Turned on to Africa

Africa`s ICT market is bouncing back after the recession, say analysts, which is good news for the scores of companies hoping to tap into the continent`s potential. But Africa`s ICT spending patterns aren`t quite the same as those in the developed world, analysts note. Hardware and telecoms are the hottest growth areas in Africa now and in the foreseeable future, as the continent races to bridge the digital divide and spur economic growth. In Africa - excluding South Africa - the bulk of IT spend is currently on hardware, which accounts for around 80% of the continent`s IT spend. Software and services lag.

ICT advisory firm International Data Corporation (IDC), which hosted the recent annual Africa CIO Summit in Johannesburg, says Africa`s IT market is headed for recovery this year, with growth levels expected to reach $22.53 billion in 2010.

Major drivers of this spend include cost cutting, security, regulatory compliance needs and an insatiable demand for telecoms and internet access.

Said Jyoti Lalchandani, IDC VP and regional MD of IDC MEA and Turkey: "There seems to be a consensus that 2010 will be better than 2009.

"In 2010, our current projection is that IT spending will increase by just over 3% in terms of overall IT growth. And we believe the African region is going to be the fastest growing region worldwide.

"Over the next two years, we believe that over a quarter of all IT investments are going to come from the emerging markets [including Africa]," he said, adding that the MEA region accounted for over 6% of all new spending in 2009, but that this would rise to nearly 17% of net new spending on IT, topping $33 billion over the next two years.

"The region is becoming an important area of focus for everyone," said Lalchandani.

IDC`s senior VP of research for EMEA, Steven Frantzen, said the coming years would be a "fascinating period for the development of Africa`s IT and communications markets."

Birgitta Cederstrom, head of research for ICT Africa at Frost & Sullivan, told iWeek that Frost & Sullivan also believes most African ICT markets will have recovered from the recession by mid 2010.

"What is driving the recovery is the high demand for ICT in Africa and [the fact] that the continent is one of the preferred emerging markets for investors," she said. Cederstrom added that South Africa was never as badly hit by the recession as other markets. "We are very positive for a fast recovery and a vibrant business climate towards mid to end 2010."

IBM, one of the sponsors of the recent summit, feels Africa is the place to be. IBM sub-Saharan Africa GM Oliver Fortuin notes that IBM has opened offices in Nigeria, Kenya and Ghana, and is now opening an office in Angola because the company recognises that Africa is one of the fastest growing emerging markets. It`s a greenfields market, with vast opportunities to establish complete infrastructures, particularly within telcos, oil and gas companies and financial companies, he says.

Frost & Sullivan thinks Africa`s telecoms sector is seeing rapid growth, with demand for continued rollout of mobile networks and broadband connectivity. "Connectivity is key for Africa`s business and its people," Cederstrom said. "Fixed telecom operators are looking at mobile and, for example, we have our own Telkom South Africa, which soft launched its Telkom Mobile offering at the end of 2009. Several other African fixed operators are going the same route to increase revenue streams." She noted that consumers spent less on value-added services such as ringtones, games, videos and Internet downloads, but only minor revised forecasts have been made, as consumers are prioritising their mobile and connectivity. "We predict that in 2010, VAS in markets such as SA, Nigeria, Ivory Coast, DRC and Kenya will have a major uptake from Q2 2010."

Earlier, Frost & Sullivan ICT analyst Silvia Hirano Venter noted that Africa was seeing an increased demand for services such as high speed Internet, VPN and mobile Internet. She noted that in Africa, mobile phones are no longer seen as only a tool for basic phone calls and SMSes. "They`re slowly starting to replace personal computers. In sub-Saharan Africa, where a PC is still quite expensive, there is less incentive for consumers to acquire laptops or desktops if they can do what they need to from their phones," she said.

Another trend Venter noted is that alternative power sources and wireless Internet is taking connectivity beyond urban centres.

"One of the common trends among operators in sub-Saharan Africa is their high CAPEX over the next few years," Venter notes. "This is due to the rollout of basic fibre-optic cables.

"For instance, Angola and Kenya are among the most prosperous countries in the region. Both are experiencing a very high demand for data services and other advanced value-added solutions. However, the backbone and backhaul infrastructure capacity in both countries is still not quite adequate to support this high traffic volume."

IDC`s Frantzen said Africa`s telecoms market will continue to grow, but will have to adapt to changing dynamics. "Submarine fibre connectivity will drive major drops in bandwidth pricing and boost Internet adoption," he noted.

He predicts that telcos in Africa will begin to focus on small to medium-sized businesses, offering bundled managed ICT services. Telcos are destined to become major players in the channel, he said.

But connectivity is not Africa`s only ICT growth area.

Cederstrom says Frost & Sullivan also sees higher demand for managed services, data centre and outsourcing across Sub Saharan Africa and South Africa, as well as countries like Kenya and Nigeria. Frost & Sullivan believes that the South African infrastructure hosting market is worth R1.9 billion, with a CAGR of 17%.

IDC`s Frantzen says data efficiency remains a top priority for CIOs, with increased focus on consolidation. "Some leapfrogging will take place in `developing` Africa due to limited legacy infrastructure," he observed.

Virtualisation remains the most important data centre issue in Africa, but due to the lack of skills in Africa, adoption rates may be limited, he added.

In line with data centre consolidation, Frantzen also predicted further focus on application modernisation and consolidation, particularly for companies with multiple regional operations. Frantzen explained that key areas of modernisation will be centred on ERP upgrades, SOA implementations in the enterprise, and the addition of a business intelligence (BI) and analytics dimension to existing solutions.

This ties in with an emerging trend towards enterprise information integration, as companies focus on better access to critical information, he continued.

Frantzen noted that ICT in Africa would continue paving the way to a better future, with continued emphasis on transformation in several African countries. He added that capital constraints would require governments to depend on partnerships, shared services and outsourcing.

Some African countries will begin the move towards citizen and business-centric services such as e-filing of tax, registration of official forms, access to official information and tenders. This will extend to national identity and security systems implementation and roll-out, he added.

Frantzen concluded by highlighting African governments` commitment to the promotion and sponsorship of e-skills, and continued support of national technology infrastructure extension and deployment.