Dimension Data has successfully managed to adapt to a rapidly changing operating environment and by increasing its focus on solution sales, the group has managed to reduce the impact of lower product sales, says Frost & Sullivan.
The IT services and solutions group released interim results today, showing 8.1% revenue growth in constant currency, and a 0.7% improvement in operating margin to 4.6%. Growth in the services business drove this profitability, with services revenue increasing by 21.1%.
“The recession has affected different parts of the world differently and Didata’s wide geographic footprint has cushioned the company from the worst of the current crisis,” says Frost & Sullivan ICT analyst Spiwe Chireka. “Didata has also become more service and value oriented rather than product oriented in response to declines in product purchases.”
The decrease in investment into infrastructure has, however, had an impact on the company, as the bulk of its revenue comes from its infrastructure business.
“The financial crisis has led to IT spend constraints and consequently lower sales,” Chireka says. “Companies have shown that they would rather bleed their technology in the short term than make huge investments into additional infrastructure.”
She also notes that traditionally strong markets, such as the call centre industry, are experiencing lower growth than in previous years. This is driven by the fact that the business case for new call centres or significant expansion of existing ones has become difficult to justify in the current climate.
In response to this, Chireka expects that DiData will continue to focus on client services in the short term to shore up revenues.
“Outsourcing of technologies, networks and services may also become a key revenue stream as companies look for ways to stay afloat,” Chireka adds. “Africa could present a willing market for this approach. IT infrastructure outsourcing is still nascent in large markets such as Nigeria and Kenya, which presents a huge opportunity for Didata on the continent.”
Recent analysis from Frost & Sullivan suggests that revenues in the Nigerian IT infrastructure outsourcing market are expected to grow at a compound annual growth rate of 28.3% up to 2014.
Chireka says that broadband development on the continent still lags behind the rest of the world and Frost & Sullivan therefore expects Internet Solutions to enjoy healthy growth going forward.