South African companies are playing catch-up in 2018 with their IT spending

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Ahead of next month’s Gartner Symposium/ITxpo taking place in Cape Town the research firm released an IT spending report detailing how organisations will be putting their budget to use this year, as well what the next 12 months may hold.

It was a rather illuminating report, with an estimated R276.6 billion in IT spending being made during 2018, which would also see an increase of 4.3 percent over last year, according to Gartner.

What was equally interesting is the context to the figures that Gartner VP and noted analyst, John Lovelock, served up, stating that local organisations are “playing catch-up” with their global counterparts.

To gain a better understanding as to why they are investing so heavily, as well as dividends it will reap, we spoke with Lovelock recently.

This is what we were able to glean from our discussion.

Playing catch-up

In unpacking his “catch-up” statement, with South African organisations having what Gartner would refer to as a technology deficit. This as underspending on technology in the past leading to the country’s tech companies being in the position that they are currently, explains Lovelock.

“We know that they [SA organisations] are under what we’d [Gartner] expect for IT spending compared to productivity levels within the country. South African falls below the norm for IT spending based on the labour productivity level we’ve calculated for the country,” he says.

As for whether South African companies can indeed catch-up with their global counterparts following their IT spends in 2018, Lovelock has a mixed outlook.

He notes that there are a few organisations that will catch-up, and in certain cases he adds that they are trying to surpass them as well. This too is another reason why spending in the country is expected to total the aforementioned R276.6 billion.

“Instead of getting to the level of spending that they’d expect to be at, focusing on on-site data centres, bringing in computer systems, some companies are rather looking to leapfrog by heading to the cloud and getting services from providers outside South Africa,” adds Lovelock.

Added to this ability to leapfrog is the impending arrival of Microsoft’s local Azure data centre, says Lovelock, which could indeed see more organisations becoming ambitious in the coming year.

Mind the gap 

While Lovelock admits South Africa is in a state of digital transformation, he stresses that the pace at which it is happening is low, with low cloud adoption being one of the major hurdles despite Microsoft’s Azure data centre being on the way.

“It’s not as simple as paying your monthly subscription and now you’re fully in the cloud. There are still a great deal of organisations that have to make the move, with significant issues around infrastructure, communications, reliability of power and economic uncertainty still forcing South Africa to spend in order to address deficits,” Lovelock points out.

He also counters this by noting that some organisations will be able to overcome low cloud adoption hurdles, with banks in particular earning praise in this regard from Lovelock.

Despite a few notable barriers, he does add that the increase in IT spending offers reason for optimism.

“Growth in IT spending is set at 4.3 percent, whereas GDP spending is under 2 percent, which is double the rate of GDP growth. People are investing in IT ahead of economic return,” enthuses Lovelock.

Looking forward

Along with 2018’s numbers, Gartner provided some predictions for next year, with spending in devices expected to grow by 10.5 percent compared to this year’s rate of 0.9 percent.

We had initially suspected that an influx of new 5G smartphones, routers and related mobile devices would be the main driver in this regard, but Lovelock actually believes that it is the lower end of the market that will result in the significant increase.

“2019 will see a mobile devices refresh. There’s going to be new models coming in, and we’re also looking forward to seeing the prices fall as entry-level phones come into the county,” he adds.

Pace of change

As for how successful companies will be measured in 2018 and moving forward, Lovelock refers to what Gartner terms as the internal pace of change, adding that dynamism is required to separate leaders from chasers.

“If you’re able to bring on technology and actually make the business changes along with that technology, you’re far likelier to outperform your peers than if you take a more measured approach and wait for things,” he says.

Lastly, looking at how South Africa can not only catch-up but keep pace with global leaders, Lovelock highlights the significance of spending on communication services, with growth in that regard set at 1.0 percent for 2018 and 0.4 percent for the following year.

“Right now you’re sitting at 43 percent for comms services spending, with the growth staying flat. For South Africa that percentage needs to be declining,” Lovelock says.

“There is room for the country to be spending less on comms services and freeing up money to spend elsewhere, and that would be a great instant change for South Africa,” he concludes.

With the Gartner Symposium/ITxpo aiming to cultivate conversations and engagement around the requirements of the local tech landscape, it should be interesting to see whether it affects IT spending and the pace of change for South African organisations.

Robin-Leigh Chetty

Robin-Leigh Chetty

Editor of Hypertext. Covers smartphones, IoT, 5G, cloud computing and a few things in between. Also a keen photographer and dabbles in console games when not taking the hatchet to stories.


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