Business Daily (Nairobi)

16 June 2011

Africa: Technology Companies Plot Assault On Continent

Photo: Jeremy Weate.
ICT: A key driver of economic growth.

In what could be termed as the new rush for Africa, international ICT firms are expanding their local offices as they seek to position themselves for an assault on the wider African market.

Nairobi - with its growing influence as an ICT development hub and its leaning towards innovative use of technology - is gaining currency as the venue of choice for companies that are keen to use the city as their hub to reach other parts of Africa.

In the last six months, firms such as Airtel, Comviva, Samsung, IBM and Google have moved to strengthen their regional headquarters as they gear up for a push into the continent.

"Over 30 per cent of our revenue now comes from the African continent. We are in the process of expanding our pan-Africa operations significantly and as part of this further expansion will create 200 jobs across the region," said Manoranjan Mohapatra, CEO, Comviva.

A growing number of multinational companies has selected Nairobi as their centre of operations in the continent as multinationals seek physical presence and local intelligence in markets where they previously relied on representatives.

Research house IDC says the main driver for this impetus is the continent's Sh527 billion IT market, which is creating new competitive fields for international firms who are keen to gain a piece of the emerging opportunities within the region as they seek new grounds for growth.

IDC says that it expects regional IT spending to rise by 10 per cent this year, mainly driven by increasing trust and confidence in the public sector, where the revamping of "outmoded regulatory regimes" will spur investments in e-government.

"Information and Communication Technology (ICT) will be increasingly recognised as a key driver of economic growth and productivity across the Middle East and Africa," said Mukesh Chulani, senior research analyst at IDC.

Mr Chulani said regional governments see ICTs as a means of supporting innovation through more efficient utilisation of capital and labour.

In particular, one major deal has been pivotal in attracting the interest of several firms in the sector. Last year, when Indian mobile firm Bharti Airtel bought the 16 African operations of Zain Africa, its lean operational model created new opportunities for companies who are keen to capture a share of its outsourced operations.

So far, the deal has spurred five companies - Comviva, IBM, Ogilvy, Ericsson and Huawei - to realign their operations in order to handle demand of the contract.

Comviva recently won a landmark deal with Airtel Africa to provide end-to-end management of the mobile firm's VAS services. As part of the five-year deal, Comviva will manage all VAS nodes across Airtel's 16 operations in Africa. Earlier this year, Comviva partnered with leading content aggregators to further strengthen its content portfolio offering in the region.

Last November, American technology firm IBM won the opportunity to handle Airtel's IT systems.

"Africa is in a period of transition. Banks, telecommunications firms, and governments are all investing heavily in solutions and our role as an enabler becomes even more critical during this period. It is now essential for us to be in these markets physically," said Tony Mwai, general manager of IBM Kenya.

Expansion programme

IBM recently announced that it was embarking on the second phase of its Africa-wide expansion programme as it seeks new opportunities in emerging markets where it sees potential for growth.

The firm, which already runs a 20 country operation from Nairobi, said it intends to increase the number of offices in Africa to 40 within the next four years.

"While older markets are squeezing value out of their legacy IT installations, markets like Africa have the flexibility to leap-frog to the technologies that are more relevant to their needs. The growth opportunity in these markets is especially attractive at this time," said Mr Mwai.

IBM is banking on a strategic mix of products to reach a growing number of clients in the country that will see it shed its more familiar role as a hardware provider to become a firm that provides customised solutions for its clients, ranging from software suites to specialist consulting services.

A large part of this growth will be made possible by partnerships with higher education facilities, which the firms hope to mine to tap into the growing number of partnerships between IT firms and universities.

"We plan to create jobs for 200 people in the first phase, creating employment opportunities for talented individuals and providing all necessary training for those recruited directly from schools and colleges. We have already made over 35 offers to fresh technical graduates in East Africa," said Sandyp Bhattacharya, Vice President - HR, Comviva.

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