Mapping a path of success
As governments and private sector firms continue to rollout ambitious IT and infrastructure projects in East Africa, how can channel stakeholders capitalise on these emerging opportunities in that region?
The East African IT market is simmering nicely thanks to a combination of government and enterprise initiatives and the widespread adoption of mobile as the communications medium of choice. Innovation, particularly in the form of mobile payment systems and telecoms services, is helping to create a dynamic landscape which has caught the attention of the big IT hitters.
However, it remains a market full of potential rather than a fully evolved landscape, and for budding channel players, success continues to depend on their ability to educate customers and drive demand for new technologies that will enable them to compete on a global stage.
Alkesh Soneji, head Africa at network security specialist Cyberoam, said that IT investment is one of the main triggers for regional growth that the African Development Bank estimates will be 5.6% this year, and 6.7% in 2016 – the highest in Africa.
Kenya’s IT market alone is expected to be worth Sh85bn ($830.6m) by 2016, influenced considerably by the government’s ICT masterplan which aims to eradicate traditional bottlenecks such as power infrastructure, the skills shortage and the deluge of digital content on creaking networks. Elsewhere, Huawei is now an ICT advisor to the Tanzanian government. All of this bears testimony to the seriousness with which governments are treating the IT sector, added Soneji.
“IT adoption across East Africa is being driven by a need to boost growth across various sectors by leveraging the potential of information communication and technology,” he said. “ICT is playing a huge role in supporting East Africa’s economic boom and shaping its future trajectory. Governments are using IT to deliver better and quicker basic services to their citizens; there is also a core focus on keeping in step with global standards of information and communication [such as migrating to a fully digital TV platform].
“What is also coming across is a need to change the status quo. For example, many East African countries are digitising various administrative departments. The banking sector is becoming digitised with consumers making a shift towards online and mobile banking. There is also a cultural shift towards IT, wherein it has become an integral part of the lives of people in East Africa.”
Nowhere is this clearer than in the mobile sector. James Mutua, senior research analyst, East Africa, at IDC, said mobile money innovations have helped to slash the region’s unbanked population, while other initiatives such as mobile money interoperability, mobile number portability and m-government programmes are also creating major opportunities for the IT industry.
“The improvement and expansion of broadband infrastructure has also led to improved ICT usage for individuals and business due to reduced Internet costs as a result of fibre deployment throughout the urban and rural areas,” said Mutua.
“In addition, the implementation of rural electrification in East Africa by various governments is expected to support the roll out of ICT masterplans in rural areas and open them up to the ICT age.”
These trends add up to an exciting climate for the IT channel, with demand for secure systems soaring vertically. “Spreading knowledge and awareness about the need for optimising the use of IT products can help resellers and distributors increase business footprint [across the region],” said Cyberoam’s Soneji.
But they will also help to create intense competition in the market as multinational vendors and suppliers begin to muscle in on the territory off home-grown players. Mutua said that regulations such as those being formulated by the Kenyan government to ensure that multinationals have local partners while bidding for state tenders should help to give local firms advantage.
Multinationals with more local ownership will be preferred over those without a strong local presence. “In addition, the foreign multinationals can only bid for contracts of more than Ksh100m ($977,170), while any contract less than that amount will be left to local contractors,” he said.
Amanulla Khan, director – MEA at vendor Belkin International, said that in order to build a sustainable IT channel business, resellers must understand this kind of government policy and process. “Also studying the government and local business dynamics will help them get a better understanding of the business culture in the region.”
Meanwhile, incumbent players should use their experience and marketing intelligence to come up with business strategies and plans that will help them secure their own market share.
“Their knowledge of the customers’ buying behaviour and persuasion tactics can also help them to achieve their commercial objectives,” he said. “The arrival of large, multinational brands of repute will add to the healthy competition in the IT space.”
Old challenges die hard, of course. Suneet Sahai, managing director of Ugandan distributor Global Info Distribution Africa, said that competition from global players is healthy, and that the regional player can always leverage sales on the strength of their customer relationships and the provision of local support.
“But the high cost of logistics is a major impediment for the growth of IT products,” he said. “Especially for land-locked countries. We have to bring down the freight and logistics costs to make IT products more affordable.”
Navigating complex local import and export laws is also a challenge. “Each country in the region has different laws, some of which pose real challenges for those looking to penetrate the market,” said Adel Elnaggar, country manager Egypt and East Africa at Fortinet.
“Conversely, as a result of lax laws and weak enforcement, the East African region has a massive grey market that poses a real threat to building a sustainable IT channel. Through the grey market, buyers can sometimes get hold of solutions that aren’t officially available in addition to enjoying, in most cases, lower costs.”
The answer is for the channel to build a reputation for providing high-quality solutions, meet their commitment schedules and maintain high service standards. This, said Elnaggar, will help to ensure repeat business even if newer and larger players enter the market.
“Our clear advice to the channel is to work towards outcome-based selling,” said Hatem Hariri, senior director – Africa at vendor Avaya. “We are not in the market to sell boxes of our products but to partner with governments and businesses as they set out to address socio-economic issues, create new pools of solutions, and effectively use technology in multiple spheres.”
More tech-savvy users have raised the stakes for resellers and systems integrators, who must match their customers’ knowledge and aspirations with first-class, business-aware consultancy.
“The channel needs to fine-tune its customer service and experience offering, which calls for a fair amount of skills development in terms of global best practices,” added Hariri. “Training and education on new technologies is often the vendor priority but the real-world application and innovation needs to come from channel expertise. Another area that needs development is around end-user-facing solutions such as desktop or mobile apps. This is an area that could see significant growth in the region, and calls for expert counsel to be implemented smoothly.”
According to Hariri, the East African market is hungry for solutions to business and socio-economic challenges.
“This is the time for holistic solutions to shine, not simply shifting stock,” he said. “This approach naturally means slightly more complex engagements, but brings the added benefit of ongoing revenues from service and support.”