SA organisations eye modest growth

The majority of South African organisations appear to be targeting modest growth this year - almost 40% are expecting growth of 6% to 15%.

This is according to the ITWeb/Accenture IT Strategy Survey, which ran online for a fortnight and attracted 110 responses. While there was predictably strong representation from the IT Industry, the respondents represented a good spread across major industry sectors.

While 39% are expecting growth of 6% to 15%, just over 18% believe their growth rates will exceed 15%; however, the same percentage said their organisations would see slower growth, of 1% to 5%. Less than 3% indicated that they expect negative growth.

Commenting on this finding and its implication for IT budgets, Lee Naik, executive director: IT strategy and transformation at Accenture, notes that South African companies' IT budgets are mostly in line with spend levels in other parts of the world.

However, he says the differentiating factor between high- and low-performing organisations is how IT spend is allocated.

“An IT budget can be simply allocated into two categories: discretionary investment focused on strategic objectives, and non-discretionary spend focused on 'keep the lights on' activities. High-performing organisations typically spend as much as 40% of the IT budgets on discretionary investment, while organisations that typically do not achieve their targeted growth allocate much less to new products and services or new IT platforms,” Naik explains.

“The challenge for these organisations is to reallocate non-discretionary spend to value-adding activities, which will help them to achieve market competitive growth.”

It was also discovered that the investment agenda for the majority of organisations (36.97%) over the next three years is strategic investments in new products and services. This was followed by 26.89% who are targeting tactical investment in infrastructure or facilities refresh, while 13.45% are eyeing large-scale business transformation.

Regarding their current IT budgets, a third of companies indicated budgets in the region of zero to R10 million. Those with R10 million to R100 million budgets followed, at 16.81%, while 12.61% say their budgets are R100 million to R500 million. Some 5.88% proved to be big spenders, with R500 million to R1 billion earmarked for IT, while 10.92% have set aside more than R1 billion.

Commenting on the finding that 43% of companies are focusing on IT cost reduction, Naik observed that CIOs are under significant pressure to run lean IT organisations while still delivering new products and services in an effort to protect or expand market share.

Thus, he says, CIOs are under tremendous pressure to do more with shrinking IT budgets. “Particularly in the current economic climate, the majority of CIOs have placed a high priority on cost reduction in environments where the 'trim the fat' cost reduction approach has all but been exhausted.”

Hence, he adds, CIOs are moving past cost takeout and are looking to new technologies and IT platforms that enable greater efficiencies to be extracted from existing assets, or are exploring completely redesigned IT platforms and delivery models.

He also explains that these advanced cost reduction approaches also present opportunities to meet new business demands in a more agile way. “By delivering new products and services in a faster and more cost-effective way, CIOs can satisfy multiple priorities with a single investment.”

The survey also probed the respondents' progress in developing and implementing cloud computing strategies. The majority (35.65%) said they have a conceptual strategy without milestones and timelines. This was closely followed by 33.91% who indicated that they have a clearly defined strategy and plan, and are executing it. Some 15.65% said they do not have a cloud strategy, but need one - 3.48% asked “what is cloud computing?”

Software as a service is the cloud platform that the majority of organisations are currently using or plan to use in the next 12 months.

Naik believes adoption of cloud computing in SA is lower than the rest of the world, but in Accenture's opinion, the lag between South African mainstream adoption and the rest of the world is shorter than with previous technology waves.

Infrastructure as a service and platform as a service offerings are aplenty in the international market; however, the typical barrier to entry for most South African organisations is bandwidth availability and the cost associated with these services, he explains.

He also points out that security concerns and the issue of cross-border data movement are also issues that organisations are coming to terms with.

Nonetheless, he believes the connectivity problem will largely be solved as new offshore cables land and as local cloud service providers establish infrastructure that bypasses international connectivity and local organisations with public cloud offerings.

Naik is also of the view that local providers have an advantage over international providers in that, while they may not have the same scale as that of international providers, they avoid the cost and potential for failure associated with international connectivity.

“In order to capitalise and capture local market share, local organisations will need to not only establish infrastructure, but also the ability to provide true on-demand provisioning to clients. If local providers can establish operations that rival the efficiency and speed of provisioning of the major providers such as Google and Amazon, they should be able to capture a significant portion of the local market.”

Another interesting finding was that most organisations (52.26%) have not experienced IT or data breaches over the past 24 months.

A more accurate interpretation would be that organisations have not had a security breach that resulted in significant losses, Naik comments.

Thus, he adds, it is likely the organisations did have security breaches, the results of which were largely insignificant and were not detected or reported. “An effective IT security approach is to understand the dimensions of a security breach and to ensure appropriate levels of reporting and response to these breaches.”

“For example, most organisations do not consider the theft of information by an employee as a security breach. Or in the case where an employee resigns, taking a copy of their personal hard drive; this is typically not detected or reported by an organisation. Also, the organisational statistics around lost or stolen laptops and mobile devices are quite staggering; however, organisations do not consider this as a security breach. As can be seen, the response alludes more to what organisations consider a serious breach rather than providing true insight into the vulnerability of South African firms.”

To address security concerns over the next 24 months, most of the respondents said they have a security plan in place and are executing it, while 24.35% said they respond to security gaps as they are identified. Meanwhile, a joint 10.43% said they are either developing a comprehensive security plan and will execute it, or have no major security concerns.

It was interesting to note that 43% of companies see mobile apps as very important to their business.

According to Naik, mobile is becoming more important in a number of ways, including how organisations interact with customers and as a way of improving productivity within the organisation itself.

“In developed markets, consumers have an expectation that service providers will offer a mobile channel. Online shopping, access to information and entertainment on mobile devices are fast becoming the norm, with consumers becoming more reliant on accessing services on the move.

“This trend is largely driven by smartphone and tablet adoption, which has been so aggressive that PC and laptop sales have been affected so significantly that there is a debate over whether a PC should still serve as a primary device at all. Productivity in the workplace is also a very important mobile topic. Trends such as the mobile workforce, bring your own device and online collaboration are all on the CIO agenda to enable a more productive workforce.”

Closer to home, he explains, the key driving force behind mobile in Africa is accessibility, with more Africans having access to mobile phones than to clean drinking water.

In SA, adds Naik, latest industry research shows that mobile phone usage is approximately 80% with 29 million South Africans using mobile phones as their primary source of communication.

“With these levels of penetration, local companies cannot afford to ignore mobile as a low-cost channel for interacting with an incredibly large customer base.”