Outsourcing SA Profile

Outsourcing SA is the marketing and awareness programme for the South African software sub-sector, forming part of the broader SAVANT initiative, the partnership between the Department of Trade & Industry and the ICT & Electronics sector.

This portal creates an opportunity for South African software developers and software service providers to showcase their products and to enhance the collaboration between them and their customers, partners and employees.

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Software Development in South Africa

The South African IT industry growth outstrips the world average. The country's sophisticated and established local information and communications technology (ICT) and electronics sectors consist of more than 6 000 companies.

Ranked in the elite in terms of worldwide IT spend, South Africa has ready access to cutting edge technologies, equipment and skills, and has the advantage of access to the rapid expansion of telecommunications and IT throughout the African continent. For this reason, South Africa is seen as the gateway to Africa South African companies have long been providing IT services in other African countries, and have been thriving because of their understanding of the local business environment.

Implementing solutions under various business conditions in Africa has given South African software companies the time and space to perfect their solutions. South African companies understand that each country and each market demands a different kind of solution, and that success in Africa lies in providing tailored solutions.

South African software developers are recognised as world leaders in innovation, production and cost efficiency, backed by an excellent local infrastructure. In business environments where resources such as bandwidth can be very expensive, and where business models can vary significantly from international norms, South African software developers have become experts in minimising costs and increasing software efficiency.

The South African software development sector is ably supported by the telecommunications and electronics sectors, which enable local developers to leverage excellent infrastructure and test web-based efficiency of their products and services.

The South African electronics industry has repeatedly proved itself in terms of world-class innovation and production. The industry is characterised by strong capabilities in professional electronics, security systems and electricity pre-payment meters.

On the back of technological sophistication second to none on the African continent, South Africa retains a strong tradition of software development.

The software industry is expected to grow from ZAR13.3 billion (USD1.9 billion) in 2004 to ZAR21.7 billion (USD3.1 billion, at the current exchange rate) in 2009, which represents a compound annual growth rate (CAGR) of 10%. Applications software is the largest software category, which represented 39.3% of the total market in 2004. Software-related services, the second largest category, is expected to grow at a CAGR of 11% from 2004 to 2009. Application development and deployment software is the third largest category, which accounted for 18% of the total software market in 2004.

Employment and productivity

Skills availability

There is an abundance of generic IT skills in South Africa. Software developers, multi-skilled in various platforms and tools and readily able to work on complex integration projects, are growing in number through various technical training institutions. There are currently large numbers of young, certified IT personnel gaining experience in the booming software development and ICT sectors.

Thus there is a huge IT training requirement in South Africa and a thriving market revolving around the provision of IT skills. New initiatives, such as the Johannesburg Centre for Software Engineering and the Meraka Institute, are adding essential capacity at the higher levels of the tertiary education platform.

Employment numbers

It is estimated that there are over 200 000 IT professionals working in South Africa. Growth in the number of IT professionals over the last ten years has been strong. This growth has been driven by strong demand for professional skills in the industry, based on a 10% per annum real growth in IT spending during the 1990s, which is a result of increasing computerisation.

The labour market has responded well to this demand for IT skills because of the excellent employment opportunities and salary premiums compared to other professions, as well as the relatively short training periods. The rapid growth in IT professionals has been aided by economic growth and other sectors, such as government, becoming increasingly computerised.

Exports

76% of South African software exporting companies export to other African countries. 32% of exporting companies trade with Europe, 17% with North America and 7% with the Australasian region.

Labour productivity growth

Developed countries tend to have the highest operational costs and therefore require much higher levels of productivity. South Africa's operational costs tend to be low, mostly due to the weakness of the South African Rand, yet the country's skills and product quality are world-class. South Africa is known for producing systems software (operating systems, network software and application development tools) and packaged application software at relatively low cost.

Industry structure

The South African software industry consists of four main types of companies, namely mini software vendors, local software vendors, global software vendors and system integrators.

Mini software vendors: Mini software vendors are companies consisting of highly competent technical teams of fewer than 15 employees, or annual revenues of less than ZAR10 million (USD1.5 million), which have come to dominate a niche segment of the South African software arena.

Local software vendors: These companies have moved up the production and commercialisation value chain and are more focused on providing solutions and products than on merely generating code

Global software vendors: It is estimated that there are several hundred global software vendors with some kind of a footprint in South Africa, even if very small in some cases.

System integrators: This category consists of all types of companies that provide a service offering around software products and services.