Lauri Elliott

This article was commissioned by ITWeb’s Brainstorm Magazine of South Africa for July 2010.

Location-based services and personal tracking is also a trend.

Tracking vehicles in a fleet via GPS has become ubiquitous. Logistics companies are able to pinpoint exact locations of vehicles in real time, not only for security purposes, but also for roadside services, efficiency, as well as offence management. The full audit trail offers huge benefits for corporates.

Technology is being used by fleet companies to track the odometer reading reported by on-board computers to bill their customers on a pay-as-you-go or per-kilometre basis, ensuring fairness and objectivity.

There are specialist applications where customers in the cold chain, for example, are able to measure temperatures in real time. In the broader logistics industry, the application of ICT systems allows companies to safeguard vehicles and drivers, improve customer communication and fuel economy, lower maintenance costs, tighten regulatory compliance, increase asset utilisation and reduce their carbon footprint.

Local company MiX Telematics has pioneered the leveraging of the technology platform onto mobile devices. MiX Mobile is available for the iPhone, BlackBerry and Android devices.

It’s the first telematics company globally to enter the mobile app market, and “with its existing installed base of over 500 000 fleet management and vehicle tracking units worldwide”, this was the next logical step.

The applications allow users to find vehicles and “determine whether they are moving, at what speed and their exact location”. Users also have the ability to track a vehicle directly via text messages.

Using built-in GPS, users are able to determine the phone’s position relative to a specific vehicle.

“Historical information is available in trip reports that display the total mileage a vehicle has driven within the past 48 hours. Trips are plotted on a map in order to view an entire route, or just start and end points,” the company says.

Mobile operator SK Telecom launched its mobile telematics service, Mobile in Vehicle (MIV), last year. This service enables remote control of vehicles via mobile phones.

SK Telecom sees services in four areas: vehicle diagnosis and control, safety and security, route guidance, and entertainment services.

While mobile applications are a strong trend, Charles Tasker, MD of MiX Telematics, sees a number of other themes becoming prominent in 2010.

The reduction of carbon emissions is critical, he says. Fleet owners will use technology in order to have a clear understanding of the carbon footprint of their vehicles, in order to reduce it.

Location-based services (LBS) and personal tracking is another important trend, he adds, and is being driven by the adoption of the technology in the consumer space.

Tasker also sees a trend towards the substitution of “traditional” on-board computers by “fancy mobile devices that can communicate with vehicles as effectively”.

And, he sees more sophisticated, faster applications which put more control in the hands of users. Tasker believes this will be a key differentiator between telematics services.

The experience during the downturn in 2008 and 2009 meant that fleet owners were forced to increase their focus on the efficient management of their vehicles.

Tasker expects this trend to continue: “The efficient usage of existing fleets is driven by cost savings that can be achieved through the implementation of intelligent telematics, vehicle tracking and fleet management solutions.”

Across the continent

Transport Management Systems (TMS) is a growing software segment in the US and Western Europe. But with fragmented infrastructure in Africa, if and when will it become viable in Africa is the question.

Transport management systems are software-based solutions for managing transport. TMS can increase fleet utilisation and transport availability while reducing costs and the size of a fleet. Because TMS reduces costs, this segment grew more than other software segments in 2009.

Adrian Gonzalez, director of Logistics Viewpoints for ARC Advisory Group, says the market will grow 5.6 percent globally over the next five years, but this is down from a seven percent projection prior to the economic crisis.

TMS has been around for several decades, but it has been fragmented. More recently, TMS applications have become more process-oriented in line with enterprise resource planning (ERP) systems. The primary global markets for TMS are first the US, then Western Europe. Key vendors include Manhattan Associates, RedPrairie, Mercurygate, and Descartes. SAP and Oracle have also entered the market, hoping to leverage their ERP customer base, according to Gonzalez.

The TMS market in Africa, except for South Africa, almost doesn’t exist. Gonzalez says there are several reasons why this could be the case. First, the US and European markets are rife with opportunities. Second, Africa’s lack of infrastructure means that transport is very fragmented. Third, vendors have to dedicate resources to adapt their offerings to a new region. One vendor said that they receive inquiries from Africa, but do not have live clients.

How can the TMS market develop in Africa?

First, understanding of transport management has to grow. Vendors can educate and develop processes through the implementation of the software while increasing revenues by offering consulting services.

Second, TMS started as land-based transport management systems, but evolved to include air, sea, and rail. So vendors have a larger variety of transport sectors to work within. Logistics firms like the Bollore Group are prime targets. However, there are many other logistics firms and networks, as well as private and public fleets, of smaller size in Africa.

Third, vendors can innovate. A key trend in TMS globally is providing a software as a service platform, which, according to Gonzalez, has allowed a broader market to take advantage of TMS at a much lower entry price point.

In countries like Kenya, Ghana, and South Africa with better ICT infrastructure, vendors can create their own markets. However, it will take some creativity.

Imagine modernising the South African taxi industry, perhaps helping it to maintain or increase its viability? Another advantage to working with ecosystems like this is that transport can become a profit centre for the provider other than just providing the service to clients. The amalgamation of clients becomes a transport system on its own.

