The South African IT services market is expected to grow to R27.5 billion by 2009, according to a forecast by research firm BMI-TechKnowledge.
According to senior analyst Natalie Bryden, the market reached R18.4 billion last year, reflecting a 5.3% year-on-year growth. The group is expecting a compound annual growth rate of 8.4% between last year and 2009.
BMI-T expects market growth of 7.8% next year and 8.1% in 2007.
Bryden says the IS outsourcing, systems integration and deploy and support markets will continue to generate the largest amount of revenue over the period, while the software-as-a-service market will remain the fastest growing, with a growth rate of 30%.
According to BMI-T`s South African IT Services Report and Forecast, 2004-2009, most of the services spending growth in 2004 came from cost-cutting initiatives, although this year more growth is expected from more optimistic initiatives around how to increase revenues.
The trend to consolidation, which last year saw EOH merge with KPMG and CSH being bought by Bytes Technology Group, is likely to continue this year.
The top service provider in terms of revenue last year was Business Connexion, followed by arivia.kom, Dimension Data, the State IT Agency and AST Group. Together, these top five accounted for R7.5 billion of the R18.4 billion market.
For the period until 2009, Bryden foresees continued vendor consolidation and an increase in value-added partnering.
"We don`t see competition abating," she says. "On the contrary, it will get worse. So what will be crucial is partnering."
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