Analysis: Middle East on verge of massive digital disruption

Some countries are faster to adopt digital change than others; United Arab Emirates comes first, then Qatar, thirdcomes Bahrain and then Saudi Arabia

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The Middle East is on the verge of a massive digital disruption, which is not surprising as we have been addressing the digital era for over a year now.

But how far is the Middle East in its transformation and are the economies smart enough yet?

A recent report published by Digital McKinsey said that in the past decade, the cross-border data flow connecting the Middle East to the world has increased by more than 150 times.

Two trillion gigabytes worth of data by 2020

Additionally, it is estimated that by 2020 there will be what is equivalent to two zettabytes of data in the Middle East, a zettabyte equals one trillion gigabyte, in simpler terms, after four years the number of bytes the Middle East possess will be greater than the estimated number of grains of sand covering the entire Arabian Desert.

Discrepancy among Middle Eastern economies

Few countries in the Gulf were faster than others to ride the wave of digitization by taking advantage of the sharp growth of the digital consumption sector, notably with high adoption rates and social media use, which sheds light on the discrepancy between one country and the other in terms of digital transformation. McKinsey explained that the journey in digital transformation is yet far but also pointed that this region captured just a fraction of its digital potential.

Digital economy in the Middle East contributes to four percent of GDP

To elaborate, the digital economy in the United States (US) contributed to 8 percent of the gross domestic product (GDP) in 2015, this percentage was six percent in Europe but barely exceeded 4 percent in the Middle East.

However, within this region, some countries are faster to adopt digital change than the others; United Arab Emirates comes first, then Qatar, thirdly comes Bahrain and then Saudi Arabia.

Cybersecurity is the biggest challenge

The region also lags behind in its share of ICT companies, as its share of revenues contributes to merely 1 percent of the total revenues for the biggest 1000 ICT companies in the world, despite consumption being very high, in fact, the report stated that digital consumers in the Middle East are amongst the most sophisticated in the world. This realization overshadows that keeping up with the growing demand of consumers is the second most challenging issue facing companies in the region. The first is cybersecurity.

“Cybersecurity poses a threat to all organizations across the world”, said Jigar Patel, Partner in Digital McKinsey, Riyadh, who also added that the percentage of chief executive officers from top organizations saying cybersecurity is on the top of their agendas jumped from 47 percent to 67 percent this year. But, this, according to Patel creates an opportunity for home-grown companies to cater to the rising demand for cybersecurity.

How does digitization benefit the economy as a whole?

Digital transformation leads to prosperity which leads to GDP growth. The report calls for the integration of Middle Eastern economies, explaining that a unified digital market means 160 million potential digital users by 2025 who can contribute with an additional 3.8 percent of GDP annually, that is equivalent to 95 billion dollars.

Human talent is integral to the success of digital transformation

The young population in this region are very savvy consumers of the digital sector, however, they are not savvy producers yet. “Now is the time to prepare the youth to become digital producers”, said Jan Moore, Associate Partner in Digital McKinsey Dubai, which requires, as Moore stated lots of preparation and shifts in both the education sector and labor market.

Well, it seems that one of the first jobs to be created in this whole new world of digitization is ‘Chief Security Officer’, and to quote Patel, “companies in the Middle East are already considering creating this position to ensure digital security”.

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