TMS can even be applied to more basic forms of transport. Transaid, a UK-based NGO, helps organisations develop non-software transport management systems. For example, they helped develop a bicycle-based patient ambulance system in Zambia. Imagine adding TMS tools that can be run across the mobile and mobile internet platforms.

TMS as we know it today has a long-term horizon before it becomes prevalent in Africa, but software as a service platforms and innovative business models may change that.

This article was commissioned by ITWeb/Brainstorm for May 2010 edition.  It was co-written with Hilton Tarrant.

The Department of Defence admits its information communications infrastructure requires serious upgrades and replacements.  

IT in the public defence arena in South Africa can be summed up as a state of under-investment. While the US Military, arguably one of the most advanced defence outfits in the world, grapples with whether or not to allow the use of Twitter and Facebook across the army (it has allowed it), South Africa’s Department of Defence is dealing with what it euphemistically terms the need for “considerable investment” in information technology architecture.

In its annual report for 2009, it specifies the need for investment: “The information communications infrastructure requires serious upgrades and replacements while priority is given to information technology support to the flying environment.”

It has been working with the State Information Technology Agency (Sita) over the past decade to get the department into shape.

The Department of Defence operates over 500 separate information systems, with over a fifth of those defined as “major”. The department’s IT acquisition plan makes for sombre reading. Its budget for the 2009-2010 financial year was R200 million, out of a baseline allocation for the department from Treasury of R28.6 billion.

The money was allocated roughly equally to management applications, functional applications, common applications and an integrated information and communication infrastructure.

It had requested an additional R500 million from Treasury for information and communication system renewal over the past three years, but did not receive any allocation for that purpose.

In line with the rest of government, it’s rolling out the Integrated Financial Management System (IFMS). National Treasury says the IFMS project will “review and upgrade government’s transverse information technology systems”.

The objective is to enhance transverse – or general administrative – systems including financial management, human resource management, supply chain management (procurement) and related business intelligence.

Business process management outfit Ovations has been awarded a tender to implement service-oriented architecture at the department.

Private

Aside from the travails in the public sector, the country has a vibrant defence industry in the private sector.

Denel remains a sizeable outfit, and numerous weapon components are manufactured in the country. These companies are under the same pressures, from an ICT perspective, as any other industrial outfit.

The trend towards outsourcing certain functions is not as pronounced in the sector, because of the highly specialised processes.

Many argue that consistent research and development into new and highly specialised technologies is critical. Otto Schür, Denel’s Group executive: Technical, maintains that “with the Defence Force typically sourcing these technologies from suppliers in the industry, companies in this sector need to effectively remain ‘one step ahead’ of the enemy.

“This ‘new’ approach to national security has seen the defence industry sector focusing even more on accuracy, as well as advancing and enabling high-end technology.”

There is also a trend towards the commercialisation of military technologies, enabling certain product offerings to add significant value to the local security industry, among others.

A Natural Mix

Defence and security are critical issues for African nations, but Africa still accounts for less than five percent of the market globally. Key drivers for the defence market in Africa for the last several years have been the need to modernise, as well as the need to secure oil and gas assets.

A few years back, the market in Africa was projected to grow six percent to seven percent yearly. The economic crisis caused the forecast to slow to 2.6 percent through 2013, according to Forecast International.

The major country markets, excluding South Africa, are “Algeria, Angola, Kenya, Morocco, and Nigeria,” says Shaun McDougall, International Military Markets analyst for Forecast International. The African market can be delineated between more and less advanced economies. This delineation also defines the focus in ICT opportunities.

More advanced economies are looking at intelligence gathering, ICT and data networks, and securing the networks, while the less advanced economies are focusing on basic voice and data capabilities to support command and control structures, indicates McDougall.

In either case, ICT plays an important element that weaves itself through the defence subsectors, including aircraft, warships, ordinance, missiles, vehicles and C4I. C4I stands for command, control, communications, computer, and intelligence. It’s obvious that ICT plays a signifi cant role in the C4I space, but electronics are found in devices and equipment in all subsectors. As such, the development of ICT infrastructure is a strong contributor to the growth and potential of the defence market going forward.

According to McDougall, regional integration is another driver for ICT in defence. Even small countries are looking at how to improve command and control within the field, using communications. “Being able to participate fully in joint operations and interservice/ international training exercises is important,” says McDougall. For example, Nigeria opened its first advanced operations centre in Abuja in 2009. The centre allows officers to stay connected with soldiers deployed on domestic and international missions. Its capacity includes real-time video and data communications.

Another set of drivers, particularly in North Africa, is insurgency and border control. Due to this, some of Algeria’s focus is on intelligence, aircraft, and unmanned aerial vehicles (UAVs). “Aircraft and UAVs can include technology like smart weapons and advanced radar capabilities, defi nitely enabled by ICT,” says McDougall.

Nigeria is focused on managing the Niger Delta conflict.

Maritime defence systems are the key to protect the waterways and coast in the region. McDougall notes major vendors in the African defence market do not come from the African continent. Russia has a long history in sub-Saharan Africa (SSA). Today, many SSA countries are modernising ageing Russian defence systems. The United States defence industry is another major player. Europe is in the mix, with France’s defence industry working mostly the French-speaking countries.

China appears on the radar, but in niche markets, not major defence systems.

