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Issue Date: April 2008

A mix of local and international priorities

April 2008

GijimaAst, Faritec and Business Connexion released their results recently. Frost & Sullivan analysts offer their take on the year ahead for the respective companies.

ICT company GijimaAst released its interim results showing that operating profit increased by 114% on the comparable period last year, driven by the strength of contracts won by the company. GijimaAst's clients include heavyweights such as Anglo Platinum, The Airports Company of South Africa, South African Revenue Services and Total (South Africa).
Frost & Sullivan notes that GijimaAst's recent performance was also boosted by the R2 billion tender it was awarded last year by the Department of Home Affairs as part of a consortium of BEE companies. The company will lead the implementation of a citizen-centric system, which is a key prerequisite for the issuance of electronic passports and smart ID cards.
"In a span of three years, GijimaAst has established itself as an accomplished home-grown ICT company," notes the head of Frost & Sullivan's African ICT practice Corrie Froehlich. Froehlich points out that, as a home-grown BEE organisation, GijimaAst is continually in the spotlight. Its accomplishments only heighten awareness of the company and this raises the level of scrutiny placed on the organisation.
Corrie Froehlich
Corrie Froehlich
"It is not surprising that the company will have to proactively deal with critical press, adverse allegations and stakeholder sensitivity in the short and long term," Froehlich says. "However, it continues to weather this storm while attracting high profile and innovative partnerships in a market in which it has come to stand with the best."
Frost & Sullivan believes that, given its impressive growth and strategic alliances, GijimaAst may want to consider further growth opportunities beyond South Africa. It already has projects under its mining portfolio in economies such as Zimbabwe.
"Given its partnership with the South African Department of Home Affairs, it may attract the attention of several other African countries who will be considering similar partnerships to implement their immigration systems in line with electronic governance," Froehlich says.
International markets key for BCX
Global growth consulting company Frost & Sullivan believes that Business Connexion (BCX) should consolidate its industry position through further exploring the opportunities in international markets. The ICT service provider released its interim results today, noting that the African region as a whole continues to be an excellent growth opportunity for the business.
BCX recorded revenues of R124,4 million through operations in Africa outside of South Africa, an increase of 5,25% on the comparable period last year. The company's UK operations also grew strongly, up nearly 60% on the comparable period from last year to R34,5 million.
"BCX already has five country offices outside of South Africa," says Froehlich. "With the phenomenal growth rate of the ICT sector in Africa, coupled with very good opportunities for converged systems, BCX is poised for significant horizontal and vertical integration."
BCX is a leading integrator of innovative business solutions through its five part 'Solutions Integration Model'. Its ability to design and implement practical business solutions has seen it win tenders from public and private sector organisations in a number of African countries.
However, BCX still faces the challenge of a highly competitive market in which companies struggle to remain relevant as cross-industry technology partners.
"While its business model has so far successfully ensured its visibility and credibility, the challenge still remains for BCX to enhance its potential and offer innovative and integrated solutions that will continue to set it apart," Froehlich says.
Recent analysis of the South African unified communications and messaging markets by Frost & Sullivan identified that BCX has a competitive edge as a systems integrator in this sector. The company has the envied capability to deploy a diverse range of products from vendors such as Microsoft, Cisco, Avaya and Nortel. BCX stands as a formidable competitor in the ICT space through its phased approach in the migration of legacy ICT infrastructure to next generation unified communication systems.
Acquisitions skills commitment lift Faritec
Although Faritec has returned lower than anticipated earnings in the last year, the IT services company continues to show growth due in what is a very competitive market. Frost & Sullivan believes this is mainly due to targeted acquisitions and the company's commitment to skills development.
"The acquisitions have included companies that are considered best of breed in the services in which they specialise," notes Frost & Sullivan ICT industry analyst Lindsey McDonald. "This means that an extended service offering has not meant a dilution of expertise or quality. The particular attention that has been paid to the effective assimilation of the acquisitions into the business has also proved beneficial."
Lindsey McDonald
Lindsey McDonald
McDonald adds that Faritec's skills development initiatives should be a lesson to other companies in the ICT sector.
"Given the challenges that the ICT industry faces in this regard, it is a very important exercise that more companies need to undertake," she says.
Looking ahead, Faritec will face its greatest challenge in dealing with the country's electricity supply problems. This will, however, also present the company with some specific opportunities.
"This is not only a threat to the infrastructure belonging to the company and its clients, but also in terms of how it might contribute to an exodus of skilled personnel from South Africa," McDonald notes. "However, storage and disaster recovery arenas are really expected to show very healthy growth given the concerns over power supplies coupled with current credit regulations."
Recent research from Frost & Sullivan also pointed to opportunities in the open source software market.
"Our analysis shows that increased investment in OSS is likely to see higher incomes and new opportunities for services companies such as Faritec," McDonald says. "The ability of companies such as these to provide integrated support for both proprietary and OSS systems will stand them in good stead going forward."

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