SA’s IT market in good health

7 June 2007

California-based business consulting company Frost & Sullivan states that the South African information technology (IT) infrastructure outsourcing market earned revenues of between US$2.78-billion and $3.5-billion in 2006, estimating that it will reach $5.6-billion by 2012.

“South Africa’s IT infrastructure outsourcing market is expanding at a robust rate due to sustained economic growth,” said Frost & Sullivan research analyst Lindsey Mc Donald in a statement issued this week.

“The market is poised to experience fairly significant consolidation within the next five years.”

According to the business research and growth consulting firm, South Africa’s IT infrastructure outsourcing market will continue to show healthy levels of growth, but that the country would need to focus on the requirements of the SMME sector in order to effectively capitalise on existing opportunities.

“This follows a trend whereby large market participants have started to increase their services and areas of expertise through targeted and strategic acquisitions of ‘best-of-breed’ service providers,” the company said.

The company states that such moves are already happening, as seen through Telkom’s attempt to take over Business Connexion.

Frost & Sullivan also states that two significant challenges threaten market growth, the first of which is the country’s skills shortage leading to service providers experiencing problems with attracting and retaining skilled staff.

Secondly, the company points out to the high cost of bandwidth due to lack of competition to the incumbent fixed-line operator.

“Service providers can look forward to the introduction of the services of the second national operator; a development that will go some way to reducing the cost of bandwidth,” said Mc Donald.

“In order to build a reserve of skilled personnel, service providers should show higher levels of commitment to skills development.” reporter

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