The South African IT services market reached an estimated R104.9 billion at the end of 2024, and is projected to grow to R182 billion in 2028, amid soaring demand for cloud services.
This is according to BMIT’s latest SA IT Services Market Report, which shows this market is poised to grow at a healthy compound annual growth rate of 14.8% over the next three years.
It will be fuelled primarily by the increasing demand for cloud services, with other IT sub-sectors displaying low growth, or in some cases, even declining revenue, it reveals.
IT services covered in the report include cloud services; managed hosting; full outsource; managed services; IT training; maintaining, upgrading and support; cloud enablement and managed services; custom application development; system integration; and information systems consulting.
Cloud-native development is a particularly important component as companies − particularly those unencumbered by legacy systems − take full advantage of cloud-based services and toolkits to develop and deploy applications with greater agility and efficiency, the study finds.
BMIT MD Chris Geerdts tells ITWeb that generative artificial intelligence (GenAI), will be a game-changer in the sector, as it continues to rapidly gain traction, with the potential to revolutionise content creation, customer service and various other business functions – further driving cloud services consumption.
“The main driver of growth is cloud-driven digital transformation, which has been a trend for several years now, as enterprises embark on cloud-driven digital transformation.
“Digital transformation is essential for companies to remain competitive and grow in a digital world, and cloud-based applications and services help them to manage costs, scale effectively and develop innovative services.
“A key driver which is emerging and likely to dominate in future, is the growth in the use and capability of GenAI, which is highly-impactful at a national, business and personal level, and is particularly cloud-intensive, due to the need to process substantial volumes of data,” notes Geerdts.
While local companies are exploring and tentatively adopting GenAI, BMIT is seeing hyper-automation as a significant focus in the shorter term. The use of AI, along with machine learning and robotic process automation to automate complex business processes end-to-end, will take automation to new levels, reaping the benefits of accuracy, improved response times and efficiencies.
The provision of everything-as-a-service (XaaS) is one trend closely associated with cloudification, and requires that IT service providers develop appropriate service-level agreements and partner appropriately to offer and manage complex solutions, according to BMIT.
IT service providers therefore see a growing market opportunity, with services − such as managed hosting, full outsource, managed services and IT training − growing faster than SA’s economy and presenting unique market opportunities, while other service categories are flat.
Dwindling services include custom application development, system integration and information systems consulting.
“IT service providers should see their role as shifting from a support function, to a value co-creator role, partnering with businesses to drive change and growth. This means collaborating on roadmaps, measuring IT’s contribution and building trust. This shift requires open communication, collaboration and a focus on continuous improvement.”
Cyber security risks, the skills shortage and financial constraints remain stumbling blocks that the sector continues to contend with, according to the study.
“One fundamental challenge reported by the companies BMIT surveyed is cost management, as those that have migrated to the cloud are finding the costs are higher than anticipated. In addition, many companies are paying for their services in forex, resulting in variable opex each month. At the same time, economic growth remains low,” states Geerdts.
Even as the overall spend increases, many companies are putting the brakes on spend. For service providers to thrive, they need to become more user-centric.
Threat actors are becoming more sophisticated in their cyber attacks, resulting in more frequent and consequential attacks on business and government entities, says the report.
“Companies generally need to increase their budgets for cyber security to counter these threats, while also needing to take a smart approach, which the best service providers can assist with.”
Another challenge is the fundamental skills shortage, which means that most companies embarking on a digital transformation journey lack the requisite capability.
“This is both an opportunity and a threat for IT service providers, which can offer managed services that leverage their capability, provided they themselves can skill-up effectively.”
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