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Managed Services Market in South Africa
Frost & Sullivan, January 2012, Pages: 122
Small to Medium Enterprise Sector Emerges as a Key Market for Cloud-based Offerings
Under the current economic conditions, managed services have emerged as particularly critical for businesses in South Africa as they aim to contain costs and improve efficiency. Enterprises are increasingly outsourcing non-core IT processes in order to focus on their core mission. The emergence of cloud computing has given impetus to this trend, as businesses are now able to access the computing resources they need, when they need them, over the internet.
Small and medium enterprises (SMEs) are positioned to benefit immensely from cloud-based offerings as these services essentially circumvent the need for businesses to invest in costly capital infrastructure. In South Africa, cloud computing is now a reality, and is poised to become the standard mode of delivering computing resources in future. More pertinently, a significant majority of enterprises have invested in or are planning to invest in cloud services in the near future.
“Increased uptake of cloud-based services will be driven by the ever declining broadband costs,” notes the analyst of this research. “The SME sector represents a key market for cloud-based offerings as these companies often cannot afford to build their own infrastructure. The declining costs of bandwidth will make these offerings affordable and attractive to the sector.” The cloud presents SMEs with the only route to access normally expensive computing resources.
Shared cloud infrastructure, or the public cloud, is a viable option for SMEs that cannot afford to build data centres of their own. Thus, cloud services are slated for greater uptake in future as businesses move towards managed hosting services. “A critical enabler of this level of uptake will be the projected falling of bandwidth prices on a sustained basis,” remarks the analyst. “As infrastructure becomes far more ubiquitous, particularly undersea cables and terrestrial networks, the costs of bandwidth and internet-based services, such as cloud offerings, are expected to fall.”
Service Providers Need to Focus on Reducing TCO, Especially for Emerging Services
Although managed services’ key value proposition is its ability to reduce costs, the reality is that the total cost of ownership (TCO) for a number of businesses is still high, or has even subsequently increased, negating any potential benefits to be derived from these services. A case in point lies in areas such as software as a service (SaaS), where challenges related to integration with existing systems have resulted in companies running SaaS systems parallel to their existing systems. This has further increased the total cost of ownership for these businesses.
Another manner in which managed services can potentially impose additional costs on businesses relates to the sub-optimal customer service that can emanate from poor service provider response times and lacklustre technical innovation. It is therefore imperative for service providers to focus more on providing true TCO savings rather than merely on price.
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
- Data centre hosting
- Cloud services
South Africa's managed services market is at its infancy stage and is viewed by service providers as an exciting market with endless opportunities. Companies are looking to transform from a capital expenditure model to operating expenditure model by reducing their total cost of ownership. The recent economic downturn and the constant pressure on business environment by advanced and fast evolving technology have forced companies to develop IT strategies to reduce costs while increasing efficiency and ensuring global competitiveness.
1. Executive Summary
2. External Challenges: Drivers and Restraints – Total Managed Services Market
3. Forecasts and Trends- Total Managed Services Market
4. Market Share and Competitive Analysis – Total Managed Services Market
5. Competitor Profiles of Selected Industry Participants
6. Segment Analysis: Data Centre Hosting
7. Segment Analysis: Cloud Services
8. Strategic Recommendations for Service Providers
9. The Last Word
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