UAE Data Center Market Size, Share, Industry, Forecast and outlook (2024-2031)

UAE Data Center Market is segmented By Enterprise Size (IT & Telecom, BFSI, Healthcare, Retail, Others) – Share, Size, Outlook, and Opportunity Analysis, 2024-2031

UAE Data Center Market Size

The UAE data center market was US$ 740.53 million in 2023 and is expected to reach US$ 1,992.69 million by 2031, growing with a CAGR of 13.3% between 2024 and 2031.

The aggressive digital transformation, widespread cloud use, and implementation of cutting-edge connectivity technologies like 5G are driving the UAE data center market's rapid expansion. By making strategic investments in cutting-edge network technologies like SDN and NFV, as well as subsea cable infrastructure, the UAE is positioned to become a hub for global connectivity. The nation's dedication to sustainability and data safety is reflected in the strong cybersecurity measures and the emphasis on green data centers. This rapid expansion is in line with the UAE's goal of becoming a preeminent hub for innovation and technology worldwide. 

Innovative technologies for storing energy are being adopted by data centers in UAE to maintain uninterrupted operations. As an example, Equinix employs lithium-ion batteries, that have a longer shelf life and a greater density of energy over traditional alternate sources of power. By decreasing dependability on the electrical grid during times of high demand, these batteries not only improve reliability but also help achieve sustainability goals. 

The main objective of UAE Digital Government Strategy 2025 is to create a broad cross-sectoral government commitment and buy-in for embedding the digital aspects into overall government strategies. The document is structured around eight key components: inclusivity, resilience, digital age suitability, data-driven-ness, user-driven-ness, digital by design and proactiveness. This initiative will help the data centers to actively involve and streamline the government operations and also promote interoperability.

UAE Data Center Market Scope

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UAE Data Center Market Dynamics

Expansion of the local IT sector

The UAE is leading its regional counterparts in economic diversification beyond the oil and gas sector. In 2023, the country’s non-oil global trade reached a record AED3.5 trillion (US$953 billion), a 12.6% increase from the previous year. The UAE government is focusing on technology, tourism, and trade (3T) as central elements of its economic transformation strategy.

Significant growth is evident in the UAE's tech sector, with the nation increasingly recognized as an innovation hub in the Middle East. In the 2023 ICT Development Index, the UAE scored 96.4 out of 100, well above the global average of 72.8. Recent advancements include the launch of the Falcon 2 series of open-source GenAI models by the Technology Innovation Institute and a US$1.5 billion investment by Microsoft in the Abu Dhabi-based AI startup G42. These moves underscore the UAE’s growing prominence in artificial intelligence and its commitment to integrating emerging technologies into its economy.

Digitization of government services

The UAE government has made digitizing various services a central priority, advancing this goal with the UAE Digital Government Strategy 2025. This strategy aims to integrate digital elements into all government services and includes key performance indicators such as achieving complete digital transformation, enhancing public satisfaction, and increasing digital adoption across sectors.

By September 2023, the UAE reported a 99.5% digitization rate for government services, with digital transactions making up nearly 87% of all service transactions. The government is also exploring AI to improve service delivery and dispute resolution. In November 2023, it introduced the Government Services Development Guide 2.0, which includes smart websites and AI chatbots for efficient grievance handling. Additionally, starting May 13, 2024, the electronic ‘Family Data’ service will replace the traditional family book, facilitating digital access to government services. This expansion in digitization is expected to significantly boost the demand for data centers in the UAE over the coming years.

UAE Data Center Market Segment Analysis

The UAE Data Centers market is segmented based on end-user industry, and region.

Major Tech Developments in UAE

Telecommunications is vital to daily life, linking people and businesses globally. As data consumption grows and technologies advance, efficient data storage and processing become increasingly important. In June 2024, Freshworks Inc., a cloud-based software firm, launched a new data center in the UAE with Amazon Web Services (AWS) support. This center will serve as the main hub for Freshworks' operations in the MEA region, catering to clients across 72 countries.

Additionally, UAE telco Du will deploy Oracle Alloy in June 2024 to provide cloud and AI services to the government and public sector. This service will be centered on Dubai and the Northern Emirates, with Oracle Alloy hosted in Du's data center. Cisco also plans to open a new local cloud data center in Dubai by mid-2024. This facility will enhance cybersecurity and connection performance for organizations of all sizes, supporting Cisco’s Duo multifactor authentication and secure access solutions as part of a global strategy to advance security infrastructure. In the UAE, colocation data centers are the predominant category, surpassing other types such as hyperscale, edge, and specialized data centers. This dominance reflects the UAE’s strategic focus on providing scalable and secure infrastructure to support diverse business needs. Colocation facilities offer a range of benefits, including cost efficiency, flexibility, and enhanced security, making them an attractive option for businesses of all sizes.

Khazna Data Centers is at the forefront of the UAE’s data center expansion, with the ongoing development of four new hyperscale facilities—AUH 6, AUH 7, DXB2, and DXB3. These facilities, set to be completed in late 2024, will deliver a combined capacity of 104.7 MW. The addition of these hyperscale data centers highlights the increasing demand for high-capacity, high-performance infrastructure to support cloud services, big data analytics, and other data-intensive applications.

The UAE's investment in both colocation and hyperscale data centers underscores its commitment to becoming a regional hub for digital transformation. The strategic location of these data centers, combined with robust connectivity and advanced technology, positions the UAE as a competitive player in the global data center market. As businesses continue to migrate to digital platforms, the demand for reliable and scalable data center solutions is expected to grow, driving further innovation and investment in the sector.

