Kathy Gibson is at IDC Directions – South Africa’s economic growth is still low, while unemployment has hit historic highs, driving negative sentiment in the local market.

But there is good news, according to Mark Walker, associate vice-president: data and analytics at IDC, who says that the technology sector can help to solve a lot of the challenges we are facing.

The ICT market is still growing, Walker adds, even if it’s not at rates most in the industry would like – but it’s tracking well against comparable African markets.

“Everyone needs technology,” he states.

IDC predicts that, in 2022, IT spending in South Africa will grow at about 6,5%, to surpass $27,5-billion, with telecommunications spend set to grow at 4,9% to reach $11,3-billion.

Device spending will dip this year after the massive growth rates seen in the last two years, but from 2023 is expected to return to normal levels.

Enterprise IT spending is still growing, and this is expected to continue, Walker says. “During Covid, a lot of spend was redirected to devices, but has come back into the enterprise IT fold.”

Spending on infrastructure as a service (IaaS) is set to grow 8%, managed services will grow 5,8% and software as a service (SaaS) and platform as a service (PaaS) will increase by 7,4%.

In Africa, the overall growth rate is still pretty good, ranging from about 6% to 8% in most of the markets.

Walker points out that a number of new undersea cables are set to land this year, and this will drive further growth in Africa, connecting a number of countries for the first time.

“In the year ahead, we expect there will be a lot more activity into Africa,” he says. “And I think, from an enterprise IT point of view, Africa is looking solid.”

South African industries expected to increase their ICT spend over the next two years are finance (8,2% in 2022 and 7,3% in 2023); government (7,5% in 2022 and 8,1% in 2023); telecommunication (5,6% in 2022 and 6,4% in 2023); manufacturing (6,9% in 2022 and 8,6% in 2023); retail and wholesale (8,6% in 2022 and 10,3% in 2023); professional services (4,6% in 2022 and 7,1% in 2023); resource industries (4,5% in 2022 and 4,7% in 2023); healthcare (10,4% in 2022 and 10% in 2023); transportation (7% in 2022 and 11,3% in 2023); and education (-27,1% in 2022 and 8,2% in 2023).

Walker points out that the impact of digital transformation is being realised in the key areas of increased efficiencies, digital product innovation, CSAT and data value.

While about half of the leading organisations in South Africa had a digital first strategy in place pre-Covid, the pandemic has accelerated the shift – today, 100% of companies have at least put in place a digital-first strategy.

“Digital transformation KPIs (key performance indicators) are now a reality for most CIOs, including the creation of digital products and services,” Walker points out.

IDC predicts that South African organisations’ digital transformation spending in the post-pandemic period will grow as a share of IT spend from 26% in 2020 to 38% in 2024.

A key element of any digital transformation strategy is resiliency, with many companies investing in digital resiliency to prepare for future disruption.

Resilience will be underpinned by longer-term hybrid-first work strategies. In South Africa, 64% of CIOs say that enabling employees to work in a hybrid model in the long term is a key digital priority in the next 12 to 18 months.

That hybrid work model is still very nascent, Walker adds, and each organisation must figure out their own models. “As ICT suppliers, we need to enable connectivity, access to information and the ability to exchange information in realtime.”

In the South African context, industry ecosystems are strategic and their value is a differentiator, which is why collaboration si so important. In the local market, CIOs are looking at a digital approach to developing industry ecosystems over the next 12 to 18 months, Walker says.

At the same time, software innovation at scale and speed is crucial: 20% of CIOs say that building software-based innovation capabilities is a priority in the next 12 to 18 months. And, while 60% of CIOs are focusing on internal innovation programmes, they are also developing collaborative innovation with external resources.

An inability to implement innovation at scale and speed and a shortage of business and technical skills to support innovation are key challenges, says Walker. To meet this need, CIO technology priorities have shifted to process automation excellence, security and resilience, IS transformation; data excellence; cloud excellence; application modernisation, and software-based innovation.

Security and trust are growing as priorities for businesses and CIOs, who plan to address these issues by investing in analytics, network detection and response, cloud security gateway encryption and micro segmentation, advanced threat detection and response, and advanced authentication.

Arguably the biggest challenge facing South African CIOs is the skills shortage. “This is not going to go away,” Walker says.

The main skills shortages are in cloud, data, security and software development, he adds.

These CIO challenges and opportunities are playing out against a background of regional and local technology ecosystems that are poised for a shakeout, Walker concludes.

There is a lot of M&A (mergers and acquisition) activity happening; lot of public listing and equity investment hyperscaler-centric ecosystems will expand and mature; global Sis will dominate digital and cloud app transformation; SaaS platform-centric development and innovation; customers become software producers.

IDC guidance for the IT industry is to partner with customers in their digital resilience strategies; operate in a value-added cloud supply chain play; adopt a dynamic hybrid delivery model; and look to ecosystem expansion and growth.