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South African IT Infrastructure Outsourcing End User Survey
Frost & Sullivan, Aug 2007, Pages: 96
The Frost & Sullivan research service titled South Africa IT Infrastructure Outsourcing Market End User Survey provides an overview of the IT infrastructure outsourcing market in South Africa. The study examines market drivers and restraints and details the expected trends for the next two to six years. An analysis of key competitors provides the reader with in-depth market information.
Entry of New Participants likely to Reduce Infrastructure Costs
The imminent entry of new market participants is likely to bring about a sea change in South Africa’s IT infrastructure outsourcing market in the next five years. Most significant of these will be the Second National Operator (SNO), which should provide a good impetus for the reduction of bandwidth costs. Furthermore, the burgeoning growth of the small, medium and micro enterprises (SMME) sector is also expected to attract smaller new service providers that are likely to be specialists in their chosen fields. These newer participants are anticipated to start making inroads into the market share enjoyed by larger, more established service providers.
Notwithstanding these positive trends, the South African IT infrastructure outsourcing market is being severely restrained by skill shortages and high bandwidth costs. 'Skill shortage is nearing chronic proportions and while this encourages outsourcing, services providers themselves are finding it hard to attract and retain qualified staff,' notes the analyst of this research service. 'Poor adherence by service providers to the 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.'
Network Management remains the Most Utilized Service
Survey results indicate network management to be the most utilized service and the one that most respondents first consider outsourcing. The importance of network management was reinforced when it became clear that those respondents that had just started outsourcing had this service in their portfolio. Disaster recovery is easily the most critical outsourced service and 45 per cent of the respondents have outsourced the service for more than five years and another 41 per cent between three and five years. Nevertheless, there are still many companies that prefer not to outsource this service as they are reluctant to allow a perceived loss of control over mission critical processes.
With regard to service provider selection criteria, respondents often mentioned that one should not only look at the price but at the total cost of ownership. Price, as a factor of consideration, has varying levels of importance across companies and small organizations in particular consider it as a critical criterion when choosing a potential service provider. Nevertheless, the majority of respondents still held price to be an important criterion along with reputation. Most respondents also regard the issue of black economic empowerment (BEE) status as a significant criterion when selecting a service provider.
'Although it was mentioned that multi-sourcing still needs some time to mature as a concept, majority of the companies are willing to engage in this type of service acquisition,' says the analyst. 'This is an emerging trend as most respondents remarked that they regarded the importance of Best of Breed outsourcing as a significant part of their outsourcing strategies.'
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