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SA and IT outsourcing – what to expect in the coming years

by david.nunes

SA and IT outsourcing – what to expect in the coming years

By:  Dr Andrew Hutchison, expert for intelligent networks at T-Systems in South Africa

07 November 2013

With the South African IT services market expected to reach R53.3 billion by 2015, according to BMI TechKnowledge’s (BMI-T) South African IT Services

Market Sizing and Forecast it is safe to say there is still considerable opportunity for IT players in their respective specialist fields, be it vendor, service provider or integrator.

However, it is the outsourcing market in particular that has enjoyed significant support over the last three years and will continue to provide a lucrative playing field in the coming two years. This statement is also echoed by a report released by KPMG: South African Sourcing Pulse Survey:Shared Services & Outsourcing Advisory Practice, Management Consulting in September 2012 which indicates that the outlook for domestic outsourcing is looking favourable in terms of adoption.

Why outsourcing?

Considering the above figures, why is the SA outsourcing market such a strong force, particularly in light of global economic pressure?  For one, the outsourcing market continues to grow through its dynamic evolutionary nature which in turn allows it to meet the varying demands of organisations.

It is specifically the managed services and hosting segment that are enjoying some strong adoption.  Managed services enable clients to choose what outsource services they require such as end user device management or security instead of necessarily outsourcing the entire IT stack.

This also gives the market the flexibility of outsourcing different services that are tailored to meet company requirements.

However, the mantra remains the same: with an outsource partner, organisations benefit from the use of specialist systems and insight that offers the latest in technology advancements and can ultimately impact the way they run their daily operations.

Full outsourcing services take this one step further,  whereby outsourcers take ownership of, and responsibility for, managing all or very large parts of the customer’s information infrastructure and operations according to a service level agreement (SLA).

Driving the evolution

But, it is not only the outsourcing market that is evolving on its own – external technology influences are also dictating the way it is developed and implemented.

Take Unified Communications and Collaboration (UCC), for example.  The convergence of IT and telecoms, mobile workforce support and the constant need for broad network connectivity are playing a significant role in the adoption of wireless and mobile technologies.

This is resulting in continuing developments in the UCC space, hence the changes in traditional IT infrastructure and network design.

Here, it makes complete sense to partner with a UCC outsource provider who can take the guesswork out of unifying the myriad of connectivity and communication options such as videoconferencing, messaging, telephony and VoIP.

However, where outsourcing will really come into play in the next few years is to address the complexity of IT environments which show no signs of abating or simplifying for that matter.  Whilst a lot of organisations do have IT departments to support businesses processes they don’t always have the skilled resources to handle the increasingly complex IT infrastructure.

Outsource service providers have a major role to play here; businesses can outsource their environments in order to optimally focus on their core businesses while gaining access to best-of-breed technology expertise. It also then becomes the service provider’s responsibility to ensure that training occurs, certification levels are maintained and that technical expertise and optimisation is available for the outsource client’s benefit.

Overall, the research group IDC states that general IT spending in South Africa will steadily increase at a compound annual growth rate (CAGR) of 6.2% over the coming years to reach $17.42 billion (around R150 billion) by 2016. As indicated, the IT services market represents a significant part of this growth.

Outsourcing will no doubt play a critical role in the above growth and, importantly, in the manner in which IT services are provided in SA today.  Outsourcing allows local organisations to truly embrace the advancements that come with technology, be it cloud computing, mobility or UCC, but with the confidence and benefit of using a partner organisation which is completely focused on these technology business enablers.  There is no doubt that outsourcing will remain a major force in the coming years.

About Deutsche Telekom

Deutsche Telekom is one of the world’s leading integrated telecommunications companies with 144 million mobile customers, 32 million fixed-network lines and more than 17 million broadband lines (as of June 30, 2013). The Group provides products and services for the fixed network, mobile communications, the Internet and IPTV for consumers, and ICT solutions for business customers and corporate customers. Deutsche Telekom is present in around 50 countries and has over 231,000 employees worldwide. The Group generated revenues of EUR 58.2 billion in the 2012 financial year – more than half of it outside Germany (as of December 31, 2012).

About T-Systems

Drawing on a global infrastructure of data centers and networks, T-Systems operates information and communication technology (ICT) systems for multinational corporations and public sector institutions. T-Systems provides integrated solutions for the networked future of business and society. The company’s some 52,700 employees combine industry expertise and ICT innovations to add significant value to customers’ core business all over the world.

T-Systems generated revenue of around EUR 10 billion in the 2012 financial year.

Since the inception of T-Systems in South Africa in 1997, the company has cemented its position as one of the most successful T-Systems companies outside of Europe. A leading ICT outsourcing service provider locally, T-Systems offers end-to-end ICT solutions in both the ICT Operations and Systems Integration markets. Their extensive portfolio of services covers the vertical, horizontal, IT and TC space. T-Systems South Africa’s head office is located in Midrand with another major office in Cape Town, and 20 further representative offices in locations throughout southern Africa.

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