VENDOR MERGERS ARE EXPECTED IN A CROWDED SOUTH AFRICAN IT MARKET

Mergers, Acquisitions and Financial Results

The local technology market is too small to support all the service providers that are battling for business, and consolidation among rival vendors is inevitable, says research house BMI-TechKnowledge.

Spending on IT goods and services rose just 4,4% last year, and that single-digit growth "is not a fun place to be as an industry", says analyst Natalie Bryden.

SA's IT market was worth R45,8bn last year, and is expected to grow about 5,8% a year to reach R60,8bn in 2010.

That modest growth is putting pressure on IT suppliers to take some chances to secure better prospects for their businesses in the longer term.

Players have to think creatively about new products and services, new business models, and new types of industry relationships, Bryden says.

Vendors that stay too close to their comfort zone are likely to get left behind. Last year practically the only players to record above-average growth were those that made acquisitions.

"The total market growth is not large enough for the high number of service providers to be profitable and BMI-T foresees the continuation of vendor consolidation," Bryden says. Business Connexion will be the first top-tier player to go if the competition authorities grant Telkom permission to take it over, she says.

Much of the change is being caused by the convergence of different technologies, resulting in mobile data and the internet being used to carry voice calls or supply software as a service.

Convergence is tearing down gaps between technologies, causing buyers to look at their requirements more holistically, according to research house IDC. That will result in partnerships between networking companies and those that supply software and data storage as both sides seek to expand their value.

Business Day