Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved. The Economic Impact of IT, Software and Microsoft in South Africa Mark Walker, Director - Vertical Industry Practice IDC Middle East & Africa October 2009

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa IT Market Topics and Issues in South Africa Govt spending new brooms pent-up demand Leadership accountability efficiency National Initiatives IT development zones eSkills dialogue Public Private Partnership Access to broadband and internet Price Relevance Infrastructure Skills Availability Labour Broking Regulation Monopolies ICASA Competition Commission African Collaboration Healthcare Road to Recovery GDP (2009 –2.2% vs %) SW & Services Spend ( % vs %) IT contribution to GDP SA: 4.2% Business Confidence Exchange Rate fluctuations Small Medium Business Sector

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa IT Economic Impact Model Standard Definitions IT Spending Statistics by Country Validation by Country Officials Import/Export Factors Study Methodology Macroeconomic Data Tax Rates, Labor Rates, Exchange Rates IDC Analysts in 45 Countries

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa Methodology – Process Flow

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa IT Industry – Source of Economic Growth IT spending will reach $11.7 billion in 2009, representing 4.3% of GDP. In 2013, the market will reach $15.2 billion, for 4.9% of GDP in that year. ($m) Broadband rollout Content technology IT Tax Contribution

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa Growth in IT-Related Tax Revenues IT-Related Tax Revenues An aggregate of $1.4 billion in new tax revenues over 4 years Personal & Social Taxes Corporate Income Taxes VAT Total IT-related tax revenues will reach $3.5 billion in 2009 Total taxes paid by IT sector in ~ $6.1 billion

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa IT Will Create New Jobs IT-Related Employment Between 2010 and aggregate of 95,200 new IT jobs Hardware employees Software employees Channel and Services employees IT Professionals 429,500 people will be employed in IT- related functions by the end of 2009 Source: StatsSA Labour Force Survey

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa IT Related Employment, 2009 Local Channel & Service Firms Local End User IT Organizations 83, ,900 IT Producers (Hardware & Software) 15, IT Employment by Sector  Between 2010 and 2013, even modest IT growth (5-8%) will fuel an additional 95,200 new IT jobs  While software represents only 12% of total IT spending, it drives 47% of IT industry employment

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa New IT Jobs New IT Jobs Between 2010 and Hangover Support Maintenance Customisation Govt Infrastructure Projects Commercial Demand economy fully recovered Broadband New Technologies Market Expansion New IT Jobs 07/09 –

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa Software’s Impact on Taxation, 2009 IT Spending IT-related tax revenues (corporate, personal, social taxes from both supply and demand side) $11.7 Billion $3.5 Billion IT tax revenues Software– related tax revenues 51% Non-software IT tax revenues 49% Software 12% Hardware & Services 88% While software represents only 12% of total IT spending, it drives 51% of IT tax revenues Bang for Buck Factor Software enables greater downstream value addition via ecosystem and employs people with higher average remuneration levels

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa Impact of the Microsoft Ecosystem IT SpendingIT Tax Revenues In 2009, Microsoft-related tax revenues will reach $1.59 billion, which represents 44.9% of total IT tax revenues. IT Jobs In 2009, Microsoft-enabled jobs will comprise 175,600 people, representing 40.9% of IT employment. In 2009, Microsoft-enabled revenues will reach $4.7 billion, representing 40% of total IT spending. Definition: The Microsoft Ecosystem encompasses all IT companies and IT sector employment, which depend directly or indirectly on Microsoft software products. Components of this ecosystem include: Companies that create, sell, distribute, or service hardware or software that runs on Microsoft operating systems; IT professionals at companies and other organizations that develop applications, service, or maintain such hardware or software.

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa Microsoft Ecosystem IT Spending Microsoft-enabled Revenues, 2007 vs Between 2007 and 2009 Microsoft- enabled revenues grew at a CAGR of 9.8%. MS CAGR: 9.8% SW Mkt CAGR: 4.3% MS enabled Revenues includes application and development software, MS related Services and OEM but not channel revenues. Other IT Revenue includes PC and Server Hardware, Networking Equipment, non-MS IT Services, Storage Hardware, Peripheral Equipment and non- MS software

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa Growth in Microsoft Ecosystem- Related Tax Revenues Microsoft-related Tax Revenues, 2007 vs Microsoft-related tax revenues will be $384 million higher in 2009 than in $384 million new tax revenues MS related Tax revenues includes all taxes paid by ecosystem including personal, corporate and social tax accrued from Microsoft, partners and Users Microsoft ecosystem tax base is typically more affluent due to higher compensation and stronger company revenue levels

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa Growth in Microsoft Ecosystem- Related Employment Microsoft-enabled Jobs, 2007 vs Between 2007 and 2009 the Microsoft Ecosystem created 22,200 new jobs. 22,200 new jobs MS enabled Jobs includes roles related to application and development software, MS related Services and OEM support as well as those created in the channel and at end-user IT departments via the use of MS software. Roles include design, deployment, management, support and training. Other IT Jobs includes Hardware, Storage, Peripheral and networking equipment and non-MS software related design, deployment, technical maintenance, support, management and training roles,

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa The Microsoft Footprint In 2009, for each $1 of Microsoft revenue, there will be downstream revenue of $11.26 for the local IT sector compared to $9.69 in New $1.57 in downstream revenue For each $1 of Microsoft revenue, downstream revenue will be $1. 57 higher in 2009 than in Partners see software as the “key” that unlocks additional value-addition opportunities at their customers

© 2009 IDC Source: IDC IT Economic Impact Study, 2009, South Africa Summary  Growth in the IT sector is dynamic and will continue on an upward trajectory through 2013  The software market will grow at 7.2% average compound growth rate (CAGR) between 2009 and 2013  In the next four years, the IT sector will generate more than 95,000 new jobs, and an aggregate of $1.4 billion in new tax revenues.  The software sector will generate 60,300 new jobs, and an aggregate of $1 billion in new tax revenues between 2009 and  The Microsoft-enabled revenues will account for 40% of total IT spending in Between 2007 and 2009 the Microsoft Ecosystem generated 22,200 new jobs.  In 2009, for each $1 of Microsoft revenue, there will be downstream revenue of $11.26 for the local IT sector compared to $9.69 in 2007.