IT and telcoms have come a long way
Business Connexion (BCX) group’s executive for strategy, Willem van Rensburg, said the ICT sector had turned the corner and was ticking upwards because most of its companies were concentrating on servicing their clients instead of on achieving blue-chip status.
Van Rensburg said confidence in the industry was returning and the valuations of shares were now generally based on realistic earnings predictions.
In the boom before the bust, companies invested millions in startups with no clear business plan beyond putting “dot.com” on the end of something.
“The ICT sector is maturing and we can’t ride on hype alone. It’s about consistency of service and delivering results.
“If you haven’t got a product or service that people want, and if you don’t make it available quickly, easily and at the right price, then your business will fail,” said Van Rensburg.
Companies are increasingly relying on outsourcing — getting ICT companies to manage their IT departments — so that they can concentrate on their core business. Banks and the retail sector rely heavily on ICT in servicing their clients.
Van Rensburg declined to comment on a takeover of BCX by Telkom but said consolidation had always been an issue since the ICT crash.
Datacentrix chairman Gary Morolo said the worst was over for the ICT industry but structural problems such as the government’s slow procurement processes and lack of internal capacity might curb a rapid, robust recovery.
Datacentrix reported improved full-year results on Wednesday after a disappointing first half. Its headline earnings a share increased 11% to 28.7c.
Morolo said Datacentrix performed badly in the first half because it lost sight of the fundamentals and built a bubble that burst when reality returned.
“Our execution of growth strategy let us down in our first half.
“It led us to move our focus from our everyday business because there were all these new areas we were chasing which seemed more value-adding.
“Some of our contracts were revised but when we returned to our old strategies we were back on track,” said Morolo.
He said accelerated economic growth has stepped up competition across the ICT sector, whose players are seeking to gain market share through improved services tailored for the business and technical requirements of SA markets.
He said most companies had not spent on ICT for some years and were due to upgrade, enhancing business opportunities in the sector for the next few years.
Morolo said he was not concerned about consolidation and didn’t need “Big Brother” to survive.
“But it’s up to the shareholders.”
Morolo said consolidation would be good for Datacentrix because it would reduce the number of players in the ICT infrastructure business from which 85% of his company’s revenue is derived.
“Most ICT companies have shunned this area of business saying it’s unattractive and that’s where we have established a dominance,” Morolo said.
Allied Technologies (Altech) chief executive Craig Venter said: “The results of some telecoms companies offshore and locally indicate that there is a significant increase in the fortunes of telecoms and ICT.”
Altech unveiled a 12% rise in annual headline earnings a share to 379c on Wednesday. Annual revenue climbed 9% to just over R6-billion.
Venter said cash of R1.5-billion would be deployed in acquisitions.
He said the liberalised telecoms market in SA should fuel rapid growth and Altech was ideally positioned to capitalise on the telecoms multimedia ICT space.
He said the local ICT market required some consolidation because during the boom there were too many ICT companies.
Altech’s growth, Venter said, would be driven by its telecoms subsidiary, Autopage Cellular, and by car tracker Netstar.
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