IT spend set to increase in SA, but currency risk must be embedded in contracts
IT spending in SA is forecast to total R266bn in 2017, a 2.4% increase from 2016, according to global research firm Gartner.
Software is predicted to be the best-performing segment, with a 13.2% increase year on year. Spending on devices, such as PCs, tablets and smartphones, in SA is forecast to decline by 4.6% in 2017.
Purchases of devices by businesses and consumers are slowing in the face of rising prices and in the expectation of new products, Gartner says. But this is set to rebound in 2018. "SA has traditionally under-invested in IT," said John-David Lovelock, vice-president and analyst at Gartner.
South African organisations continue to prioritise investments in software, as software spending is the means by which they will catch up with the rest of the world, he said. With regards to spending on devices, Lovelock expects the introduction of premium smartphones to increase device spending by 3.8% in 2018.
Spending on communications services, the largest segment in SA, reached R122bn in 2017, a 0.8% rise. "Price competition between regional carriers, along with extremely price-sensitive consumers, is preventing substantial growth in spending in this segment, despite an overall increase in mobile device ownership," said Lovelock.
The rand’s fluctuations against the dollar also affects IT spending because the cost of most IT products is based in dollars, so local prices in rand must increase enough to cover costs and margins in dollars. The higher the dollar cost of a product or service, the more volatile the local price is to currency movements, according to Gartner.
Generally, the rand has help up well against the dollar, and this will help curb the recent price increases on servers, storage and devices, according to Lovelock.
He said local organisations should learn from their European counterparts by embedding currency risk into all IT contracts, ensuring long-term contracts are priced in rand, and seeking local delivery, where possible.