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Healthy growth for SA's managed services

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 09 May 2016
Managed services growth has been restricted by a lack of access to reliable networks in SA, says Frost & Sullivan's Gareth Mellon.
Managed services growth has been restricted by a lack of access to reliable networks in SA, says Frost & Sullivan's Gareth Mellon.

Improved connectivity in SA has bolstered the country's managed services market.

This is according to a recent study conducted by Frost & Sullivan. The market analyst firm interviewed IT executives and managers of major companies across eight key industries in SA.

Although the study does not give the exact value of the market, the company says the top managed services players in SA include Dimension Data, Business Connexion, Altron/Bytes, EOH, T-Systems, Vodacom, MTN, Gijima and Neotel.

Frost & Sullivan believes managed services, one of the largest ICT cost components for South African enterprises, is an area poised for healthy growth over the next five years.

Gareth Mellon, ICT programme manager at Frost & Sullivan, notes that in SA, the growth of the managed services market has been restricted by a lack of access to reliable networks.

SA ranks 33 out of 50 countries on a global connectivity index released by Chinese telecoms equipment company Huawei.

Enterprising businesses

Mellon explains that improved connectivity has given enterprises the opportunity to host services off-site and allowed providers to offer reliable managed hosted solutions, including for critical applications. Such managed application services enable enterprises to enjoy the functionality of their critical business systems without investing in extensive infrastructure or even technical expertise.

Frost & Sullivan says with the introduction of cloud-based models, providers are also able to deliver customised services more efficiently and affordably, reducing the maintenance burden for enterprises, while maintaining or even enhancing performance.

As a result, it points out, managed services in SA have evolved from managed on-site solutions, to consumption-based, on-demand offerings with the emphasis on connectivity also drawing telecommunications operators and infrastructure providers into the supply chain.

The research also found the South African market is facing increased levels of competition with both local and global participants vying for key contracts.

Frost & Sullivan believes the greatest chance of success in this highly-competitive and changing landscape will come to enterprises that anticipate and change to meet the market expectations.

"While it has long been a key component of enterprise ICT expenditure, the provision of managed services has received increased attention over the past five years as South African companies have sought to move from 'break-fix' service models to more collaboration between providers and customers," says Mellon.

In addition, he notes, as technology solutions have grown in number, complexity and strategic importance, resource-strapped internal ICT units have increasingly turned to outside experts to help them manage those technologies and the business processes they support.

Nonetheless, Mellon says the study also found there is a fair amount of dissatisfaction with providers - despite the fact that most complied with their service level agreement (SLA) commitments. "This suggests SLAs are not capturing the true needs of customers, or that providers are not able to provide the level of strategic partnership they are seeking."

He says local providers can help facilitate the move to cloud, especially by quantifying the specific returns than can be generated by the new solutions.

Describing the main benefits of managed services, Mellon says in the South African context, access to scarce skills and technical expertise is probably the most significant benefit. "It is easier and cheaper to share access to such skills than for each company to carry this cost. Managed solutions provide a mechanism for this."

Under dispute

Meanwhile, Frost & Sullivan says managed services is a contested term globally. Businesses are buying and selling services up and down the supply chain, but not every service can be called a "managed" service, it notes, adding the South African market is no different, with little consensus as to what comprises a managed service.

Frost & Sullivan defines managed services as the minimisation or elimination of the internal IT team and the transfer of responsibility of non-core, ICT-related business processes to service providers that deploy, support and maintain these services. It is important to note that managed services are markedly different from outsourcing.

It explains that outsourcing involves transferring the entire IT environment including all IT departments and activities to a service provider, whereas managed services refer to taking over a specific area of IT. Managed services are typically provided for applications, networking, enterprise infrastructure, communications and end-user computing.

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