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Nigeria's economy is
undergoing serious recession and currency value erosion. This implies that
acquiring ICT infrastructure will become more onerous, considering the USD
component of most of these solutions, especially the enterprise grade high-end
solution sets.
For context, let
us look at some facts. In 2014, only 3 countries relied on oil for
over 90% of export income: Nigeria (92%), Angola (95%), Venezuela (93%). Saudi
Arabia, Norway and UAE, earned 83%, 65% and 59% respectively from oil
exports. The former trio also spent heavily on food. Venezuela $9.2b (25% of
imports), Angola $4.6 b (18%) and Nigeria $7.7 billion (15%) comprised of,
amongst others, $677m on non-fillet frozen fish, $ 209m on processed fish,$699m
on sugar, $499m on palm oil, $ 709 on rice and $1.4 billion on wheat.
We spent another $ 7.8b (15%) on refined petroleum products, $1.9b on cars ( it
is unlikely that countries with twenty times our per capita feature households
with three or four cars as is common with our so called elite class), $493m on
rubber tyres, $304m on embroidery ( number one in the world), $203m on
fake hair, $615m on telephones etc.
The chances of the Nairas SUSTAINED
recovery especially as the Petroleum resources that bring in over 90% of FOREX
has reduced significantly, both in value and quantum produced. Our view is that
recovery will also not happen overnight. The LONG TERM Naira appreciation will
be predicated on various things including reduced expenditure on imported
vanities, increased domestic productivity and decimation of corruption.
A small cluster have basically
taken what should have been used to create widespread prosperity, enlightenment
and elevation and used those resources to fund 'rock star lifestyles that mask
severe personal insecurities and lack of substance. Their actions over many
years have depleted the psyche of a once productive people, as too many
positioned around the oil funnel to 'lick' a few drops. It has largely been an
unproductive existence based on extravagant lifestyles, negative competition,
gaudy display of wealth ( often with dirty roots), and a young generation
almost exclusively focussed on just making money. It is, in our view, still
likely that there will be severe consequences further down the road, beyond the
economic tightening we are currently seeing. These are simple laws of action
and consequence in the affairs of men and economies alike.
It is instructive to note that we
spent only $213m on tractors, and $306m on computers - productivity and
knowledge enablers. Thailand, whom we bought some $500 m worth of rice from in
the same period, spent $50 for every dollar they spent importing fake hair. We
spent $1.09 on tractors for every $1 we spent on fake hair. Thailand spent
$3.5b on food imports representing only 1.6%
Is it any surprise therefore that
these three countries are suffering punishing inflation (with Venezuela
breaking ceilings in many respects), and are amongst the worst performing currencies
in the world? Venezuela 800% + inflation as of December 2016 with
currency value loss over 80% in 2016. Angolas inflation rate is over 40% whilst
Nigeria is somewhere close to 20%. Their currencies have also suffered serious
losses.
The structure of our individual
priorities will also need to change significantly to stand any chance of
recovery. Pumping money into the economy will only provide the funnel with
funds to keep pursing the vanities we are used to. Nigeria and Venezuela could
not till their land to feed themselves despite their historical dependence on
agriculture. Emerging economies simply cant spend the way we have and expect
currency stability or economic growth. Attitudes need restructuring away from
consumption towards productivity, learning and innovation. This shift, in my
view, may be akin to weaning a cocaine addict off the drugs. However, huge
opportunities lie in wait for the productive minded and long term investors.
ICT will be affected in a number of
ways. Companies may reduce investments. On the other hand, Investment in ICT
may actually increase in some narrow sub-sectors such as Governance, risk and
compliance management solutions, cyber security and business intelligence and
collaboration platforms and tools. This may be driven by the imperativeness for
organizations to seek more efficiency and transparency to reduce overheads,
increase efficiency, and block loopholes; measurably. However, we do not
produce ICT infrastructure, and complex software just yet, so these items will
still consume very scarce resources. Therefore, the balancing act will need to
be delicately undertaken to achieve desired results.
DATABASE
At the foundational level of
building the enterprise dataset lies the database market dominated by OEMs like
Oracle and Microsoft. We believe that unless these organizations are able to
deliver tailored emerging economies solution bundles that recognize the
economic disparities between advanced markets and emerging economies, their
market share and revenues will encounter serious erosion, especially in light
of open source alternatives that are gaining in credibility, skills support and
cutting edge functionality. Gartner already reports this trend even in advanced
markets.
Not only will 70 per cent of all
new in-house applications be developed on an open source database, 50 per cent
of all existing commercial RDBMS (relational database management systems) will
convert to an open source database (OSDBMS). Research firm Gartner predicts
this uptake in its report. The State of Open-Source RDBMSs, 2015. The open
source approach, Gartner writes, has entered a state of full market
productivity.