The need for defence, including ICT infrastructure, is there. But, African economies need to grow signifi – cantly overall to take on the funding requirements.

Commissioned by ITWeb/Brainstorm of South Africa for May 2010 issue.

While the economic crisis at the end of the first decade of the 21st century has made the most headlines, there are more significant shifts afoot that will inform the future of business.

The years 2000 through 2009 represented not only a decade, but the end of a generation in technology.

In 1957, the Russians put the first satellite in orbit. In 1969, the first man walked on the moon, and the internet officially went online. Now, these technologies have converged in innovative ways and opened doors to average people around the world. People can use services like Google Earth to see and pull up information on physical locations around the world, combining satellite and internet technology.

In many ways, the first decade of the 21st century was also a transition decade. The transition, which is still underfoot, will fundamentally change both our economic and business environments.

Politically, the last decade started with the stalwart, unipolar power of the United States. It ended with an emerging configuration of multipolar power, inclusive of emerging nations. It has spilled over into the co-ordination of global economic policy changing from the G8 nations to the G20 nations, including South Africa.

Aligned with these political shifts are the dynamics of global demographics, which are setting the stage for the major consumer markets of the next 40 years. These markets are shifting to emerging regions like Asia and Africa due to fast population growth. While consumer demand should continue to rise globally, it will increase the fastest in Asia and Africa. In fact, the International Monetary Fund says that emerging consumer markets will serve as the new growth engine for the global economy.

This equation holds true in technology as well. The International Data Corporation’s “Economic Impact of IT” study says that emerging markets represented 21 percent of IT spending in 2009, but through 2013 will represent 50 percent of net new growth in IT spending.

Technology also serves as a catalyst for economies and an enabler of business. Each ten percent increase in broadband connections results in 1.3 percent economic growth, according to the World Bank.

A New Impetus

While these notes serve as a backdrop to the transition in the last decade, they do not reveal the real story of how technology is fundamentally influencing our economic and business environment.

John Hagel and John Seely Brown, authors of The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization, theorise that the business environment is transforming from push to pull models for mobilising resources. Essentially, instead of organising resources in anticipation of needs, resources are positioned when needed. For example, cloud computing allows digital infrastructure to be used and scaled when needed. Pull models are more conducive to the chaotic and turbulent environments in which we live today, allowing for greater agility. The shift from a push to pull paradigm has been occurring for decades. It seems more apparent now, however.

According to the Shift Index 2009, by Deloitte, there are three key waves (The Big Shift) impacting our business environment. The first wave is the impact of an expanding digital infrastructure and public policy focusing on economic liberalisation. The second wave is the shift in knowledge, capital, and talent flows due to an expanding digital infrastructure. And the third wave is the impact created by the first two.

There is a ray of light for emerging nations and markets in The Big Shift. Thomas Friedman, in the book The Lexus and The Olive Tree: Understanding Globalization, says that there will no longer be a First, Second, and Third World, but only the Fast World and Slow World. The Fast World is a wide-open society.

In The Big Shift, African economies do not need to catch up to industrialised nations, per se, because the open playing field creates space for them to innovate.

The growth of the mobile market in Africa in the past decade is a perfect example. If Africa had waited for fixed line deployment, it would still have been catching up, but instead it is leading global markets.

D for Democracy

The Fast World/Slow World paradigm is evolving due to the democratisation of technology, finance, and information, which started in the 1980s. Democratisation of technology encompasses the innovations that have allowed hundreds of millions of people to communicate, connect, and exchange information, money, etc. Democratisation of finance means people have the power and information to invest.

Democratisation of information means that people around the world have access to information. In essence, the power to shape economies and markets no longer rests in the hands of the few, but is open to the masses, or crowds, around the globe.

From a practical business perspective, these forces mean the way we do business now and in the future will change. There are several evolving models that took root in the past decade.

Crowdsourcing is any sort of outsourcing that involves a large group of people, usually the public, to actively contribute to a task or project. Wikipedia is a prime example of crowdsourcing. In a business context, Goldcorp, a Canadian mining company, outsourced the task of identifying gold deposits in a concession to the public in 2000. Through this process, Goldcorp was able to find deposits worth $3 billion.

In Africa, crowdsourcing is a model well suited to mobilising people around development, political, or business projects. First National Bank (FNB) used crowdsourcing to solicit a business idea that would draw its wealthy customers to online banking in 2008. The selected idea garnered $2 500 for winner, Guillaume Martin.

Another operational model is crowdfunding. Crowdfunding is crowdsourcing applied to raising funds. Osterwalder Alexander and Pigneur Yves, authors of Business Model Generation, used a combination of crowdsourcing and crowdfunding to write and fund the book. The public was invited to serve as co-writers and investors at the same time. As people joined the project, they paid a fee that got them a copy of the book when released, allowed them to provide input as the book was developed, and get a royalty as the book was sold.

Locally, Eve Dmochowska has started a crowdfunding project for South African start-ups, which generated nearly R1 million in investments within its first few weeks of opening.

In another instance, digital democratisation and the cost of technology, e.g., internet bandwidth, reaching almost a “virtually” free state in the West, catalysed the “freemium” business model.

