The South African IT Services market grew 15.13% in rand terms over the course of 2016, according to the recently published South Africa IT Services Market 2017–2021 Forecast by the International Data Corporation (IDC).
However, this increase was relatively marginal in dollar terms and there are tough times on the horizon, said Jon Tullett, research manager of IT Services at IDC Africa.
“2016 was another challenging year for IT Services, and IT in general in South Africa,” said Tullett. “The economic climate and several years of austere spend are starting to come to a head with confidence in future growth at a very low level.
“Opportunities remain in key areas such as outsourcing and cloud, but more strategic and longer-term engagements are under pressure and may remain on the back burner until the economy improves.”
Tullet noted that there had been a notable trend by enterprises in previous years to rely on services to facilitate cost-cutting and to restructure infrastructure spend, improve efficiency and position themselves for digital transformation.
“This trend is starting to decline because of continued economic pressure, with many organisations now operating in a fully defensive model, with longer-term strategic investment on hold,” he said.
The researcher said that the continued market pressures meant that vendors will now have to align themselves more closely with their customers’ positions in their respective markets.
“They will have to restructure contracts and relationships where necessary and focus on delivering immediate value while positioning capabilities in advanced or emerging technologies cautiously,” he said.
“Vendors will also have to evaluate local resources and right-size these to reflect the realistic expectations of local business opportunities. Vendors using South Africa as a base for other African operations will most likely also find themselves undergoing similar evaluations in other territories on the continent.”
The IDC forecast that IT Services spend in South Africa will slow down to a single-digit percentage in 2017.