IT services spending in SA is expected to increase 8.8% year-on-year in 2016 to total $5 billion.
This is according to forecasts from market research firm IDC in its 'Africa IT Services Market 2015-2019 Forecast and 2014 Vendor Shares' report. IDC expects outsourcing services to continue to garner broad appeal as companies increasingly look to limit and predict their costs and optimise their current investments.
Lise Hagen, IDC's research manager for software and IT services in Africa, says the increasing demand for innovative IT solutions to operational challenges is a priority for decision makers in purchasing IT services.
She believes market growth will rest on third-platform technologies of mobile, cloud, big data analytics, and social.
"An increasingly mobile workforce will have a significant impact on purchases across the whole technology stack of software, hardware, and IT services. IT initiatives will also remain focused on technologies that enable continuous improvement and optimisation," she explains.
In its report, IDC notes that the considerable shifts in the rand/USD exchange rate are having a significant impact on the local IT services market. Spending on IT services in 2014, for instance, declined 1.5% year-on-year in US dollar terms, but when measured in the local currency, it was up 10.7% over the same period.
Currency volatility is closely linked to both macroeconomic factors and local market conditions. Similar to other emerging markets, SA is subject to weak external demand and soft commodity prices, as well as deep-seated structural issues, it notes.
Given the ongoing economic challenges, IDC adds, the outsourcing services macro-market remains the largest in SA and is expected to comprise 44.3% of the country's IT services landscape in 2016.
This will be predominantly due to increased spending in the managed services space as organisations increasingly make use of outsourcing services to drive greater efficiencies and cost reductions.
IDC expects IT services spending in SA to increase at a CAGR of 7.9% over the five-year forecast period to reach $6.8 billion in 2019.
Information systems consulting will be the fastest-growing service, expanding at a compound annual growth rate (CAGR) of 13.7%, as organisations seek guidance on how best to incorporate third-platform technologies like cloud, social, and mobility so as to gain an edge in the increasingly competitive marketplace, says IDC.
The other top-performing services in terms of growth over the forecast period will be application consulting and customisation (12.6%) and combined systems integration (12.4%).
To take advantage of the market growth, Hagen says IT services vendors need to consider the drivers across the entire ecosystem in order to successfully accelerate IT services adoption.
"Successful IT services providers in the South African market will not only be able to navigate the growing requirement for interoperability, flexibility, and collaboration, but also to retain brand integrity and differentiate their services."
She adds that IT services vendors also need to consider the impact of other ICT entities - including SMEs and start-ups, as well as governments and regulators - in order to actively foster a robust ICT ecosystem.
According to IDC, Dimension Data ranked as the leading IT services provider in SA in 2014, with 12.0% share of the market's overall value. BCX ranked second, with EOH in the third spot.
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