Major shake-ups in the ICT outsourcing market through 2005, including merger and acquisition activities are expected, says META Group, a leading provider of information technology (IT) research, advisory services, and strategic consulting.
According to the latest METASpectrum results, organisations seeking to outsource, must have a threefold strategy. This entails ICT charter compliance, competitive pricing and flexible service offerings. "Stagnant business models are outdated, and any organisation wishing to grow must rework and review their models continuously. Therefore, the Outsourcing Service Provider partner must be able to do the same, without impacting the Service Level Agreements (SLA), " says Johan Jacobs, enterprise applications and analytics senior research analyst for META Group.
In Southern Africa, given the market share, there is a continuous jockeying for potential leadership position (in contract monetary terms) and, as such, price represents the ultimate contract winner. Pure infrastructure services are viewed as a commodity, and Service Level Agreements within that space are expected to include the highest possible service at the lowest cost.
The final publication of the ICT charter will be a key influencer in the relatively niche outsourcing service provider (OSP) market in South Africa, says Jacobs. Local and global vendors with local subsidiaries that have resolved their black economic empowerment (BEE) status will be in a good position to leverage the largest untapped market - namely, the public sector and national, regional, and local government. These OSPs will be able to aggressively position themselves when the contracts come up for renewal.
The study further shows that mergers and acquisitions will occur in the OSP market during 2005/06 - there are currently too many players in this space. Market share will significantly change through acquisition and successful deals within the public sector. Organisations will have fewer OSP vendors to choose from and will have to critically review their BEE position to ensure that the correct BEE alignment is maintained.
The research showed that organisations seeking to outsource through the end of 2005 would be able to negotiate heavily on price. Vendors will look closely at the public sector for opportunities as well as at contracts coming up for renewal after the ICT charter is published. OSPs are aggressively focused on moving up the service stack into the Business Process Outsourcing and call centre space, with a particular emphasis on being the offshore partner to firms in the US and Europe in order to expand their service offerings.
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