Overall, small and medium enterprises (SMEs) will be the largest growth area over the next five years. This is one of the key findings of recent research done by Networks Unlimited.
Networks Unlimited commissioned Africa`s leading ICT market analyst, BMI-TechKnowledge, to survey the South African IT market`s growth potential and found that in spite of the global economic situation, IT investments will continue to grow across SA, and in the majority of business sectors in the foreseeable future.
"The results of this research give us a good indication where to focus our efforts going forward," says Craig Copeland, director at Networks Unlimited. "The mid-market is a substantial source of potential revenue and a tailor-made marketing strategy to reach this market is vital."
The South African IT market generated R44 billion in 2003 and will be worth R65 billion by 2008, growing at a CAGR of 8.2% over the period 2003-200 according to BMI-T. "In the short-term, IT spending will nevertheless be subdued and show only a slight increase," says Roy Blume, Software and Services Research Manager at BMI-T. "As a consequence it becomes increasingly important for IT vendors to segment the market to identify opportunities."
Growth in IT spending in small companies is expected to continue to suffer in the short-term. However, although many smaller companies will continue to devote the majority of their IT funds to maintain and upgrade their basic Internet services infrastructure, in the long-term those with stronger links to the value chains of larger organisations will be forced to invest in more compelling IT solutions to keep up with the other competitors. "As a consequence, once large companies` IT spend will recover in 2004 and 2005, this is expected to have a good impact on investments also in smaller companies," says Blume.
Detailed company segmentation and spend
Employees
No of companies
IT Spend (Rm)
% Spend
1-9
957 909
3 640
8%
10-99
80 938
3 075
7%
100-499
3 616
6 870
16%
500-999
1 116
3 349
8%
1000>
2 207
26 949
61%
Total
1 045 787
43 883
100%
Source: BMI-T, 2004
Rounding and end-user perspective modelling have resulted in the revenues reflected in the tables not always being consistent with other BMI-T reports. In order to maintain the integrity of the primary data, the revenues reflected in this document are consistent with the primary researched data.
The Networks Unlimited survey discovered that companies with 100-499 employees are expected to be the fastest growing segment in SA and offer good revenue opportunities to IT vendors. "The more stable financial situation of these companies, coupled with the increasing recognition of the value that IT can bring to their business, is spurring IT adoption in this market segment," says Blume.
According to Blume, SMEs` diversity across business sectors/countries will continue to challenge IT vendors to provide a "one-size-fits-all" solution. "Those that will be able to offer the right balance between customisation and standardisation while providing user-friendly applications at a reasonable cost, will succeed in the small and midsize business spot."
For more information, please contact Networks Unlimited on (021) 531 6000 or visit www.nu.co.za.
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