[23 October 2008]
Outsourcing is on a huge upwards curve internationally, and locally, with the latest research showing that the SA IT infrastructure outsourcing market notched up revenues of between $2.8 billion and $3.5 billion (R19.8 billion to R24.8billion), said Eric van Heerden, business development executive at UCS Software Manufacturing (UCSSM), the retail-focused software factory in the JSE-listed UCS Group Ltd.
Van Heerden said that according to research from international research group, Frost & Sullivan, local revenues earned by this marketplace by 2012 should reach almost R40 billion.
"Although the local economy is facing a downturn due to higher inflation, higher interest rates, and punitive food and oil costs, the outsourcing market is, to a large extent, bucking the trend. Outsourcing, overall, is going through robust times - and there are a lot of advantages for local companies to pick up on."
Van Heerden said that SA's high bandwidth costs are restricting the country's competitiveness, but this is "rapidly changing" as companies like Seacom, Neotel and Infraco start "entering the economic mainstream".
Thanks to a Seacom's plan to cut international bandwidth costs by as much as 80% - due to its $600 million under-sea cable project - and announcements that both Neotel and Infraco are ready to roll out commercial solutions, the local ICT industry should become far more competitive from a 'cost of communications' perspective.
Infraco is the state-owned broadband entity, who has already concluded a deal to offer its bandwidth at significantly lower prices to Neotel, the country's first converged communications network operator.
"Our telecommunications costs are still too high; but due to announcements such as these we will see costs coming down during the latter part of 2008 and beyond. This will assist South African companies to play more competitively on the global map. The telco industry - and the outsourcing indusry itself - can really provide a lot more employment in the future if opportunities are seized," said van Heerden.
Currently, IT companies in India - the largest outsourcing destination globally - employ 1.63 million people. And that figure is still rising.
During 2007 it was expected that Indian-based companies such as Tata Consultancy, Wipro and Infosys were poised to employ 300 000 software engineers.
"India is literally bursting at the seams when it comes to handling business outsourcing projects. Despite claims that they are operating at an optimal level - and are reaching a serious pressure point - they remain a fearsome force. This will not change during the next decade."
The need for software development in Africa
As a continent Africa needs to invest more time and money in software development if it "wants to stay a player on the international business map". According to the World Bank (1993) business computer software has become the lifeblood of any business - and this is more true now then it was 15 years ago, said van Heerden.
"The development of the local software industry is, therefore, of critical importance. Unfortunately, Africa does not even show as a blimp on the radar screen when it comes to software development - and this is unlikely to change in the near future, meaning the continent will 'miss the boat' from an economic point of view. South Africa, however, is doing much better - certainly when compared to the rest of Africa. But there are still very few local companies outsourcing software solutions for international companies, or selling home-grown software."
He said UCSSM is currently "the only South African outsourced software development company competing in the international retail software market".
India - still the roaring tiger
India's software and services exports, meanwhile, are estimated to have grown 32% to $31.3 billion (US dollars) in 2006/7. "I am not saying that South Africa can become another India, but there are certainly opportunities for us to generate more revenue in the software services industry," said van Heerden.
ends
Issued on behalf of:
UCSSM
Ph:+27 12 643-8300
www.ucssm.com
Issued by:
BE Agency
Ph: +27 12 346-3005
www.beagency.co.za