South Africa's IT infrastructure outsourcing market will continue to show healthy levels of growth but will need to focus on the requirements of the SMME sector in order to effectively capitalise on existing opportunities.

Frost & Sullivan finds that the South African IT Infrastructure Outsourcing Market earned revenues of between $2.78 billion and $3.5 billion in 2006 and estimates that this will reach $5.6 billion in 2012.

"South Africa's IT infrastructure outsourcing market is expanding at a robust rate due to sustained economic growth," notes Frost & Sullivan Research Analyst Lindsey McDonald. "The market is poised to experience fairly significant consolidation within the next five years."

There is already evidence of this with a leading telecommunications company and an IT services company poised to merge. This follows a trend whereby large market participants have started to increase their services and areas of expertise through targeted and strategic acquisitions of 'best-of-breed' service providers.

Two significant challenges, however, threaten market growth. Firstly, the country's skill shortage is reaching chronic proportions and while this is pushing the trend towards outsourcing, service providers are themselves experiencing problems with attracting and retaining skilled staff. Secondly, the high cost of bandwidth due to the lack of competition for the country's national operator is a limiting factor.

"Service providers can look forward to the introduction of the services of the second national operator; a development that will go some way to reducing the cost of bandwidth," says Ms. McDonald. "In order to build a reserve of skilled personnel, service providers should show higher levels of commitment to skills development."