Government, business support organisations (BSOs) and private companies in the IT outsourcing space all need to work closely together if the Western Cape is to improve its global competitiveness and grow the amount of IT outsourcing revenues it generates from foreign markets.
This is one of the key messages to emerge from the first IT Outsourcing Conference recently held in Cape Town with the aim of helping BSOs to find ways to spur the growth of the sector in the Western Cape. The conference was a joint initiative between the Department of Trade and Industry (DTI), the Centre for the Promotion of Imports from developing countries (CBI) in the Netherlands and Wesgro.
Wesgro, the official trade and investment promotion agency for the Western Cape, is responsible for attracting investment, growing exports and promoting the business image of the Western Cape. The organisation works closely with foreign importers, local exporters, labour, local and provincial government, and investors to grow the province's economy.
The CBI, established in 1971, is an agency of the Ministry of Foreign Affairs and part of the development cooperation effort of The Netherlands. It helps companies from emerging markets to grow their exports to the European Union by providing them with services such as market information and matchmaking, technical assistance, and training and coaching. The CBI also works closely with other BSOs.
Some challenges that South African companies face as they try to enter the European market include weak industry representation and strategy, weak industry support, and a lack of market knowledge, says Dutch IT services and outsourcing consultant, Lazlo Klucs, who was a guest speaker at the conference.
"To be successful local outsourcing service providers need to have the capacity to perform, a customer base and references, solid value proposition and sophisticated marketing, long term commitment, domain expertise, technical and communication capabilities, technology, know-how, infrastructure and quality management, processes and standards," says Klucs.
The Western Cape has a well-established IT, business process and call centre outsourcing sector. Cape Town, the hub for ICT in the Western Cape, is home to some 1,500 electronics and ICT companies. The sector is supported by excellent technical skills and world-class fixed and mobile communications infrastructure.
While the range of IT products and services exported from the Western Cape is broad, software development dominates followed by mobile telecommunications, web development and Internet-related services.
A number of global companies are looking to Cape Town as an alternative location to India and other Asian destinations for selected business process and IT outsourcing services.
Yet there is still plenty of room for growth and development. The 2007 Cape IT Census conducted by Frost & Sullivan earlier this found that only 23% of Western Cape IT services companies are providing services to foreign clients, down from 34% in 2003. The greatest exporters come from the software development and online digital media segments, again underpinning the importance of software development for the region.
According to the survey, which was commissioned by the Cape Information Technology Initiative (CITI), a lack of funding and incentives is one serious constrain on innovation and export growth. Other challenges companies face in exporting IT services include, lengthy payment processing time and limited access to clients.
"The findings confirm what we have long suspected. We have a strong and growing software development hub in the Western Cape and this needs to be nurtured and encouraged. The only way that can happen though, is with support from all levels of government," says Viola Manuel, executive director of CITI. CITI is a networking and cluster development agency that brings together people, ideas and capital to grow the Western Cape, South Africa's ICT sector. CITI's goal is to promote Cape Town as a global IT hub and gateway into Africa.
The IT Outsourcing conference is the first of a series of national conferences being rolled out by the DTI in collaboration with CBI. A ten point action plan developed at the conference will guide and inform the strategy for the Western Cape's IT outsourcing sector going forward. The action plan will seek to establish a cohesive strategic international marketing plan for the ITO sector nationwide.
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