Chris Anderson, Editor-in- Chief of Wired Magazine, coined the phrase in his book, Free: The Future of a Radical Price. Freemium is where basic services are offered for free, while a premium is charged for special features. A typical application is magazines or newspapers that offer some online content free but the majority for paid subscribers only. Anderson expects, “freemium to cross over into other industries as part of a new industrial revolution”.

New Horizons

Will Africa win or lose in this new business context? It has the same opportunity as any other region to move in the new business dynamics, and it has several things going for it. Mobile and internet infrastructure development has gained momentum in the past decade, but there is still a lot to do. The continent has one of the world’s largest consumer markets and ample human capital, both of which are underdeveloped. And, of course, Africa has an abundance of resources.

The question is, will Africa leapfrog, as a whole, like it did with the mobile market? The next two to three years will see whether it rises to the challenge or falls behind the occasion presented in this decade.

Today’s business environment is turbulent, fast, and constantly changing.  It’s a complex environment with many variables woven together that creates business.  Africa is no different.  It has its own set of complexities that dynamically impact the business environment.  My firm, Conceptualee, has started research to help navigate those dynamics more fluidly.  One of the areas of research is the dynamics of social politics.  Our topic, “Social Politics in Business in Africa,” was chosen as a poster session at the Duke Political Networks 2010 conference.

The poster provides a stratospheric view of the evolving dynamic themes on economic development of the South African Development Community based on a historical and political streams.  This is just a starting point for an ongoing dialogue about how to increase economic opportunity even within the constraints of current systems.

You can download the poster Social Politics in Business in Africa (36).  And please, comment and provide insight below.

This piece was commissed by ITWeb/Brainstorm for April 2010.  Original Title is “Regulation is the Name of the Game.” Hilton Tarrant co-wrote the article.

Pharmaceutical players need to be able to track everything.

Regulatory and legislative requirements are top of mind in the pharmaceutical sector.

“Our customers are coming under a demanding set of regulations,” says Keith Fenner, sales director at Softline Accpac. “This is a highly regulated industry.”

Ironically, Accpac hasn’t traditionally targeted the sector, largely because of the “complexities around the process or batch manufacturing, formulation management, weight calculation, potencies…”

Jane Thomson, MD of Softworx, says that “validation is very important”. Companies operating in “markets covered by the [US] FDA approval and the MCC regulations in Europe” have a lot of complexity added to their business, she adds. “When they do implementations, they have to have everything validated, right from the software to the processes in their business.”

There are also challenges around traceability, believes Fenner. “Everything from full-lot traceability and control to quality assurance” needs to be managed.

“At any point in time, you have to manage inspections and these things have to be process-driven.”

“It can’t be about ‘we decided to inspect this batch and not that one’,” he adds. “And it can’t be done on an Excel spreadsheet somewhere! Even the distributors have to be stamped and approved,” says Fenner.

A number of pharmaceutical players have made the decision to outsource their distribution function. Fenner says the split is about 50/50 among his clients.

Most of the manufacturing of pharmaceuticals takes place offshore, and Fenner explains that Accpac has mostly been “asked to help with complying in a warehouse world”.

“I’ve been reading in the market about guys starting to rationalise and focussing on what they are good at,” says Fenner.

His clients are saying things like: “My job is to get product into the country at the lowest cost possible to make the highest margin. How we push that out into distribution, we’ll leave other guys to figure out. Everyone is trying to streamline that process … but you cannot get around the complexities of the legislation and the regulations,” says Fenner.

“Our clients need to still have visibility into that supply chain … whether their stock is on consignment or sitting in a warehouse. They still have to manage the expiry dates.”

And for this, you need a collaborative supply chain.

Thomson says Softworx’s biggest client in the space, Aspen Pharmacare, has – like its peers – expanded rapidly over the past few years. The manufacturing and distributing of products in other territories adds “huge complexity into their supply chain”.

“Their business needs to be extremely responsive and flexible,” because of this growth, she says.

“They’re doing rollouts of their ERP systems in four to six weeks in some of their territories. So in terms of their ICT requirements, there needs to be a rapid response.”

Fenner agrees, saying: “The questions that are coming at us are around being responsive.”

Thomson also says that clients in the sector are looking to move some of their systems into the SOA space.

“We’re seeing on-use, on-demand type of software emerging now.”

And she says this is being driven by “local business in their desire to remain competitive and to grow market share.” Like other sectors, there is a lot of consolidation taking place in the industry. This is being driven by market forces.

This piece was commissioned by IT/Web Brainstorm for March 2010.  It was written jointly with Hilton Tarrant.

It’s all about the customer right now.

The insurance sector is grappling with the same sorts of cost pressures evident in other industries, and “outsourcing is a trend” among most players, says Haydn Pinnell, MD of Gallium.

It’s not ‘simple’ outsourcing, however. There is a lot of demand for Gallium’s software and application testing services in the insurance market now “because of some of the pressures the sector is facing”.

Fierce competition means client-retention for insurers is critical, and companies require a “faster time to market with new, innovative services”.

This is “no different to anywhere else in the financial services industry,” Pinnell says. Adriaan Rossouw, account manager at business application provider Softworx agrees, and goes so far as to say that insurance has “almost become a commodity”.

The competition from banks and other financial services companies only serves to increase the pressure. “There is a big reliance on intermediaries,” explains Rossouw. “And historically they’ve been left to their own devices.” Now, insurance companies have realised that whoever controls the intermediaries controls the “share of wallet”, and insurers have begun opening up their systems.

