Amazon investment a nod to Kingdom’s digital plans

The number of internet users in Saudi Arabia is growing rapidly, along with demand for the Internet of Things. With an increase in digitalization and internet penetration, there has been an uptick in the volume of data creation and cloud storage solutions. The Saudi cloud services market stands at $4.04 billion in 2024 and is expected to double over the next five years. The opportunities created by this are immense, as the number of digital users grows and the digital economy attracts greater investment. This has led the country to develop its framework for digital transformation, with the aim of becoming a pioneer in the field in the broader region.

The Kingdom’s emergence as a regional digital leader was affirmed by its hosting last week of LEAP 2024, an annual technology conference in Riyadh that focuses on various facets of the digital economy. During this year’s event, Amazon’s cloud division, Amazon Web Services, announced its plan to invest $5.3 billion in Saudi Arabia’s digital infrastructure and launch data centers in 2026.

Amazon Web Services will now launch an “Infrastructure Region” to aid the growth of cloud services in the Kingdom. This region will increase efficiency and security in running workloads and storing data. It will also allow a variety of sectors — such as healthcare, startups, education and gaming — to localize their data and run cloud-powered applications. Initially, this will consist of three “Availability Zones” to provide low-latency network infrastructure.

Amazon’s primary competitors, such as Google and Microsoft, have also expressed a similar interest in investing in Saudi Arabia’s adoption of artificial intelligence. Google launched a cloud region in the Kingdom in November 2023.

Rapid advancements in the growth of the Kingdom’s digital infrastructure are a positive sign

Zaid M. Belbagi

Other notable announcements from LEAP included IBM’s $250 million investment in a software development center and Dell Technologies’ plan to open a new merge and logistics fulfillment center in the Kingdom. These announcements are timely given the global demand for data localization and sovereignty. The establishment of multiple data centers and cloud storage options in the Kingdom will make its digital transformation efficient, cost-effective and secure.

Last week’s news followed announcements in January, when Amazon, Google and Microsoft confirmed their plans to establish regional headquarters in Saudi Arabia. These developments highlight increased demand for digital services in Saudi Arabia and the wider region.

Rapid advancements in the growth of the Kingdom’s digital infrastructure are a positive sign, as it is on the course of economic diversification. Under the Vision 2030 framework, the Saudi government is shaping an economy that will no longer depend on oil revenue. This will inevitably involve a high digitalization rate. From e-governance models to digital business strategies, the demand for digital technologies continues to grow, alongside a marked rise in the amount of data creation.

Moreover, during and since the COVID-19 pandemic, various traditional sectors, such as education, health and banking, have rapidly digitized. This has translated into high volumes of data being generated within the Kingdom that must be stored locally, efficiently and securely. In turn, this has required a robust digital and cloud computing infrastructure, as seen by the investments made in the Kingdom by the tech giants.

The Ministry of Communications and Information Technology is working to enhance this infrastructure and create a digital society. It has overseen various initiatives, including the digitalization of payments, certification and procurements. A notable indication that the Saudi government has prioritized digitalization in the Kingdom was the 2020 launch of the KSA Cloud First Policy, whereby the adoption of cloud solutions is encouraged ahead of traditional solutions. In 2021, the ministry announced its intention to invest $18 billion in the Kingdom’s digital transformation, including the creation of data centers and a regional digital hub for cloud computing. It also works with the private sector locally and internationally to diversify digital investments.

Advancements in cloud storage and digital platforms will lead to increased efficiency and transparency

Zaid M. Belbagi

Building on this momentum, Crown Prince Mohammed bin Salman last year announced the creation of a Cloud Computing Special Economic Zone, managed partly by the Communications, Space and Technology Commission. This special economic zone strongly incentivizes investments by international technology and cloud computing companies and has transformed the Kingdom into a destination for technological investments. It has also encouraged entrepreneurship, skill development and employment opportunities related to emerging technologies, such as blockchain, artificial intelligence and machine learning.

It is increasingly evident that Saudi Arabia has a vision for a digital future and the capability to finance and regulate this space. The recent announcements by Amazon and other technology companies also show a growing international confidence in Saudi Arabia. With its ambitious reforms under Vision 2030, a sizable and tech-savvy young population and increasing international investments, the global technology giants see the potential in investing in the Kingdom’s digital growth.

The demand for cloud services has increased significantly in Saudi Arabia and the wider region as the number of internet users and digital services has increased. Within this context, the Kingdom’s annual expenditure on cloud computing and public cloud services is projected to grow to $2.5 billion by 2026.

Digital transformation is a key pillar of Vision 2030 under the National Transformation Program. This plan envisions a digital society in Saudi Arabia — and collaboration with international technology companies is key to achieving this goal. Advancements in cloud storage and digital platforms will lead to increased efficiency and transparency in both the public and private sectors. It will also increase accessibility for a diverse range of users, thereby broadening public engagement with governance and the economy.

Furthermore, the expansion of Saudi Arabia’s digital infrastructure will significantly boost employment generation and technical education and training. The developments in this space, as seen by Amazon, are central to the country’s economic transformation and sustained future competitiveness.

• Zaid M. Belbagi is a political commentator and an adviser to private clients between London and the GCC. X: @Moulay_Zaid