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Hardware still forms the bedrock of South Africa`s IT market, but its size and importance relative to the fast-growing software and services sectors continues to decline. Hardware, the traditional engine of growth in the IT industry, is increasingly taking a back seat as the software and services markets emerge as the new drivers of the computing world. Apart from the battered networking industry, hardware is the sector that has been the hardest hit by the downturn in corporate spending on technology. South Africa has proven to be no exception to this global trend with sales that are, at best, flat when measured in US dollars, the only currency that counts for multinational computer companies. During 2001, the hardware market [including data communications products] recovered slightly from the negative growth of 2000 and was worth around R14.5 billion, according to research from BMI-TechKnowledge [BMI-T].

However, BMI-T expects hardware to account for only 34.4 percent of total IT spending by 2006, down from 42.6 percent in 2001. Much like the rest of the world, the South African market continues to feel the effects of the consolidation of the industry as companies continue to embark on defensive mergers in hopes of increasing market share and driving costs down through economies of scale. The most dramatic example is the completion of the merger between HP and Compaq last year that catapulted the combined organisation into the top spots of the worldwide PC and server markets.

Smaller vendors continue to disappear from the landscape as a mere handful of vendors tighten their grip on the market – Sun, , EMC and HP in the enterprise storage and server markets, and HP, IBM, Acer, Dell and in the PC market.

The other broad trend in South Africa`s hardware market is that multinational vendors are becoming increasingly reliant on the local channel to sell their products into the corporate market as they try to simultaneously contain their costs and increase their reach into the market.

Apart from Dell, there are few examples of companies that have enjoyed much success with a direct sales model in South Africa. Even EMC, which once only sold directly to customers, has started to push more and more sales through a network of business partners.

This trend is also symptomatic of the declining importance of hardware in corporate IT purchasing decisions. Companies now first look for applications and business solutions, and then choose the hardware to run them on. That means hardware companies increasingly need to align themselves with systems integrators and software vendors to get a foot in their door when potential customers are buying new systems.

PCs and notebooks

According to BMI-T, the South African PC market showed some resilience in 2001, showing growth of 13.9 percent to R5.78 billion in 2001. However, unit shipments rose by a measly 2.9 percent, indicating that the growth in the rand value of the market was more a function of the depreciation of the currency during that year than anything else. With the recovery of the rand throughout 2002, spending on PCs continued to be muted.

South African manufacturer Mecer still leads the South African PC market with 19 percent market share in 2001, thanks to its strong presence in both the retail and corporate markets. Direct vendor Dell, in a second place with a 13.6 percent market share, continues to show strong growth in the corporate market thanks to its aggressive pricing and has emerged as a particularly formidable player in the burgeoning mobile market.

Servers and storage

During 2001, the server market grew by a meagre 2.2 percent in rand terms, according to BMI-T, and anecdotal evidence from Brainstorm`s conversations with the major vendors suggests that 2002 wasn`t much better.

According to the big vendors, the major factors in the server market in 2001 were a slowdown in large-scale IT projects in corporate South Africa, the decline in the value of the rand and a shift away from expensive proprietary servers [particularly mainframes] to Linux, Windows and mainstream Unix variants.

IBM, Sun and HP have pretty much sewn up the Unix market, while Unisys is also starting to become a major high-end player with its mainframe-class multiprocessor Intel servers that allow users to run different operating systems in separate partitions.

The enterprise storage market has also shown modest growth, but prices have fallen and margins come under pressure. Like anywhere else in the world, EMC hangs on to the leadership position and competes against Hitachi Data Systems, HP, Sun and IBM.


The paperless office remains a myth – the Internet and e-mail have caused people to print out more documents than ever before. For that reason, the printer industry is expected to show slow but steady growth at a compound annual rate of 4.6 percent beyond 2006, says BMI-T. HP is by far the leader in the South African printer market with nearly half of the market.

Closest rivals Epson and Lexmark had market shares of 9.4 percent and 8.3 percent in 2001.