The South African IT services market grew by 6.1% in 2006, reaching a total value of R19.8 billion, says BMI-Techknowledge in its latest report.
The market is expected to grow at 6.4% between 2006 and 2011, reaching R26.9 billion by 2011, the report says.
The SA IT Services Market Sizing and Forecast 2006-2011report says service-oriented architecture (SOA), corporate governance and convergence are driving IT services spend.
According to the report, the outsourcing sector was the single largest foundation market (41.6% share) in terms of IT services spending in 2006, followed by deploy and support (26.7%) and system integration at 17.8%.
BMI-T senior analyst Natalie Bryden says an increased uptake of broadband and efficient cost-effective communications will lead to a strong adoption of hosted application management and hosted infrastructure services. As a result, these two services are expected to be the fastest growing services in the forecast period.
"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," she says.
Additional complexities
BMI-T says its research also found that the regulatory environment, globally and in SA, is forcing companies to adhere to strong compliance policies. This has led to business continuity and IT security becoming a high priority, which translates into more IT spend.
"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 says.
The changing legal and regulatory environment in Africa has also led to stronger competition in the IT space, and a growing eagerness by international companies to expand their footprint in the continent. South African companies are also looking abroad to increase their revenue.
In 2006, consolidation in the vendor space continued and BMI-T says it expects more mergers and acquisitions in the coming years. This will come about amid the struggle by companies to tighten margins, and the need to expand their skills set to be able to address the issue of convergence and stay competitive, says Bryden.
"Expect integration, consolidation and architecture to dominate the IT priority list for years to come."
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