executive director, Cape IT Initiative

The Western Cape has received a lot of press lately as the South African hub of call centre activity, to the degree that readers would be forgiven for assuming that is all that goes in Cape Town, IT-wise anyway. The region, however, has long been a hub of niche software development activity, and is making its mark in other sectors too.

Says Cape IT Initiative (CITI) Executive Director, Masedi Molosiwa: “We are seeing an increasing number of local software development houses winning offshore development contracts. Initially this business was won on the strength of the exchange rate, but local companies are increasingly winning contracts due to the high level of technical skill available.” Initially this business was won on the strength of the exchange rate, but local companies are increasingly winning contracts due to the high level of technical skill available.Masedi Molosiwa>Text

Secondly, adds Molosiwa: “Another key trend we are seeing is the move, by local software development houses, to develop open source applications. Part of the reason for this, I believe, is increasing government focus on open source. As government is a big IT spender, it follows that local companies would move in this direction in a bid to gain government business.

“One of the advantages the region has over other offshore destinations is tourism,” he continues. “Customers are keen to offshore here because they like coming to Cape Town. Tourists discovered the area when the rand was weak, realized that it offers more than just a beautiful holiday destination, and have increasingly moved business here.

“The more SA and Cape Town are marketed as tourist destinations, the better off we are,” he says smiling.

The other side of the software development coin, however, says Meta/Gartner Senior Research Analyst, Enterprise Applications and Analytics, Johan Jacobs, is that the software development service providers in the region tend to be ‘mostly smaller and niche-playing organizations, which provide solutions in a specific area to a specific industry’.

“Very few of them play across the industry,” he states. “A big issue for these small players is that, if a software developer produces an application for one company in a sector, that company is not going to be keen to have its trade secrets given away, if the software developer makes the product available to other players in the same sector. The smaller organizations tend to stick to a few clients in one sector, and seldom corner many players, because of this perceived anti-competitiveness.”

That said, a survey conducted by CITI in 2003 revealed that there are some 1,200 IT companies in the region, 50 per cent of which are software development companies, indicating that there is clearly a demand for niche software development services.

One area where Jacobs says local software developers have a huge opportunity is in the outsourced application development space. “Locally there is only one large player providing outsourced applications development and maintenance service,” Jacobs notes. “There is a huge opportunity here for other players.”

Local companies understand the local business landscape, as opposed to Indian outsourcers who do not, says Jacobs. “The opportunity for local players is huge,” he emphasizes.

Molosiwa says his organization is also seeing increased activity in the mobile applications space. “Fundamo, for example, is the second largest mobile payments platform in SA, and it is a Cape-based company. iTouch is also based in the Mother City. We have also seen several smaller Cape-based players develop applications for SMS distribution.”

User organizations in the region are increasingly focusing on mobility too, comments Jacobs. “There is a big move from the insurance companies towards mobility — mobility of the sales force, and mobility from the perspective of developing an environment that is increasingly self-service centered. For example, most of the banks charge higher fees for in-branch visits to tellers, and SAA charges a R50 premium for clients wanting paper tickets over e-tickets. For financial services companies, enabling sales people to go to a client, record an order, interact with the head office back-end system, and close a sale, brings enormous cost and productivity benefits.”

“In the systems integration environment there is a big drive towards solutions for mobile users,” says one local player. “This is being driven by the fact that Cape Town is a very active, yet small part of the economy, so there are a lot of executives in Cape Town who travel between that city and Johannesburg. By and large though, the majority of technology services are still supplied around the call centre space,” he notes.

On that note, says Jacobs: “The call centre industry in the Western Cape is currently in a very low growth phase. There is a lot of activity, but few new call centres being established, primarily due to most large organizations already having established call centre initiatives.

“Where there is a focus in that space is from service providers supplying technology updates or refreshes, or providing extended functionality to existing clients. Local players are heavily courting international clients, and have seen a few successes. Hopefully we will see more in the future, but right now it almost seems as if there is a little bit of a lull in the awarding of new contracts.”

“Where we are well placed in the Western Cape,” Molosiwa comments , “is that government has played a leading role in many ways. The City of Cape Town Smart City strategy, and provincial government’s knowledge economy strategy, were both developed around four years ago, and are now being implemented. CT is one of the few municipalities that runs on an SAP platform, so a lot of SAP skill sits here. We are now in contact with other municipalities, and there is the potential to export these skills to them.

“What is also important is that the ICT industry is being seen as a job creation vehicle in the province, something we have seen based on the funding we get. The industry is one of the largest employers in the region, providing jobs to 27,000 people as per our 2003 survey.”

Telecommunications deregulation has resulted in an increase in the number of companies playing in that space, regionally and nationally, says Molosiwa. This deregulation, and the wider availability of a broader range of bandwidth options, may or may not also be driving another interesting trend.

“Although we are not seeing a lot of action yet,” says Jacobs. “There is a huge amount of investigation and business case analysis happening at the moment, from a number of large Western Cape corporates that are looking at expanding to the Paarl and Malmesbury areas. Property is cheaper, labor is cheaper, the roads have been upgraded dramatically, and communications infrastructure is not an issue.

“Expanding to the northern suburbs and Paarl also solves the traffic problem, as commuters will go against the daily traffic flow. On the communications front, there is a lot of underutilized infrastructure, and if more is needed, it is easy enough to lay fibre, or use wireless technology,” he adds.

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