The South African motor industry is enjoying sustained growth, and has seen a good start to 2007. Generally positive global economic conditions have been augmented with a strong domestic demand for new vehicles from manufacturers such as BMW, DaimlerChrysler, Delta Motor, Ford, Toyota and Volkswagen - all of which boast local manufacturing and assembly plants.
According to Gert Cronj'e, regional chief executive of Business Connexion's Eastern Cape region, significant demand for new vehicles has placed pressure on the motor manufacturers' resources in terms of technology requirements.
Those that have outsource agreements in place are better equipped to match demand with supply.
"While most motor manufacturers keep their supply chains in-house as they are perceived to contribute to competitive advantage, we have seen elements of technology outsourcing gaining popularity with some car makers," he says.
Cronj'e says Business Connexion is strongly advocating the 'on-demand' concept of delivering technology as a service as this model is ideally suited to meeting the fluctuating needs of business. "The motor industry is a prime example of unpredictable demand. Some years ago, the prime interest rate was at 17%, which resulted in a depressed market," he says - noting that car sales were in decline in the 1990s, and only started showing marginal growth in 1999.
"As the Reserve Bank steadily lowered the interest rate - and in combination with other factors such as the emergent black middle class - car sales have accelerated considerably," he adds.
An examination of the prime interest rate over the years shows a consistent pattern of rise and fall. It is widely believed by analysts that the present cycle has bottomed out, and that the next change is likely to return to an upward trend.
"The point is that the motor industry is a very good indicator of how companies experience differing market conditions, which are dictated by a variety of internal and external forces. The challenge for such companies is to ensure that they can easily scale their technology resources to match their needs - without the administrative overhead of managing headcounts or owning more resources than required in a bear market - a situation which drives up the relative cost of technology to the business," Cronj'e explains.
He says the advantages of managed services delivered on an on-demand basis apply in both a bull and a bear situation. "Strong growth such as that being experienced in the motor industry requires rapid ramping up of resources. Similarly, if the market contracts, companies need to have the ability to rapidly scale down resources. Efficiency and cost-effectiveness are achieved by delivering services against requirements," he concludes.
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