IT event highlights economic uncertainty
BY BANDILE SIKWANE , ITWEB JOURNALIST

[ Johannesburg, 18 March 2008 ] - 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.

BPO transformation

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.

Good year for broadband

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.”

Pockets of growth

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.” 
 

Education, construction to boost IT 
By CHRISTELLE DU TOIT , ITWEB SENIOR JOURNALIST

[ Johannesburg, 11 March 2008 ] - This will be a tough year for the economy as a whole, but there are areas in IT that can look forward to a boom in spending.

This is according to Chris Hart, chief economist for Investment Solutions, and Roy Blume, IT research manager for BMI-TechKnowledge. They addressed the ITWeb IT Confidence event, in Midrand, this morning.

Both Hart and Blume identified construction and education as sectors that will continue to spend on IT, despite constraints by the likes of Eskom.

“The building boom will continue, not withstanding what Eskom is doing,” said Hart.

Furthermore, he said: “Education is ripe for an improvement. It has not been performing and it will start to look at technology.”

Blume added that the private healthcare sector and government would also be drivers for ICT spend.

In addition, he said financial institutions would continue to invest in CRM technology as they look to differentiate themselves.

While there will be sectors of the South African economy that face recession conditions, IT can create pockets of excellence for itself, noted Blume and Hart.

“We have had these bumps in the past and they are usually quite short-term in nature,” said Hart, referring to general negative market sentiments.

“Big business is still quite optimistic in terms of their IT spend, which is said to be in the region of 2% to 3% of capital expenditure,” added Blume.

Outages offer IT opportunities 
By CHRISTELLE DU TOIT , ITWEB SENIOR JOURNALIST 

[ Johannesburg, 14 March 2008 ] - While power outages and load-shedding are negatively impacting the economy at large, they also bring unique opportunities for the ICT sector. This is the view of market commentators Roy Blume, IT research manager for BMI-TechKnowledge, and Chris Hart, chief economist for Investment Solutions.

According to Blume, Eskom's inability to ensure a stable electricity supply is not only driving the uptake of 3G and wireless technologies, but is making itself felt in the business environment.

“Virtualisation is becoming more key to business and will be driven by concerns over a secure power supply,” he says. Blume predicts the uptake of virtualisation will be felt in 2008, making it a top trend to focus on.

Eskom's unreliability could also, in Blume's opinion, lead to more outsourcing and a subsequent boom in business process outsourcing (BPO) and call centres.

However, BPO centres will have to make sure clients know they have fail-safes in place for when power outages do occur.

“You can't become the off-shore BPO and call centre destination of choice if you have no confidence and power.”

Counting the losses

Hart says the economic impact of the power outages is still hard to predict, but is estimated to have already cost the country R1.7 trillion.

He explains that the combination of a huge current account deficit, weak rand, high interest rates, a slower economy, political uncertainty, and power supply problems all feed into a negative cycle that could see some sections of the economy – like vehicle sales – enter a recession.

However, he adds that all economies have ups and downs as part of their natural cycles and predicts that SA could come out of the current downturn as early as year-end.

In the meantime, he says government needs to change its thinking if it wants to address the situation that has been aggravated by the power outages.

“One of the ways to fight inflation is to add competition,” says Hart, explaining that the oligopoly in the telecommunications market will have to come to an end.

“When free markets want to create employment they move away from monopolies [such as the one currently experienced in SA's telecommunications market],” he says.

In closing, Blume says IT has become more than a “nice to have”, but rather an essential business tool for most companies, which means that not even Eskom will be able to take away big business' spend on ICT.

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

* Hart and Blume spoke at ITWeb's IT Confidence event earlier this week.