AI Impact Analysis:

Artificial intelligence (AI) applications, such machine learning and deep learning, have different needs than standard cloud-based data center services. AI is less susceptible to latency than the latter. Data centers are being freed from the confines of cities due to this change in criteria.

The need for qualified data center engineers is growing rapidly as AI continues to transform data centers. These experts are in charge of streamlining data center operations, assigning resources effectively and putting AI algorithms into practice to improve efficiency and lower energy usage.

AI has a significant impact on data centers, changing the needs for infrastructure and causing unorthodox data center sites to arise. Concurrently, this shift is leading to a boom in employment opportunities for data center engineers, providing promising career paths for tech-savvy individuals. A more diverse and decentralized data center ecosystem that can satisfy the growing demands in a more interconnected world is what this transition offers.

As of April 2024, UAE has accelerated its AI deployment to drive sustainability in resource allocation and energy efficiency and has developed AI processes for network optimization. Through the company's strategic AI deployments, the telco was able to identify areas for improvement and cut operational expenses dramatically. The organization successfully integrated Robotic Process Automation (RPA) solutions across departments, decreasing manual effort and streamlining activities by establishing a Robotics Center of Excellence and a dedicated RPA team. By utilizing AI, e& UAE also redesigned their sales and marketing strategy. The issues like fraud by implementing over 160 machine learning models across multiple roles. e& UAE guaranteed consumer convenience and security by incorporating AI and ML solutions into its Customer Value Management models and implementing cutting-edge technologies like voice biometrics, facial recognition, and optical character recognition.

COVID-19 Impact Analysis

The prevailing trend, intensified by COVID-19, has led numerous organizations to accelerate the adoption of data center automation, motivated by the need to minimize disease transmission risks both on-premises and in colocation environments. Despite the inherent limitations of data center automation, it is likely that facilities will continue to maintain reduced physical staffing levels even after the pandemic abates. This transition towards a more hands-off approach to hardware in the post-COVID era is expected to increase the adoption of private cloud and managed service models, particularly in situations where full cloud migration is impractical. Chief Information Officers (CIOs) are anticipated to increasingly recognize the benefits of outsourcing the maintenance of their operational hardware.

Historically, there has been resistance to repurposing data center hardware, contrary to the prevalent make-take-dispose mindset. However, COVID-19 may serve as a catalyst for change in this area. Confronted with budgetary constraints, enterprises are likely to become more adept at creatively repurposing hardware for internal use. Extending the lifespan of products and materials aligns with the principles of the circular economy, particularly within green data center initiatives. Organizations such as the electronics manufacturing consortium iNEMI advocate for the internal reuse of essential enterprise hardware, such as hard drives, highlighting significant benefits in terms of reducing carbon emissions.

Russia-Ukraine War Impact Analysis

The energy sector continues to be profoundly affected by the Russian invasion of Ukraine, which precipitated a global energy crisis beginning in February 2022. Although energy prices have declined from their peak levels over the past two years, significant regional disparities remain. Many regions around the world are still grappling with high energy costs, which impede economic growth, place considerable strain on household and business finances, and complicate efforts to expand access to electricity.

In Ukraine, the energy sector endures ongoing hardship as it faces its second consecutive winter amid the conflict. With the onset of colder temperatures, Russia has renewed its extensive military operations targeting critical energy infrastructure, causing substantial damage and prolonged disruptions to both electricity and heating supplies for the Ukrainian populace. Despite recent improvements in Ukraine’s air defense capabilities, the persistent Russian attacks highlight the need for additional resources to address the enduring structural challenges within the country's power sector.

Key Developments

• May 2023, The third International Business Exchange (IBX) data center to be opened by Equinix, Inc. is located in Dubai. When fully constructed, the new location, called DX3, will have a total footprint of 12,000 square meters (135,000 square feet) or 1,800 cabinets of capacity spread over two phases, making it Equinix's largest data center in the area. With an investment of over US$ 60M in the first phase, the building of this new facility reinforces Equinix’s commitment to creating and supporting digital opportunities for Dubai and Middle East.
• March 2024, Tencent has announced that it is planning to expand its cloud business in Saudi Arabia and UAE and will reportedly make "huge new investments" in data storage. This will be followed by computing power for artificial intelligence applications.
• March 2024, The first data center in the Middle East, which Coupa, an AI-driven platform, revealed was opened in Dubai in partnership with the Amazon Web Services (AWS) team.
• October 2022, A UAE Firm Khazna Data Centers has announced the development of new additional data centers in the country named as DXB2 and DXB3 and are located in Dubai Design District and Ibn Battuta. Both data centers have a combined capacity of 43 MW of IT load and their goals are to enhance organizations' digital transformation and resilience efforts as well as meet the requirement for a future-ready digital infrastructure. In 2024, Abu Dhabi Investment office collaborated with Khazna Data Centers to build an digitally advanced data center in Abu Dabi.

Market Major Players

The major global players in the market include Dcvaults, Etisalat, Gulf Data Hub, Khazna Data Center, and datamena.

Why Purchase the Report?

• To visualize the UAE Data Centers market segmentation based on component, enterprise size, end-use and region, as well as understand key commercial assets and players.
• Identify commercial opportunities by analyzing trends and co-development. 
• Excel data sheet with numerous data points of data centers market-level with all segments.
• PDF report consists of a comprehensive analysis after exhaustive qualitative interviews and an in-depth study.
• Product mapping available as Excel consisting of key products of all the major players. 

The UAE Data Centers market report would provide approximately 18 tables, 9 figures, and 110 Pages.

Target Audience 2024

• Manufacturers/ Buyers
• Industry Investors/Investment Bankers
• Research Professionals
• Emerging Companies