Business data services have increasingly emerged as business-critical in South Africa. However, the majority of business data services are complex, resource-intensive and expensive to operate in-house.
In addition, stringent regulatory requirements in sectors such as the financial services, retail and hospitality have resulted in operators opting for specialist expertise by outsourcing these services, to ensure that their systems are legislation-compliant. While cost cutting has historically been the main reason for outsourcing, in the case of business data services, improved efficiencies and access to skills are the key drivers.
New analysis from Frost & Sullivan finds that the South African market for outsourced business data services earned revenues of $158-million in 2008, and estimates this to reach $327-million in 2015.
"The critical shortage of relevant skills for business data services, the high cost of retaining dedicated in-house staff, and rising legislative and regulatory demands are encouraging companies to outsource their data services processes and systems," says Frost & Sullivan ICT industry analyst Spiwe Chireka.
Most of the data services in South Africa have reached the maturity stage or are nearing maturity in terms of adoption and usage. These include Internet services, data storage services and disaster recovery/business continuity services. Consequently, the outsourcing of these services has followed a similar trend.
However, cost savings from outsourcing services have not been as forthcoming as the market initially expected. Additionally, customer service has been below the customers' expectations, resulting in some providers in-sourcing their data services operations.
"Companies have indicated that it is not always possible to justify the acquisition of a completely new system and as a result, they are often required to integrate new components with legacy equipment, posing issues in terms of interoperability," explains Chireka. "While strong inroads have been made by vendors, there still remains room for improvement to provide seamless integration and interoperability between the new outsourced and existing in-house systems."
Business data services have become so mission-critical that companies are prioritising it on the true manageable total cost of ownership, rather than merely on return on investment (ROI). Thus, service providers should have a greater focus on providing the true total cost of ownership benefits and reduce their effort on promoting outsourcing as a means to cost savings.
"Customer service strategies that enhance value for the customer – access to a wide support network, deep and wide technical solutions, and applications that facilitate knowledge sharing – will provide a strong competitive differentiator for operators in the future," concludes Chireka.