“They need to give intermediaries access to their information, and better decision-making tools,” Rossouw notes. “This is a big drive going forward … by opening up systems to external parties”, insurance companies are going to be able to grow their books significantly.

“Insurers want to get a lot closer to intermediaries, whether they’re independent or captive.”

This obviously means a substantial number of external people accessing the company’s systems, a decision that has significant impact. Gallium’s Pinnell says that together with the mindset change around intermediaries, “traditional insurance players are having to re-engineer and relook at the way they are doing business with their customers”.

The rise of the direct (online) insurance players has almost forced this reaction. Insurers are becoming laser-focused on how they retain their customers, explains Pinnell. They want to do “better business, quicker”.

This re-engineering impacts on whether or not “they refresh or continue using their legacy applications and systems”. It also impacts on what technology they’re using.

“It’s all about the customer right now,” states Pinnell. Rossouw agrees: “It’s been very product-focused, not customer-driven”.

Within insurance companies, the allocation of people to product versus to customers is changing.

“There is a much bigger focus on the customer,” he says. “This brings with it challenges around systems.”

Traditionally, a customer’s spending on insurance is very much split into sectors. The challenge is to “bring that information together into one view of a customer,” says Rossouw.

“Insurers want to break down those silo walls” and this will help grow cross-selling of products and services. The Holy Grail is to “try to get a customer to spend all of their money with one insurance company, instead of splitting it up.” There is a delicate balance, however, between the drive to change the model, while at the same time containing costs.

Rossouw says Softworx hasn’t “seen too much in terms of deferring costs, but some of the roles within IT have been outsourced. “For instance, the BI role might be provided by external service providers.”

Pinnell says that even though South African financial services companies often do pioneer in terms of products and services, insurance, specifically, is subject to global influences. “We’re seeing stricter, tighter regulatory and governance-type requirements,” he adds. While global regulations are driving decisions locally, technology choices are largely driven per market, says Pinnell.

Some insurers are driving strategy from South Africa, others are being dictated to from their global owners/partners overseas.

Growing opportunities

The insurance sector in Africa only represented about 1.3 percent of the global insurance business in 2007, according to Swiss Re Economic Research. In the ‘South African Insurance Industry Forecast to 2013’ by RNCOS Industry Research Solutions, 85 percent of the current African insurance market is in South Africa. Both figures demonstrate the undertapped potential of the insurance market on the continent.

The industry faces major challenges, however, according to the African Insurance Organisation, including underdeveloped insurance organisations, a weak insurance regulatory environment, need for expertise in the sector, and lack of ICT infrastructure.

Even with the challenges, there is one insurance sub-sector – micro-insurance – drawing significant interest. Micro-insurance is insurance for low-income people. In ‘Insurance in Developing Countries: Exploring Opportunities in Microinsurance’, Lloyd’s estimates there is potential for 1.5 to three billion new policies globally. The Micro-insurance Centre estimates only four percent of Africans and less than one percent of poor Africans are covered by micro-insurance.

Major insurance companies like AIG, Zurich, and Swiss Re have entered the market. AIG was the first major player to enter micro-insurance in Africa, partnering a local microfinance institution in Uganda in the 1990s.

This interest will naturally lead to opportunities for the ICT industry. For example, the International Livestock Research Institute (ILRI) has developed satellite technology to assess weather conditions, such as drought patterns, which could lead to livestock deaths. This technology will help insurance agencies determine whether or not to honor such claims. Eric Gerelle, director of IBEX Projects in Switzerland, says there is a gap in the market for ICT providers. To deliver insurance products and services effectively on the ground, agencies of any size need a strong back office and ICT infrastructure.

Gerelle points out that small agencies generally take the wrong approach in developing their businesses. They start selling policies before developing the infrastructure to support the business process. In fact, they often do not have the requisite skills and knowledge to develop such an infrastructure.

According to Gerelle: “Software as a service (SaaS) providers will be the real winners in this space.” A SaaS platform can provide applications for many agencies simultaneously. Also, application developers might find opportunities to plug their solutions into a SaaS provider’s platform.

Gerelle says SaaS supports a federated model for the micro-insurance industry. Small agencies would get the ICT strength of major insurance agencies while maintaining the advantage of having knowledge of the local markets.

Asked how the mobile market would influence technology in micro-insurance, Gerelle is firm: “Mobile data and handsets are definite drivers for the market, but the key is creating the back office capability first.”

This article was commissioned for ITWeb/Brainstorm of South Africa for February 2010 under the title “It’s the Platform, Stupid.”  It is written with Hilton Tarrant.

It’s no secret that the financial services sector is the biggest spender on ICT in the country. According to BMI-T’s SA ICT Vertical Market Sizing and Forecasting Report, the financial, business and other services sector accounted for over 30 percent of total expenditure on information and communications technology in South Africa. But what trends are dominating the sector?

Because of security, financial institutions, especially banks, cannot feasibly outsource their IT departments, a trend seen in most other sectors. Most functions are retained in-house. However, desktop support is one area where outsourced solutions make economic sense. Gijima AST, one local company focused on the financial services sector, offers customer interface as well as electronic payment solutions. Electronic payment (largely back office) solutions are seeing tougher security as well as further automation of processes. The trend is for cheques and other documents to be scanned and archived for simple access from anywhere on the bank’s network.

