IT event highlights economic uncertainty

This year's ITWeb IT Confidence conference began with a look at the country's economy. Chief economist for Investment Solutions Chris Hart painted a grim picture of the economy when he told delegates that South Africans must brace themselves for a tough 2008.

"In the economy, there are up-cycles and down-cycles. And after a 10-year up-cycle, 2008 is a down-cycle for SA," he said.

Compounding the situation is political uncertainty and power shortages that have made investors jittery, in addition to a high current account deficit, he noted.

"The current account deficit has ballooned in the last two years and has widened. To make matters worse, our economy is slowing down because of power shortages. This will put pressure on the rand. And then there is the political uncertainty which investors don't like," he said.

Roy Blume, IT research manager for BMI-TechKnowledge, added a positive spin when he gave his address. While power outages and load-shedding have negatively impacted the economy at large, he said, they also bring unique opportunities for the ICT sector.

Blume maintained that Eskom's inability to ensure a stable electricity supply would not only drive the uptake of 3G and wireless technologies, but also bring technology like virtualisation to the fore.

"Virtualisation, driven by concerns over a secure power supply, will become vital to businesses," he said. Blume added that virtualisation will be the top trend to focus on for 2008.

Discussions moved to business process outsourcing (BPO), where it was revealed that power shortages have jeopardised SA's chances of being the BPO destination of choice. "You can't become the off-shore BPO and call centre destination of choice if you don't have power," said Blume.

With a rampant worldwide skills dearth, BPO was touted as one of the vehicles that would bring much needed foreign investment to the country and stimulate SA's job market.

Later in the discussion, John Jenkins, group executive of services at Business Connexion, revealed that BPO in the ICT sector was undergoing changes. "Because of the challenges facing the market, BPO is moving away from a one-on-one relationship, towards commoditised core services," he noted.

However, it was not all gloom and doom, with the telecommunications operators forecasting that 2008 would be a good year for broadband, as demand for broadband services continues to rise.

Mike Brierley, CEO of MTN Network Solutions, added that this year will be a year of intense competition and consolidation in the telecommunication sector, cumulating not only in Telkom losing market share, but being acquired by foreign interests.

He expects Telkom to give up market share to accommodate new players in the market. Brierley added that it is most probable the telco behemoth will be acquired this year by foreign interests.

In regards to newly formed Vodacom Business, he said: "I'm not expecting Vodacom to make a significant impact in the first part of this year, but certainly in the latter part of the year there will be activity from the company. Vodacom is a significant company with significant resources, we obviously can't ignore them; we are certainly not going to lie down and play dead."

Even though the economic outlook for the year was gloomy, Hart noted that for every down-cycle there is an up-cycle and predicted that SA would move towards an up-cycle at the end of the year.

Blume said, while the economy was undergoing a down-cycle, there were "pockets of growth" with government set to increase spending this year.

"Construction and 2010 projects will continue despite load-shedding," he noted, adding that this is where a lot of potential for growth in the IT market lies.

Blume commented that in SA, IT has become more than a "nice to have", but rather an essential business tool for most companies. "This means that not even Eskom will be able to take away big business' spend on ICT."