Opportunities in the South African IT Infrastructure Outsourcing Market
Cape Town .– The South African IT infrastructure outsourcing market is fast developing into one of the country’s top growth sectors. While the imminent entry of new market participants, particularly the second national operator Neotel, will hasten growth, there is an urgent need to focus on the requirements of small, medium and micro enterprises (SMME) to capitalize on the growing opportunities in this flourishing sector.
Going forward, the competitive structure of the market is likely to change, with widespread expectations of consolidations amongst companies with varying specializations or from different backgrounds like IT and telecommunications.
New research from Frost & Sullivan (www.ict.frost.com), South Africa IT Infrastructure Outsourcing Market End User Survey, finds that South African companies are showing an increasing trend towards using outsourced services. This demand will continue to increase, with significant demand from SMMEs.
The SMME sector is South Africa’s fastest growing industry sector, contributing more than 40 per cent of the country’s GDP. At present, this area is apparently being overlooked by service providers.
“The growing need to focus on core competencies amidst rising competition is driving companies to outsource those processes that are not in their area of expertise,” notes Frost & Sullivan Industry Analyst Lindsey Mc Donald. “The improvement of black economic empowerment (BEE) credentials by procuring services from accredited suppliers is another factor encouraging the use of outsourced services. Most service providers are BEE accredited.”
Despite the positive trends, skill shortages and high bandwidth costs severely restrain the South African IT infrastructure outsourcing market. Skill shortage is nearing chronic proportions and while this encourages outsourcing, services providers themselves are finding it hard to attract and retain qualified staff.
“Due to high bandwidth costs, service providers are being forced to increase their prices,” explains Mc Donald. “Poor adherence by service providers to provisions of Service Level Agreements (SLAs) and an overall lack of focus by service providers on the SMME sector are some of the other restraints for the market.”
Service providers will do well to target their product offerings towards the requirements of clients of all sizes. The likely entrance of new participants catering to the needs of smaller companies will offer a significant degree of competition to the sizeable service providers.
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