Making this kind of data available on other platforms is also seeing serious adoption in the industry. Clients can, for example, access scanned cheques/ deposit slips/documents via the traditional online banking platform. The broader push sees transaction systems leveraged onto different platforms and interfaces. In the same way that an archived image of a cheque can be accessed in-branch and over the internet banking interface, banks are taking their core transaction functionality and leveraging that over a number of platforms.

No longer are ATMs simply cash withdrawal points. Transactions can now be done inbranch, online through internet banking, via ATMs, through point-of-sale systems and, increasingly, on mobile phones. Gijima says the “focus is shifting towards solution concepts for new delivery channels such as electronic banking and new branch structures”.

Mobile Banking

This leveraging requires significant integration of new systems with the banks’ core legacy offerings. The biggest push in the South African market is undoubtedly into mobile banking. FNB, one of the pioneers, set up a division internally that innovated mobile banking. This now falls under the ambit of FNB Mobile and Transact Solutions, and the group has set up a similar team responsible for innovation, with some of the original mobile banking staff involved.

It’s not only FNB that has realised that smaller, more autonomous units are the key to innovation. This new team is largely responsible for the ancillary FNB Connect service, where FNB is leveraging its excess bandwidth and providing connectivity and VOIP calling to its customers. The use of two-way SMS messaging in the customer relationship management realm has caught on in the South African market, and banks have here again married newer platforms with their legacy systems.

Internet banking systems have been further integrated with SMS gateways as a fraud prevention mechanism. Account transaction notifications are sent in real-time, allowing customers to be aware of payments immediately.

Aside from sector-specific adoption, the financial services industry is adopting broader ICT trends, such as virtualisation, standardisation and – as mentioned – the outsourcing of desktop support. Standard Bank, for example, in 2008 standardised its IT environment to create a centrally managed one.

The benefits were obvious: costs were reduced, while the bank saw increases in security, productivity, agility, and stability. It’s also used the built-in virtualisation technology in Windows Server 2008 to reduce the number of physical servers required to run bank operations. This also translates into quicker development of new services.

Cross-Continent

Less than ten percent of Africans use banking services, however. In addition, cash is still the primary financial instrument, and market capitalisation as a percentage of gross domestic product (GDP) is well below 100 percent. These statistics illustrate that financial markets in Africa only contribute in a minor way to economic growth on the continent. However, initiatives like the M-PESA mobile payment system in Kenya show the potential opportunity for ICT in fi nancial services. It is also ICT providers across the globe that are increasingly providing these services, either instead of or in partnership with banks.

There is another success story in Ethiopia – Ethiopia Commodity Exchange (ECX). Solomon Edossa, CIO of ECX, says it is designed after world-class commodities exchanges like the Chicago Mercantile Exchange. Generally, a commodities exchange would partner with financial institutions to handle settlement of trades, but there was no clearinghouse and no electronic payment system in Ethiopia. ECX established its own clearinghouse and electronic payment system, in partnership with Ethiopian banks, to handle its transactions.

In fact, ECX has become a financial services “orchestrator” in its ecosystem, which can extend to several hundreds of thousands of subsistence farmers in cooperatives participating as ECX members.

Its commodity warehouses can be considered “bank branches”. Producers deposit commodities at the warehouses. ECX assures the quality, quantity and delivery of each commodity to buyers. At the same time, ECX assures sellers their commodities are secure and payments are received within 24 hours. In 2010, producers will be able to get warehouse receipting financing on commodities they deposited. ICT abounds in ECX’s “financial market”.

Edossa says once commodities are deposited into a warehouse, they are electronically registered and tracked. This information is electronically communicated to the ECX headquarters in Addis Ababa. In addition, prices are displayed across the country at remote stations and on mobiles. Soon, ECX will begin online trading.

But the ECX story is really about the potential of its ecosystem. Edossa states: “All my staff members are local. We are creating jobs and increasing local capacity.”

In working with banks to deliver on their service delivery agreements with members, ECX is helping banks design new financial products for members. This brings more business to the banks. In addition, the process is also encouraging Ethiopian partner banks to implement core banking processes, which is creating new opportunities for ICT providers. Eventually, ECX will implement ICT-dependent services in sectors other than financial services like logistics, systems support and internet cafes.

But ECX still faces the typical challenges in Africa. In fact, Edossa admits: “I doubted it could be done.” ECX had to address the regular power outages in Ethiopia, particularly in the rainy season, and the unreliable communications network. It met the challenges with a variety of solutions like mixing generators and uninterrupted power supplies to keep systems running, and mixing broadband and dial-up for telecommunications consistency. ECX worked the ICT challenge so well that there is not a single failed transaction in two years of operation and close to $2 billion in transactions.

This is an article I wrote for Brainstorm Magazine of South Africa. It appeared in the December 2009/January 2010 issue.

The penetration of mobile phones and mobile data will serve as catalysts for a growing mobile gaming market in South Africa. The question is how well the industry will navigate these opportunities.

