With R303bn IT spend, SA has tech debt to pay off

Consumer spending was once the IT spending highlight in SA, but no longer.

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IT spending in South Africa will total R303.46 billion in 2019, a 3.9% increase from 2018.

This is according to market analyst firm Gartner, in a report published this morning.

However, the firm notes SA still has a lot of catching up to do in order to match its global counterparts’ spending on IT.

“South Africa is still behind in terms of overall IT spending and continues to have a technology debt to pay off,” says John-David Lovelock, distinguished research vice-president at Gartner.

“However, by achieving 3.9% growth in 2019, SA will be one of the fastest-growing countries in the world – ranked fourth globally.

In a telephonic interview with ITWeb, Lovelock said the three top-ranked fastest-growing countries are India, Israel and Singapore, respectively.

Explaining SA’s “technology debt”, he said: “Technology deficit is when a country or an individual has underinvested in IT. In this case, Gartner uses a measure where we correlate the individual productivity within a country in relation to its IT spend.

“We looked at SA’s GDP creation and divided that by the number of employed individuals to get the productivity number – how much does one worker produce for the South African economy?

“That number roughly correlates to the level of IT spending that we have seen globally. In the countries that we have been following, there is a fairly predictable pattern for productivity to IT spending ratios.

“SA is 10% to 15% behind what we expect that number to be,” said Lovelock.

According to Gartner, consumer spending was once the IT spending highlight in SA, driven by adoption of mobile phones, but no longer.

Gartner expects consumer spending on devices – PCs, tablets and mobile phones – to decline by 2020, and keep contracting through 2023.

“Saturation in the PC, mobile phone and tablet device markets has limited the number of new buyers. And spending on mobile phone replacements and upgrades won’t be enough to sustain current spending levels,” says Lovelock.

Earlier this month, Gartner predicted the global mobile phone market will record its worst performance, declining by 3.8%, in 2019.

The decline, according to Gartner, is the result of the trend of lengthening the lifespans of mobile devices, which began in 2018 and will continue through 2019.

The research firm forecasts high-end phone lifespans will increase from 2.6 years to nearly 2.9 years through 2023. In addition, sales of smartphones are expected to decline by 2.5% in 2019, which would be the worst decline to date.

Nonetheless, the firm says spending on devices in SA is projected to total R46 billion in 2019, up 3% from 2018.

It explains that this growth rate has more than halved, year-over-year, which shows SA has largely moved past the stage of acquiring personal devices and is now more concerned with using them.

Gartner says software spending in SA will reach R32 billion in 2019, an 11.4% increase from 2018.

“Cloud computing is a new reality in South Africa,” says Lovelock. “South African organisations are consuming significant amounts of cloud services, including software as a service, platform as a service and infrastructure as a service. CIOs in South Africa have started adopting cloud-first strategies.”

There is a flurry of activity in the local cloud computing market, with a number of multinational companies launching new data centre facilities or forging key alliances in a bid to outdo competition.

This year, US-based software giant Microsoft announced the opening of two data centre regions in SA. Last October, Amazon Web Services (AWS) also said it would bring its data centres to SA, opening an infrastructure region in Cape Town in the first half of 2020.

AWS also reaffirmed its commitment to investing in the South African market at its African AWS Summit held earlier this month.

“CIOs have to decide whether to build on-premises data centres or use the public cloud – and the cloud is prevailing. With both Microsoft and Amazon planning to open local hyperscale data centres in 2020, adoption and use of the cloud will only increase in South Africa,” says Lovelock.

Earlier this year, fellow research firm IDC said it expected “very slow" growth in the ICT sector, which is predicted to reach 3.8% compared to 7.5% in 2018.

South Africa: IT spending forecast (millions of rand)