Local IT services set to break USD 4bn
The local information technology (IT) services market is expected to exceed $4 billion (R31 billion) this year, representing a year-on-year increase of more than 11 percent, according to the latest report by research firm IDC.
The growth is fuelled by economic expansion, the adoption of open-source software, government projects such as the e-government that is meant to provide technology access to rural areas, technology upgrade cycles, preparations for the 2010 soccer World Cup, deregulation, and growth in the small and medium business market.
Many firms are outsourcing non-core operations such as IT to companies such as Business Connexion, GijimaAst and IBM to save money and focus on the core business.
IT outsourcing constitutes more than one-third of the services market, the largest market share of all IT services categories.
"Economic growth and national development projects are playing into the hands of IT services providers, in terms of hardware and software implementations, as well as custom development, outsourcing, and other services," said Pieter Kok, a senior research analyst at IDC South Africa.
IDC predicts that the local IT market will grow at an average annual rate of 11.3 percent to nearly $5.67 billion by 2011.
The skills shortage in the country, however, remains a major inhibitor in the IT services market. This week the labour department said there was a shortage of 6 675 information and communication technology (ICT) managers.
Kok said: "Despite public and private sector attempts to address the severe skills shortage, filling vacancies and keeping them has been a tough task.
"Should measures passed to remedy the situation prove futile, sourcing of expensive international skills will cause a drastic increase in the cost of doing business in South Africa, making it more difficult for local companies to effectively compete in an increasingly competitive marketplace."
Last month the government and the private sector launched the e-skills council to advise on what type of measures should be put in place to ensure that the country produced industry-ready, better skilled and more adaptable workers in the ICT sector.
The focus is not only on skills in the current period, but on skills that will be required in the future.
The e-skills council was vital because there was no co-ordinated, coherent and integrated approach to addressing the ICT skills shortages at all levels in the country, the department of communications said recently.
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