Globally, gaming is a hot market – from console, to PC, to online, to mobile. Pyramid Research’s recent report, Mobile Gaming in Emerging Markets, says that mobile gaming will grow at least 20 percent per year from 2009 to 2014 in the Africa and Middle East regions.

Jan Ten Sythoff, research manager for Pyramid Research, says that mobile phone and mobile data penetration serve as catalysts for this market. While Africa has good mobile phone penetration, there are differences between consumers in mature markets like the United States and those in emerging markets like Africa.

Says Matt Benic, a developer with I-Imagine: “While we have high mobile phone penetration, our potential consumers in South Africa typically have low levels of disposable income (also typical of the rest of Africa).”

This means handsets used by consumers are lower-end devices, and the cost of games needs to be lower than in developed markets. In addition, consumers would not necessarily have previous experience with other gaming platforms like consoles and PCs. Says Danny Day, owner of QCF Design: “The first provider that offers a truly engaging, massively multi-player, micro-transaction-enabled game on phones is going to win big.”

Benic says there is also huge opportunity with sports, like soccer, and SMS-based games in South Africa. A “taxi”-driving game might be an appealing concept in South Africa too. This is tapping into what consumers know and feel comfortable with.

Sythoff says the challenges facing emerging markets include game cost, affordable handsets and piracy.

Benic mentions that the misperception that game development is inexpensive is a challenge in the local industry. Companies that would pay to have games developed for advertising and promotional purposes are often shocked when quoted a price.

Furthermore, according to Benic, the lack of sufficient numbers of skilled developers is slowing down the mobile game development industry. And then there is the ongoing issue of the cost of internet access. There are many free and inexpensive tools online to support mobile game development but the data usage expense can be prohibitive for small firms.

Challenges impact the consumer too, says Day. “Poor visibility, commodity-focused instead of product-focused marketing, shoddy after-sales support and lack of penetration by local mobile developers means…potential players have to wade through sheets and sheets of poorly advertised games.” In addition, the games are not localised to suit consumers.

Challenges notwithstanding, Sythoff shares several business models with the potential to succeed in African markets. First, there is gaming for advertising, or adver-gaming: players are allowed to download games for free, but the games contain advertisements. The vendor and developer generate revenue by selling advertising space.

A second potential business model allows consumers to play games for free until they reach a certain level, after which they must pay. This is a good way of getting consumers hooked on a game, providing motivation for them to pay to continue.

In some instances, a game developer will work with a data provider to provide games. Both share the revenues while keeping the price of games lower. Day says QCF Design is looking into another business model – subscriptions.

No matter which business model is employed though, says Benic, a game has to make it the first month it is released.

Sythoff says there are potential spinoffs in digital content and educational games, while Day says his firm “has had some success with mobile-based learning games”.

Sythoff points out that new mobile game developers need to address several issues. First, they have to find channels to reach potential consumers. This will normally result in partnerships with mobile phone operators or aggregators. Second, developers need to consider how they will bill the end-user.

Third, games should be localised to match language and culture.

Unlike the iPhone Appstore, which shook the US mobile game industry by allowing new and more agile mobile developers to enter the market, local developers find it difficult to enter the market. Day says “commissioned game development is currently more lucrative”.

Up, up and away

As for the future, Day provides several insights. “New studios are applying lessons learned from digital distribution games on consoles and PCs to the mobile space. These are studios and products that will change the mobile gaming sector in South Africa.”

Also, says Day: “Watch content creators that produce content for local consumers, as well as the Indian mobile game development industry… (it) will inform developers here.”

Finally, Day says to track MXIT.

“MXIT is a heavyweight in the industry. It’s one to watch for future growth in the mobile game sector, especially if it acts as an aggregator for quality local content.”

The sector will also be tamed. “New gambling control laws and changes to premium cost services should help reign in the `Wild West’ nature of many mobile businesses,” according to Day. This will reduce exploitation of consumers.

Overall, two possible scenarios will develop in South Africa’s mobile game sector. Mobile games will be overtaken by flash- or browser-based games as phones evolve, if the mobile game industry does not respond on time. Or, the industry will shift from its current business models to more customer-focused models, which focus on alternative revenue streams.

Sythoff says the mobile game sector is complex. Navigating this complexity successfully is a key enabler for firms wanting to enter this space. Success will come to firms like Apple, which are able to deconstruct the complexity and tap into the potential of the sector. With the potential revenue stream and under-tapped market, it’s definitely a sector to consider.

This is an article written by Hilton Tarrant and myself as part of the ICT in business sector series for Brainstorm Magazine in South Africa.

There is no question that the healthcare sector in Africa represents a huge challenge and opportunity. The question is how, and how well, ICT will meet the challenge.

Most African countries have a critical shortage of healthcare workers, and the majority of African healthcare systems are low-ranked internationally, according to the World Health Organisation.

Dr Dirk Koekies, Chief Executive Officer of GeoAxon, states plainly that the challenge is “creating a healthcare system out of nothing, which can deliver quality basic primary healthcare services to those without it”.

While this situation is a critical challenge, it presents a tremendous opportunity for ICT in the health sector. The opportunity is particularly good in the mobile sector (mHealth) due to the penetration of mobile phones on the continent.

The United Nations 2009 report mHealth for Development says: “Mobile phones reach further into developing countries than other technology and health infrastructures.”