Table 1 contains a pricing
comparison of Oracle Database Enterprise Edition,3 MySQL Enterprise Edition4
and EnterpriseDB Postgres Plus Advanced Server,5 using a standard x86 server
with two sockets, each with six cores. Assuming a 50% discount for the Oracle
EE licenses (net $236,550), this would still represent a cost 15 times greater
than MySQL and almost six times greater than EnterpriseDB, yielding three-year
cost savings of $221,550 and $195,150, respectively.
Source: Gartner
Clearly, opportunities exist for
serious local investors to back local companies that can produce enterprise
grade database solutions that are built on open source platforms and that are
expansive enough to address the needs of Nigerian enterprises. This will drive
down recurrent expenditure incurred on licensing support, avoid punitive
reinstatement fees applied if a client that has not been paying support wants a
version upgrade or support and the relatively high fees associated with OEM
implementations. We believe a local player will emerge in the medium term with
a solution for the small to mid market enterprise segment
Many believe that a large portion
of what OEMs sell here are excess to business requirements, yet bundled in and
charged for the same way a US or UK company would avail themselves of the
technologies. When we look at our GDP per capita of $2,548 US dollars in 2015,
and that of countries like the US at $51,638 and the UK at $41,487, it is
apparent that Nigeria needs to look for a new reality where these applications
are concerned, though many will argue that Nigerian companies and business
leaders do not show aversion to purchasing expensive luxuries such as exotic
vehicles and other high end luxurious items, and therefore see no reason why
software and computing infrastructure should attract price criticisms
considering the productivity they enable.
However, the OEMs shoot themselves
in the foot with these sort of arguments as the likely outcomes will be
companies unable to acquire and deploy their technologies, unable to pay
on-going support (which at times can be up to 28% of procurement costs), which
will lead to stagnation and ultimately decline. It becomes a penny wise,
pound foolish scenario where larger spread of revenue is sacrificed in
favor of a very narrow audience that can afford these solutions and optimally
benefit from them. One solution that OEMs and certainly institutions tasked with
ICT policy and development should explore is special market prices or mid
market editions that are attuned to the realities of the emerging economies.
Concomitantly, our local development should be ramped up to enable home grown
solutions that can replace some of these applications in the future, though
these should evolve commercially rather than by government fiat, which tends to
ensure that local products have no incentive to be best of breed.
CLOUD
Another opportunity many
organizations are exploring are Cloud options. Cloud propositions are indeed
interesting as they ultimately promise cost savings through aggregation of
infrastructure at the Cloud provider, effectively replacing acquisition with
rental models. They also provide the ability for organizations to deploy
infrastructure and applications in off site environments that have always on
connectivity and power resources, ensuring an organizations market facing
services can always be accessed even if the organizations internal resources
such as power are unreliable. They also take away a chunk of ICT management
demands and allow organizations to focus on their core mandates leaving
management of a huge chunk of infrastructure to cloud providers. When updates,
security and other bells and whistles are factored in to the picture, the
increase in cloud adoption is easy to understand.
However, the cloud has
its opaque characteristics, which in some cases can be adverse. First is
the data sovereignty issue. When data is in the cloud environment, control is
somewhat ceded, even if only psychologically in some cases. This data can be
mined, compromised and even exposed to hacking outside of the security
influence of the client. Converged data offers a more attractive target to
hackers though this risk is probably minimized by cutting edge security
tools one expects Cloud providers to put in place. Furthermore, cloud
propositions, especially from OEMs have a lifetime lock in flavor, and are
not necessarily cash flow friendly with many OEM providers demanding multi year
contracts, and in many cases, upfront payments.
Then there
are the connectivity latency concerns especially when heavy-duty
enterprise productivity applications are driven from the Cloud environment. If
connectivity is down, an organization may find itself completely unable to
undertake even basic word processing tasks, until connectivity is restored.
Even advanced environments like Australia have had latency concerns leading to
a raft of in country data centers being built to deliver cloud services to the
local market.
Local cloud providers have a stake
in the game here. And the recent announcement between Main One and Microsoft
partners, Signal Alliance, is one of such interesting early moves, though it
remains to be seen whether this arrangement delivers other benefits apart from
the connectivity proximity advantage over out of countrycloud platforms. The
currency pressure introduces huge opportunities to win the business of
thousands of small medium sized enterprises that utilize various cloud services
outside the country and expend dollars to pay their subscription fees.
Capitalizing on this opportunity
will require clarity of propositions, significant trust and confidence building
and continued service excellence. Rack Center, Main One and MTN are some of the
Tier 1 data centers in Nigeria who are providing cloud-hosting platforms to
global standards. Organizations need to inspect facilities to establish how
well their individual priorities are catered for by the provider
environment for they are different in their own little ways.
Another issue is that of insurance of assets hosted at a datacenter.
From the application perspective,
decisions between lifetime subscriptions and capital purchases need to be
subjected to very stringent ROI (Return On Investment) and TCO (Total Cost of
Ownership) analysis, as well as proper risk evaluation to avoid nasty surprises
down the line.
