Last year was, for the ICT industry, the toughest in the past 40 years, says John Gantz, chief research officer and senior VP of research group IDC. But not all is doom and gloom.
Gantz points out that this is not the first crash experienced in the industry and that there are still key growth areas.
Speaking at the BMI-TechKnowledge/IDC African ICT Forum in Midrand yesterday, he said worldwide IT spending showed a 4.1% decline last year, compared with a 0.5% drop in 2001, 10.4% growth in 2000 and 10.8% growth in 1999.
IT managers are now being asked to do more with less by squeezing as much as possible out of projects. Three-year and four-year IT projects are things of the past and increasingly a payoff is expected in six months. IT career options have also changed.
Worldwide, telecom services have shown growth in revenue but capital expenditure has been declining since 2000.
The next major growth period for the software sector is predicted to begin in 2006, but before then, the greatest growth in that area will be related to "software that makes other software useful".
Cycle changes
Gantz says big cycle changes in the nature of the IT industry have always been preceded by crashes. In the 1970s the mainframe crash came before the PC market, which itself crashed in 1984 after a five-year boom. Then came the dot-com crash of the late 1990s.
Consensus forecasts indicate that an economic revival, based on GDP growth, is expected to begin in the last quarter of this year, and IDC is predicting an overall 5% growth for IT worldwide this year.
Future growth areas are seen to be the Internet, with voice over Internet protocol and instant messaging being key this year; integration; mobile and wireless; security and continuity; and globalisation.
Gantz says SA has an ICT edge. Out of the top 60 countries it ranks 47th in terms of GDP per capita, 37th on an information society index (measuring such concepts as press freedom and others), 6th in terms of IT spend per GDP, 34th in phone spend per capita and 26th in cellphones per capita.
In the Middle East and Africa, SA accounts for 7% of regional GDP, 27% of IT spend, 8% of telecommunications revenue and 16% of wireless revenue.
BMI-TechKnowledge director Brian Neilson says SA also felt the industry malaise, but not as badly and for different reasons. Last year was characterised by business closures and buyouts, cash flow problems, staff cutbacks and disputes between shareholders and management.
IT players also had new competition in the form of arivia.kom and significant-sized black IT companies. Telecommunications companies have also been looking elsewhere for growth, particularly in Africa.
Oysters
Neilson warns that more pain can be expected in SA this year. However, there are "oysters" in Africa, particularly in telecommunications. The lower maturity level of African IT markets also means higher growth rates than in SA.
The African cellular market is predicted to experience a 34% compound annual growth rate (CAGR) between 2002 and 2007. The PC market in the Middle East and Africa, including SA, has showed a 16% CAGR between 1998 and 2002.
The greatest opportunities in Africa exist in the financial and banking sectors, industry (such as oil and gas), the public sector and telecoms.
However, Neilson cautions that doing business in Africa is not for everyone, as it is a specialised skill. For most IT players, the priority will be to focus on their business in SA.
While the SA market did not fall as profoundly as other markets, some consolidation will continue. Most players will still have a presence in the country, but managing it will be different in the time ahead, he says.
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