ICT industry performance for the first quarter of 2011 remained challenging – but companies in this industry have emerged from the economic downturn in better shape than some of their counterparts in other sectors.
International credit insurer Coface South Africa says this is highlighted by the importance of geographic diversification and a healthy mix of business or product lines which mitigated the impact of the economic slowdown. This has also reduced dependency on any single territory, market or technology sector.
“The ICT services market continues to be a star performer. Services provide a steady stream of annuity revenue and this sector has shown resilience during the recession,” says Brian Peterson, industry analyst at Coface.
“Public sector ICT spending remains subdued, evidenced by a sharp fall in tenders from government. Industry executives say that the turnaround in tenders was previously between 60 and 90 days but now delays can stretch up to 200 days.”
Industry consolidations affected the industry in the first quarter of 2011 and are expected to continue as larger organisations use their cash resources to grow through acquisition.
There is growing demand for data centre security, storage, outsourcing and virtualisation. These are key growth areas. Suppliers of products and services in these sectors are well-positioned for further growth, says Peterson.
Coface expects sub-Saharan Africa, as an emerging market, to see better relative growth compared to developed economies who are still experiencing slow growth. Local companies expanding into new markets to improve their geographical diversification will have further prospects for growth.
Prospects in the ICT industry remain good as more cash becomes available for ICT infrastructure and technology upgrades. Government-related business is expected to improve as government drives to educate and improve IT literacy and service delivery, especially in rural areas.