Fuelled by economic growth and national development projects, the highly matured South African IT services (ITS) market has been growing at a healthy pace.
According to a recent report by market intelligence advisory firm IDC, the South African ITS market is expected to exceed $4 billion in 2008, a year-on-year increase of more than 11%.
IT outsourcing constitutes more than a third of the services market, the largest market share of all ITS categories, followed by systems integration, deployment and support services.
This indicates a sophisticated and mature IT spending model, which is at odds with most of the Middle East and Africa region, where outsourcing constitutes a relatively small percentage of ITS revenue, says IDC.
"Economic growth and national development projects are playing into the hands of IT services providers, both in terms of hardware and software implementations as well as custom development, outsourcing and other services," says Pieter Kok, senior research analyst at IDC SA.
"A maturing marketplace is an important driving force behind the growth in services spending. As local companies develop their decision-making processes, the benefits of services delivered by an external provider are becoming more visible, fuelling further adoption. As a result, clients are making better decisions, negotiating better terms, demanding better results, and hence, reaping the benefits of their IT investments."
IDC predicts the South African IT market will grow at an average annual rate of 11.3%, to nearly $5.670 billion by 2011.
The growth will be spurred by the realisation of such government projects as e-government and previously delayed open source adoption, as well as preparations for the 2010 FIFA World Cup, technology upgrade cycles, de-regulation, and growth in the SME market.
The skills shortage in the country, however, remains a major inhibitor in the IT services market.
"Despite public and private sector attempts to address the severe skills shortage in the country, filling vacancies and keeping them has been a tough task," says Kok.
"Should measures passed to remedy the situation prove futile, sourcing of expensive international skills will cause a drastic increase in the cost of doing business in SA, making it more difficult for local companies to effectively compete in an increasingly competitive marketplace."
IDC's South Africa IT Services 2007-2011 Forecast and 2006 Vendor Shares (IDC #ZS06P) report presents the ITS industry in SA in 2006 and forecasts expenditure on ITS through 2011.
The study provides market size information, vendor market shares, and revenue broken down by ITS categories and vertical markets. The study profiles the top ITS providers, including their IT services portfolios, their presence in individual vertical markets, and their largest contracts in 2006.
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