COLLABORATION, ENGAGEMENT AND
BUSINESS INTELLIGENCE
We use collaboration and engagement
platforms to describe contact centers, collaboration / workgroup tools and
social media engagement platforms. Business intelligence tools delve deep into
data, to locate trends that can become actionable intelligence that deliver
business advantage. Engagement with potential and existing customers will
create data that can be mined for business advantage. It will also create the
need to collaborate and engage online, particularly through social channels.
Contact-Centers that aggregate traffic from all channels including social
channels and are capable of both inbound and outbound capabilities will become
mandatory for those with retail/ market facing organizations.
Cost pressures will introduce cloud
propositions even in respect of platforms like Contact Centers. Whilst these
may be advantageous in certain environments, suitability or otherwise will
depend on various factors such as the organizational strategy, connectivity
reliability and latency tolerances, data sovereignty and other issues
that ought to be considered when weighing cloud against non-cloud propositions.
GRC AND SECURITY
Security, inclusive of business
continuity infrastructure will also come under pressure and to a large extent
will be determined by the risk tolerance of the organization. It is a fact that
cybercrime is becoming more organized, profitable for its perpetrators, and
increasingly sophisticated. Nigerian Businesses of all sizes and across
multiple sectors already lose billions to multi-dimensional cyber related fraud
orchestrated from within and outside of its borders.
At the very least organizations
should invest in best practice processes for ICT use within their organizations
whist endeavoring to undertake enterprise grade proactive and defensive
measures through the deployment of ICT security solutions that support
organizational processes.
Governance, risk and compliance
(GRC) solutions can also be formidable first line of defence in terms of
securing the organization, not just against cyber attacks, but from
threats presented by non compliance, risk identification, policy enforcement
and live monitoring of assets. ICT solutions that enable effective crime
prevention and detection will also be a growth area.
Security breaches can destroy
a small or medium sized enterprise in one fell swoop. Security, in our view,
should receive more emphasis and focus, even from a National level as
Cybercrime is easier to perpetrate when there are weak points in a
technologically integrated environment. Our financial services sector, which
cuts across banking, microfinance, companies of all sizes, the Central Bank
amongst others is one example of an ecosystem that could be faced with serious
attacks.
ETHICS
Another major issue is corruption
in the ICT space itself. Whilst a vast amount of credible professionals operate
in the sector there are indeed bad eggs littered across the entire landscape.
The activities of these few means that many organizations purchase the wrong
solutions, pay inflated prices, and ultimately organizations of responsive and
cost effective solutions. Personal interests when placed above organizational,
or even National ones in critical sectors, can have devastating effect on the
ability of that institution to deliver on its mandates.
At times, the problem is also found
in the public and private sector environments as different agencies compete for
supremacy and control, especially in the procurement loop. If the jostling were
altruistic, then it would have been a different story. Often times, it is to
feather the nests of personal or other interest and the roots often lie in
cornering resources. Sadly, too many organizations pitching solutions are
complicit and even when they are faced with these obstructions, choose to play
along rather than stand up for their rights.
Again this ensures value erosion
and waste as the emphasis is not on the technology working for the organization
but the returns that will flow. This transactional mindset is one of the
debilitating factors that have eroded value for money, and efficiency across
both private and public sectors, and until curtailed will continue to create
significant burden on the sector.
SECTOR DIRECTION
Clarity in terms of sector
direction. Whilst it is undisputable that many initiatives are ongoing across
various government agencies, there is a sense of distinct lack of coordinated
outcomes that the sector can line up behind and be adjudged upon. The Ministry
needs to take leadership in this respect and articulate just a few measurable
objectives that speak to:
Better
governance of ICT;
Local content
drive in production;
Affordable
access to quality ICT tools and services;
Ethical
framework to avoid arming criminally minded persons with
ICT skills and
tools;
Cyber-security;
and
Cost reduction
on ICT acquisition through shared services, where appropriate, and negotiation
of aggregated preferential procurement rates on software license acquisition
and support.
Perhaps the Ministry of
Communication Technology has not published parameters by which it ought to be
measured, but there is an impression of sub par performance, even if the
reasons underpinning that conclusion are also unclear. There is a need for more
clarity on the direction and expected outcomes.
Perhaps a purpose based entity like
the Digital Government initiative, or an expanded Digital Nigeria will probably
provide a good convergence to pull all digital initiatives some of which reside
at often competing ministries and agencies into one focused agenda of
both leveraging ICT maximally in the governance of Nigeria's affairs
as well as becoming a major GDP enhancer. From utilization, production and human
capacity perspectives with clear measurement indicators.
Customers, in our view, will be in an even more enhanced negotiating position as competition for scarce business deepens. But this should be used very wisely, and within the boundaries of business fair play. Screwing providers to the ground can have counter productive effect as they try to recover those loses during implementation and through other loopholes that many organizations overlook within the small print.
2017 promises to be a year of intense pressure for the industry, jobs, business volume and much more. Our productivity outcomes, even as we pursue diversification away from oil will be driven by ICT. Yet the sheer demand base lends itself to innovation, adaptability and more value oriented propositions for ICT solution providers to thrive.