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SA’s IT spending on software, hardware rebounds

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South Africa’s spending on hardware, software and IT services rebounded significantly in 2021 from the dismal spending in 2020, with overall IT revenue growth at 6.5%.

This is according to local market analyst firm BMIT, in its latest ICT Market Overview and Sizing Report.

The report is a compilation of quantitative and qualitative information from a number of sources and includes face-to-face interviews with leaders of various ICT organisations, as well as online industry and market surveys in South Africa.

BMIT says while the global ICT industry is returning to its previous growth pattern of 5%-6% growth year-over-year, the research shows that while the recovery is also happening in SA, it is occurring at differing rates within different sub-sectors, as a result of structural changes in the ICT market.

The uptick is happening despite customers facing their own challenges – a quarter of business customers surveyed by BMIT said their own revenues were still down compared to 2019, revealing the lingering effect of the pandemic.

Winners and losers

However, the firm says around a third of mid-sized companies indicated some level of growth from pre-pandemic levels, illustrating the hit-and-miss impact of the pandemic – with some industries doing well and others (such as travel and hospitality) really struggling.

Because many business customers are still financially constrained, BMIT says, they are being forced to prioritise their budgets carefully.

While spending on hardware, software and IT services rebounded, the firm says business telecoms spending declined overall.

Putting the IT and telecoms categories together, overall ICT revenue growth of 3.7% is, in fact, below the global average.

“The telecoms sub-sector saw revenue growth of only 1.2% in 2021, pulled down by declining voice markets and mixed growth in the mobile sector; ie, strong growth in fixed-mobile broadband services but declining mobile voice and moderated mobile data revenue due to price pressure,” says BMIT.

It explains that telecom companies reported significant cutbacks in business customer spending, while the residential broadband market was the notable exception last year, growing at a robust 17.5%, “putting a number to what we already knew about how critical home internet is in a pandemic”.

According to BMIT, this growth occurred in spite of the massive price/performance increases seen in both fixed and mobile broadband offerings in the market and within a highly competitive marketspace.

BMIT forecasts ongoing rollout of access fibre in both the home and business segments; ie, an ongoing land-grab.

“FTTH [fibre-to-the-home] rollout, and corresponding adoption, is now moving rapidly ‘down the pyramid’ to next-tier towns and customer affordability segments, while fixed-mobile broadband remains a very significant gap-closing solution.”

BMIT adds that Telkom’s end-of-life plans for its copper network gave rise to significant opportunities for various companies that supply both business and residential segments, as a large base of DSL connections needed to be migrated to fibre, fixed wireless and fixed mobile connections.

It points out the business market is undergoing a major shift, including the move to public cloud services.

BMIT detected a significant increase in this respect across companies of all sizes, in its annual enterprise survey, which contributed to the forecasts included in the report.

Forced digital conversion

Other key IT drivers unpacked in the report include digital transformation, automation and e-commerce.

“Digital transformation has been embraced by, or thrust onto, organisations as they come to terms with operating in a physically restricted environment where remote working and hybrid workplaces are now the new normal.

“The digitisation of back-office functions and process optimisation is also taking centre stage. As far as automation is concerned, data-driven decision-making is yielding valuable business insights and robotic process automation is a current iteration of this.”

Due to the shift in mindset required to adapt to the new nature of business, organisations are now more receptive to evaluating and adopting emerging technologies where they can be proven to benefit operational cost reduction, improve customer service and retain competitiveness, the firm notes.

It says digital business models and data protection legislation have highlighted the need for comprehensive, holistic IT security, within the ongoing proliferation of sophisticated bad actors.

“What is evident from the projections in the report is that whilst certain ICT business areas have shown muted growth, others have seen strong performance. In some cases, the growth is a temporary correction, whilst in others it is part of a new or sustained trend,” it concludes.

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