African ICT market research and analysis company BMI-TechKnowledge has revealed that the South African IT services market grew by 6.1% in 2006 to reach a total value of R19.8 billion. BMI-T predicts that the market will grow at a CAGR of 6.4% per year over the next five years and will have a total value of R26.9 billion by 2011.
In a new report, The SA IT Services Market Sizing and Forecast, 2006 - 2011, BMI-T
Says that over the forecast period, the fastest growing sectors IT sectors will be hosted application management and hosted infrastructure services. Both small and large companies are likely to adopt such services en masse in the wake of an increased uptake of broadband and more efficient, cost-effective communications.
However the real key to IT growth in South Africa will be increased competitiveness. As Natalie Bryden, BMI-T Senior Analyst and author of the report, argues, "with globalisation, almost every industry is experiencing increased competition, and IT flexibility is becoming increasingly important in an ever-changing business environment. Companies that need to adapt quickly to competitive action and changing customer needs, such as financial institutions, are already at the forefront of SOA adoption."
Bryden also notes that the regulatory environment, both globally and in South Africa, is forcing compliance. This in turn translates into IT spend as business continuity and IT security continue to be at the top of the agenda.
"Companies are struggling to deal with the additional complexities that the convergence of IT and telecommunications is bringing and new skills sets will be required to deal with this dynamic environment," Bryden explained.
Competition is fierce in the IT services space and new competitors are appearing at a faster rate than ever. Not only are foreign companies looking to expand their footprint in Africa, but South African companies are increasingly looking abroad to increase their revenues.
In 2006, Dimension Data completed the acquisition of IS and became the largest player in the IT services market, with a total market share of 12.1%. They are closely followed by Business Connexion (BCX), with an 11.0% share, and GijimaAST with a share of 8.6%", adds Bryden.
The report also reveals that, during 2006, the outsourcing sector was the single largest foundation market (41.6% share) in terms of IT services spending. Deployment and support (26.7%) and system integration (17.8%) lagged well behind.
In 2006, consolidation in the vendor space continued, and BMI-T predicts more mergers and acquisitions in the years to come as companies struggle with tightening margins and the need to expand their skills set to address the issue of convergence.
"Expect integration, consolidation and architecture to dominate the IT priority list for years to come," concludes Bryden.
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