‘Healthy’ growth for SA’s IT market

16 May 2008

South Africa’s highly matured information technology (IT) services market has been growing at a healthy pace, fuelled by economic growth and national development projects, with research and advisory firm IDC expecting the market to exceed US$4-billion (about R30.01-billion) this year.

In a recent research report, the agency found that IT outsourcing constituted more than a third of the services market, the largest market share of all IT services categories, followed by systems integration, deployment, and support services.

This indicated a sophisticated and mature IT spending model, with a year-on-year growth of 11%, which was at odds with most of the Middle East and Africa region where outsourcing constituted a relatively a small percentage of IT services revenue.

“Economic growth and national development projects are playing into the hands of IT services providers, both in terms of hardware and software implementations as well as custom development, outsourcing, and other services,” said IDC South Africa senior research analyst Pieter Kok in a statement this week.

“A maturing marketplace is an important driving force behind the growth in services spending. As local companies develop their decision-making processes, the benefits of services delivered by an external provider are becoming more visible, fuelling further adoption.”

Kok explained that as a result, clients were making better decisions, negotiating better terms, demanding better results, and hence, reaping the benefits of their IT investments.

IDC predicts that the South African IT market will grow at an average annual rate of 11.3% to nearly $5.670-billion (about R43.13-billion) by 2011.

The growth would be spurred by government projects such as adopting e-government strategies and the adoption of open source software, as well as preparations for the 2010 Fifa World Cup, technology upgrade cycles, de-regulation, and growth in the small and medium business market.

The skills shortage in the country, however, remained a major inhibitor in the IT services market.

“Despite public and private sector attempts to address the severe skills shortage in the country, filling vacancies and keeping them has been a tough task,” said Pieter Kok.

“Should measures passed to remedy the situation prove futile, sourcing of expensive international skills will cause a drastic increase in the cost of doing business in South Africa, making it more difficult for local companies to effectively compete in an increasingly competitive marketplace.”

SAinfo reporter

Using SAinfo materialWould you like to use this article in your publication
or on your website?
See: Using SAinfo material