Kathy Gibson is at IDC Directions 2020 in Sandton – South Africa is no stranger to bad news. As 2020 unfolds, every day seems to bring another blow to the business community.
But local companies still have to do business and move forward, despite – or because of – market conditions.
“We need to take things as they are and make the best of it,” says Mark Walker, associate vice-president: South Africa at IDC. “We talk in the industry about innovation – and we need to innovate, and find out how to service our customers better, and partner better.
“Technology is a massive part in the growth of South Africa in future,”
There is always the temptation to believe that things are better elsewhere when times are tough at home, Walker says.
Indeed, the South African IT market is expected to grow 2,5% this year. Although Nigeria is looking at 5% growth it is off a much lower base in a very hard environment to business in. Kenya and Ethiopia are both growing well (3,6% and 7,6% respectively), also off much lower bases, and with difficult operating environments to negotiate.
Increasing connectivity is driving growth in Africa, with sub-sea cables in place and now access spreading into the interior of Africa.
In South Africa, the big spenders in digital transformation are finance, government and communications. They are followed by retail and wholesale as well as professional and personal services, with manufacturing in the next tier. Following soon will be healthcare, utilities, resource industries and construction, transportation and education.
“Things are working. Is it as smooth as we want? No. But technology is key,” Walker says.
For many of the industries facing other challenges, technology will help them to cut costs and increase competitiveness – and so the IT industry is well positioned in 2020.
In South Africa, 56% of companies are currently engaged in digital transformation, 25% are about to start in 2020, 12% are not currently engaged, but planning efforts within two years, and only 8% are not currently engaged or planning for the near future.
“So the digital transformation message has landed, and it is a reality now.”
Technologies already implemented or at a late stages of getting there are IoT (46%), quantum coming (26%), cognitive/AI/machine learning (29%), software defined networking (34%), blockchain (11%), RPA (21%), edge computing (19%) and AR/VR (14%)
Looking at investments going forward, there is still a big focus on infrastructure including data centres, storage and networking at 61%. Security comes in at 33%, mobility at 45% and applications at 40%. Other investment areas ate data analytics at 20%, cloud at 16%, and process, organisation and skills at 28%.
Digital transformation is key to changing the business, and outcomes that are prioritised include talent excellence at 66%, operational excellence at 79%, operations excellence in production and new offerings at 67%; data capitalisation and monetisation at 55%; customer excellence at 66% and customer excellence in developing products and services at78%.
“In South Africa, it is as case of so far so good – so far,” Walker says. Companies have seen productivity improvements, revenue generation form existing products and services, better process cycle times, revenue from new products or service, and cost efficiencies.
It’s not a smooth ride, by any means though. Thirty nine percent of organisations say that initiatives are siloed, as are 58% of innovation, There is still limited long term focus, with 41% of companies reporting this as a problem. Outdated KPIs are a problem for 41% of respondents.
We need to focus on impact, by industry, line of business and company size, Walker says. Business functions that need to be transformed vary by industry, but all include production, sourcing and procurement, improving employee work experience, customer experience, sales, marketing, finance and governance.
The size of the company makes a difference across these functions as well, but mostly the same factors are all important.
In South Africa, funding for digital transformation is coming from opex rationalization, 45% form incremental funding, and 31% form internal IT rationalisation.
CIOs still mostly own the IT budget at 51,63%, line of business owns 29,9% of the budget, and 18,47% of companies have a dedicated digital transformation budget.
About 75% of CIOs expect their IT budget to increase in 2020, which is good news for the IT industry.
“To get through this we need to be confident, and have intense focus on our customers. Partnerships will be crucial, and we have to think carefully about how we manage the channel, and there will be a lot more co-opetition,” Walker says. “If you don’t have impact at line of business level, you will have a tough time selling to South African companies.”
Relevance is key, he adds. “Often as technology people we are optimistic – but that’s not always what your customers are feeling. We need to be innovative and focus.”