A waft of optimism
Tough challenges face South Africa`s ICT players, but a sense of optimism pervaded much of the discussion at the Futurex 2004 conference.Futurex 2004: The Conference, held in Johannesburg last month, set out to examine the current state of the South African ICT industry and how it is handling some of the biggest challenges faced in the 10 years since the country was readmitted to the global economy.Among these challenges are black economic empowerment, innovation and technology development, business opportunities, changes to corporate procurement practices, government spending, regulatory confusion and the impact of globalisation.While there are no doubt players who feel overwhelmed by the demands for change these issues make, others are optimistic that, despite the significant amount of business "pain" involved, the ultimate outcome will be positive.Perhaps some of the optimism follows a sense of relief that this year`s national elections are over. The "dull elections", as they were termed by some, have brought about the comfort of knowing that policy that has been in place for at least five years will remain intact. Business needs predictability."Government will have to begin to deliver on its election promises and that is good news for companies as the public sector`s annual spend on IT is about R3 billion and could increase," Ravin Naidoo, chairman of technology consultancy Radian. Time of change"Companies are going through a time of refocusing," he continues. "Corporates are reorganising their priorities and securing BEE relationships. Outsourcing is also becoming big again and corporates are turning to companies that have specialised in different areas to pass on the cost savings."But government has made it clear that its preference will be for suppliers that have transformed their companies to allow for significant BEE.Only a week before Futurex, the ICT empowerment charter working group released its proposed targets, which were met with mixed reactions. Among the concerns voiced were that too much emphasis had been placed on selling equity to black investors, while too little credit was given to social responsibility and community development investments. Comments were made that some multinationals might decide to pull out of the country altogether.But optimists argued that the five to ten years that will be given to ICT companies to achieve BEE targets is time enough.Angus MacRobert, MD of Internet Solutions, says the ICT BEE charter requirements should not come as a surprise to the sector. "In my opinion, the industry is way ahead of the charter. A lot of corporates have been doing a lot in the BEE space."The ICT sector has known about this for the last five years, and by the time the charter comes into being I think most corporates will have met their requirements already."Zulfiq Isaacs, MD and founder of Liquid Thought, says BEE, as any social policy issue, can be a two-edged sword; and usually it is the customer who ends up taking the cuts."There is no doubt transformation is essential. However, one does not just transfer the value proposition from a company that has not transformed to one that has. Unfortunately, the customer will lose something here and the balance and process of such transformation has to be carefully thought out and phased in," he says.Isaacs says the problem for companies that are undergoing transformation is to avoid the "body ship" syndrome where the company is just a placer of bodies for a project, rather than one that invests and nurtures its resources.Newly appointed, 28-year old CEO of Business Connexion Johannesburg, Sydney Ramutla, says the merger of Comparex and Business Connexion has given the company a big advantage - one on which it will have to act fast. Know thy customer"We are the frontrunner in the empowerment drive, but we have a very small window of opportunity to take advantage of that. The other players will catch up. As much as we`d like this window to be big, it`s got to be small, and that`s good for the industry."Ramutla says it`s pointless to achieve transformation without service delivery."We need to be more client driven as an industry; to find a balance between being honest to the client and making a profit."In the nineties you could make money out of IT pretty easily. But the industry promised a lot and delivered a little."Ramutla says the whole definition of value needs to change. "Clients are expecting to determine what value is; while what we keep doing as the industry is push what we see as the value."Not too many companies are going about understanding their customers` businesses and then offering to add value, and Ramutla believes changing the approach will be the biggest challenge.Richard Harris, VP of Compuware Middle East and Africa operations, says companies want to do more with less. "They want to do more for the client, get close to their client base, but want it to cost less money. They want to make better use of the investment they`ve made over the years and want to be able to show a better return for their shareholders. There`s massive pressure to make sure every decision is properly cost justified," says Harris."So people are looking very closely at the value they are really getting in terms of investments they`ve made and investments they continue to make." Rules of the gameSorting out regulation, particularly the Convergence Bill, must be one of government`s prime concerns as it will set the stage on which the future of South African ICT achievements will be showcased.Richard Heath, M-Web regulatory director, says since the cornerstone of government policy is alleviating poverty, the Department of Communications` role in that is to bring cheap telecommunications to the poor. As a result, it is time to take a close and careful look at technologies that can do so."The time has come for the Minister of Communications to do away with the artificial barriers separating voice and data and allow for technologies such as voice over IP that will bring good market competition and reduce costs for the consumer," says Heath.Another challenge is the long awaited second network operator, says MacRobert. "Six months ago I would have been very bullish about the introduction of the second national operator (SNO). Now one hopes it will be in operation by the end of the year. But there are a lot of `housekeeping` issues they need to sort out internally."MacRobert says the SNO will only be able to undercut Telkom if its debt margins are not too high. Introduction of the SNO will see some discounting, but he says it will be nothing like the industry has hoped for.Siemens Telecommunications CEO Pete da Silva believes the situation of the SNO is unacceptable. Tough decisions"After such a long time, it is sad to see that we still don`t have it. Some tough decisions need to be made, and the process needs to be speeded up. It is not a lost issue, but I think it is reflecting badly on us from an international investor point of view. They are waiting for a competitive industry."That said, there are still a number of positive signs in the telecoms sector. "It`s nice to see Sentech offering alternative access to the Internet. This means the regulatory framework is moving in the right direction."Da Silva adds that the eventual arrival of the SNO will have a significant impact, much like the arrival of Cell C had on the mobile sector.Finally, Radian`s Naidoo warns that the South African ICT industry should be careful not to become too introspective and remember that it and the rest of the South African economy are part of an increasingly competitive global economy."There are many small local companies that have no South African customers; rather they deliver for foreign entities. We still have to answer the questions of whether or not those companies have to be affected by BEE requirements and also find ways to lower their input costs, particularly broadband, so they remain globally competitive," Naidoo says.Additional reporting by: Damian Clarkson, Stephen Whitford and Ranka Jovanovic.
31 May 2004
Tough challenges face South Africa`s ICT players, but a sense of optimism pervaded much of the discussion at the Futurex 2004 conference.
Among these challenges are black economic empowerment, innovation and technology development, business opportunities, changes to corporate procurement practices, government spending, regulatory confusion and the impact of globalisation.
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