54 No. 37261 GOVERNMENT GAZETTE, 24 JANUARY 2014 Chapter 7: Information Technology (IT) 7.1 Introduction Information technology refers to the hardware and software used to store, retrieve and process data .The Information Technology (IT) market has maintained a degree of stability in spite of the effects of the global financial crisis. However, the prevailing uncertainty surrounding the global economy may well affect the future of the IT market. So far though, it has been somewhat protected because of its inherent features. An advantage for the sector, and a possible augur of growth, is its increased enterprise mobility, that is, the tendency to do business anywhere, anytime, using any device.The Internet and virtualisation also continue in an upward trajectory, thus positively affecting the broader IT market. South Africa, in spite of its solid political and regulatory environment, is not yet leveraging the potential benefits associated with the ICT sector, according to a World Economic Forum Report. This is due to the lack of basic skills in large sections of the population, the high cost of accessing ICT services and insufficiently developed infrastructure, amongst other things. As a result, the economic impacts accruing from ICT in the country remain patchy. 7.2 Infrastructure, services and applications The South African IT industry was valued at R77.1 billion in 2011 and is expected to grow at a compound annual growth rate (CAGR) of 8.6% to reach R116 billion in 2016. There were close to 2000 companies in the IT industry as at the end of March 2012. The IT services submarket is the largest, accounting for 51%, followed by hardware at 31%, and packaged software at 18% of the total IT market. The hardware sub-market is driven largely by storage and networking services. Cloud computing is expected to drive future growth in the IT services sub-market. The hardware sub-market comprises personal computers, servers, the network, and storage facilities. There has been a steady growth in the demand for personal computers as they have become more affordable. This growth is also driven by retailers, telecoms service providers and banking institutions, which have been engaged in aggressive marketing techniques through bundled offerings of PCs, tablets and smart phones. However, end users' demand for mobile computing is affecting the PC market. Improvements in quality and durability are resulting in longer replacement cycles for PCs. When it comes to software, South Africa is said to have competitive advantage in embedded software design and development. Software testing and piloting systems and applications are growing markets in South Africa. Local companies also offer niche manufacturing facilities for high-end technology solutions. The area of systems management is also growing on the back of cloud computing. The growth of the subsector is inhibited by lack of skills, especially in business intelligence, cloud and systems management. Software piracy accounts for about 35% of total software. Government advocates for a free and open source software (FOSS) policy that provides for, amongst others, encouraging the use of open content and open standards within South Africa. 7.3 Challenges for IT market growth The growth projections of the IT market are negatively affected by factors such as costs to communicate, low expenditure by the public sector, market maturity and the capacity of users to incorporate digital services in their lives and workplaces, as well as larger companies sourcing directly from the original equipment manufacturers (OEMs). 50 This gazette is also available free online at www.gpwonline.co.za