an array of traditional sectors such as energy and agriculture. This comes at a time when IoT spending in the Middle East is rapidly expanding, expected to more than double, from $8.5bn in 2019 to $17.6bn in 2023, according to market intelligence firm International Data Corporation.

The number of IoT devices – which communicate with cloud services – has been rapidly expanding. Research and advisory firm Gartner estimated that across the globe 127 new devices connect to the internet every second. IoT devices have become common in industries including manufacturing, energy and aviation, and will have a significant impact on the world economy by putting ever greater volumes of data within reach.

German industrial giant Siemens is seeking to drive IoT growth in Saudi Arabia through its MindSphere platform, a cloud-based, open IoT operating system that allows businesses to connect their products, plants, systems and machines. The platform will also enable the analysis of industrial data collected for businesses.


Projects worth over $10bn, known as giga-projects, are set to have a notable impact on demand for managed services. “The use of IT managed services – especially cloud computing – is growing rapidly,” Amjad Hafez, CEO of ICT provider NourNet, told OBG. “It is expected that demand will remain high as giga-projects will be in need of such services and that all enterprises will use technology as the main tool for operation expense optimisation.” Giga-projects include the 334-sq-km entertainment city of Qiddiya, with final completion slated for 2035. Other projects include the Red Sea Project, a tourism development encompassing 160 sq km of coastline with beach-front hotels and residences, and NEOM, a planned smart city and tourist destination on the border with Egypt and Jordan whose first phase is not due for completion until 2025.

Much of the technology required for NEOM still needs to be developed, making it an important driver of innovation in the years ahead. “Large-scale projects such as NEOM and the Red Sea Project require high levels of digitalisation,” Najib Al Naim, CEO of Schneider Electric Saudi Arabia, told OBG. “This need presents an opportunity for innovation and growth for international and local electrical equipment manufacturers.”

As Saudi Arabia works to build an economy based on technology and knowledge as laid out in Vision 2030, managed services such as cloud computing, data centres and IoT will be central to these efforts. Private cloud facilities will be required for projects such as NEOM with its emphasis on AI, robotics and smart city technologies. The rollout of these innovative technologies will enhance the efficiency and performance of both the public and private sectors over the long term.