Boom or bust, peaks and troughs – these sometimes extreme cycles in the global economy as well as corresponding fluctuations often experienced in the national economies of virtually all countries around the world are a well-accepted fact of life.
How well governments, companies and even individuals weather these cycles – as well as the almost inevitable and sudden variations in localised economic fortunes – can sometimes be a matter of pure luck or, hopefully, the product of careful and astute planning followed up by the successful execution of growth-enhancing development initiatives.
Regrettably, as we rush headlong into the third decade of the 21st Century, the South African economy appears to be unable to rely on the government for astute planning as a way out of a decidedly volatile global economic situation and an even more frightening and serious national slump in economic fortunes.
While the current uncertainty in the global economy appears to be fairly easy to explain away as a passing phase in world affairs largely attributable to the irrational behaviour of a certain individual currently living in the White House and his apparent preoccupation with geopolitical trade wars, the blame for the parlous state of the South African economy can’t in any way be linked to what’s going on in the rest of the world.
Unlike the last occasion in 2008 when the global financial meltdown caused an international economic crisis that South Africa weathered with some relative success thanks to sound and consistent financial discipline, the country is crippled by social instability, policy uncertainty, over-regulation, unemployment and almost a decade of rampant, unbridled corruption.
The moribund state of the national economy is almost entirely attributable to a governing party that is reaping the whirlwind of more than two decades of incompetent management based on practices such as “cadre deployment” that fosters nepotism and that encourages and promotes corruption that is euphemistically referred to as “State Capture”.
The government’s inability to create an enabling environment for business to flourish, leaves the private sector in a situation where all companies, immaterial of their size and regardless of the industry sector in which they operate, to adapt or die.
It is against this background that the local IT channel enters a year that may otherwise have been quite exciting given general technological trends that are underway. These trends include increasing digitisation throughout the commercial world, as well as opportunities associated with infrastructure development and resource management such as cloud computing.
In an extremely tight, stressed trading environment it’s highly likely that many IT companies are going to be faced with some extremely harsh and challenging decisions associated with issues such as rationalisation or consolidation. They will also have to consider strategic and tactical opportunities based on introducing differentiated service and support operations to supplement their traditional line of business.
The local IT industry’s heavy reliance on the multinational vendor community throughout the supply chain makes it particularly vulnerable to a number of potentially devastating problems in the year ahead.
Driven by stringent revenue-to-headcount ratios that are applied on a worldwide scale, multinational vendors caught up in geo-political trade wars are inevitably the first to institute dramatic cost-cutting measures when the going gets tough. These measures include staff retrenchments and the “freezing” of various budgets, as well as the tightening of credit into the channel among distributors and other business partners.
The domino effect is then carried into the rest of the supply chain along with the deferment of buying decisions or “down-sizing” throughout the end user market that puts the squeeze on resellers and distributors from the opposite end of the chain.
Not a very encouraging or exciting scenario, but one that could still harbour some intriguing and lucrative prospects for creative, strategic leaders at all levels throughout the IT sector.
The current “buzz” associated with technological trends such as digital transformation and the emergence of the so-called fourth industrial revolution incorporating developments such as blockchain, Internet of things and artificial intelligence can be leveraged to transform how business can rise above the self-inflicted morass of economic destruction being perpetrated by the government.
Against what appears to be frightening odds, here’s hoping that 2020 sees the emergence of IT channel players who can make us truly proud as the battle for survival over the next 12 months and beyond gets underway.