One mantra for mHealth is “make available the right information at the right place at the right time and in the correct form,” according to a 2008 Rockefeller Foundation report.

This mantra, when actualised, translates to several benefits, according to Tyson Greer, CEO of Ambient Insights.

First, clinicians and patients can make more informed and intelligent decisions. Second, real-time data is provided for communication, consultation and notification. Third, mHealth increases efficiency and speed of care, and increases productivity of healthcare workers. And finally, it provides on-demand access to information and continual learning for healthcare professionals.

There is a unique opportunity to provide ICT-based products and services to the private healthcare sector.

Firstly, because private sector healthcare already represents a good portion of services provided to Africans compared to public healthcare. And secondly, African governments are using private healthcare providers to augment and enhance public healthcare systems, which are overtaxed.

This creates a sizable opportunity for ICT firms. Specific business opportunities in mHealth, according to the mHealth in Development report, include education and awareness, remote data collection, remote monitoring, communication and training for health care workers, disease and epidemic outbreak tracking, and diagnostic and treatment support. Koekies also says that developing centralised, electronic medical information records is a low-hanging fruit opportunity.

GeoAxon is delving into business opportunities presented in diagnostic and treatment support. Its “Tele-medicine Doctor in a Box” allows a doctor to examine a patient over the internet, using devices the patient interacts with locally. These devices transmit data, which would normally be assessed in a face-to-face consultation with a doctor, remotely to the physician.

While mHealth seems to be gaining momentum, it still has several challenges. mHealth is still in the pioneer stage with many projects in pilot, but little empirical evidence to prove its impact. Koekies indicates that funding for innovative solutions is still difficult to come by. And while the technology may be there, the ecosystem for the mHealth sector is still immature.

Recognising that eHealth*, and mHealth, are still emerging markets in Africa with high potential, ICT firms might want to first look for low-hanging fruit opportunities and those that leverage its strengths.

Big opportunity

The healthcare market is huge. A recent report by research and consulting outfit Markets and Markets says the healthcare IT systems market will be worth $53.8 billion in five years’ time.

One of the major areas of growth in the space is tele-medicine. This is by no means new technology, with policies put in place and applications created over a decade ago.

A new push, by networking giant Cisco, is through a pilot programme demonstrating that tele-medicine is real and it works. The so-called HealthPresence programme saw remote clinics linked up in Aberdeen, Scotland and San Jose, California.

This service provides what Cisco terms “care at-a-distance over the network”. It uses Cisco’s TelePresence teleconferencing technology, with patients and physicians able to see life-sized images of one another. The system also collects physiological data from a variety of linked devices such as a stethoscope, blood pressure cuff, pulse oximeter and other diagnostic equipment.

The Aberdeen trial started in January last year and found that 90 percent of the patients who used the technology were satisfied with the experience, 95 percent said the visit felt confidential and 93 percent said they would recommend it.

“In almost every case, we could accurately identify the degree of urgency and make a diagnosis,” said Dr James Ferguson, national clinical lead for the Scottish Centre for Telehealth.

He added: “Cisco Health- Presence can enable us to deal safely and effectively with 90 percent of the cases we see.”

The Medical Research Council is currently running five separate tele-medicine projects around the country.

Obviously bandwidth constraints mean that the implementation of tele-medicine is difficult in both South Africa and Africa. In addition to bandwidth, the MRC identifies other obstacles such as the lack of easy-to-use, robust diagnostic instruments and no dedicated tele-medicine centre to act as a hub for tele-medicine.

The deployment of terrestrial fibre networks in South and East Africa, as well as the commissioning of Seacom, has helped solve the bandwidth problem, however.

At a recent exhibition, Seacom showcased healthcare teleconferencing applications, and earlier this year at GovTech 2009, Moses

Mtimunye, then acting CEO of Sita, said that in the near future, similar technologies to Cisco’s TelePresence “will make for commercially available tele-medicine projects providing people in rural areas with world-class healthcare services”.

The national Department of Health says its long-term goal is to “make tele-medicine live up to its potential as a valuable tool to improve access to high-quality and cost-effective health care services in South Africa”.

Beyond structured implementation of tele-medicine systems, Cisco believes that HealthPresence could mean a revolution: “Instead of making a dash to an urgent care facility or emergency room, what if you could use your television or other networked device to connect with a medical centre?”

Cisco believes this is not fantasy, it reckons it could become reality within the next three to five years.

*eHealth is the use of ICT for health services and information.

This article is one in a series about ICT in different sectors for Brainstorm Magazine of South Africa.  It was co-authored with Hilton Tarrant.

The mining sector has been slow in its uptake of technology, but the global economic crisis and long-term issues are serving as catalysts for adoption.

The outlook for the mining sector has radically changed due to the global economic crisis. This boom and bust cycle has left many mining companies considering ways to manage operating costs in order to remain economically viable. But this is not the only challenge the sector faces, according to Deloitte’s report, Tackling Trends 2009: The Top 10 Global Mining Issues. In the long run, the sector must find ways to remain sustainable amid the sea of legal, social, economic and environmental issues.

These challenges actually present opportunities for the ICT sector because technology can manage complex systems, streamline processes, reduce costs, and improve efficiency and productivity. Consider enterprise resource planning (ERP) software, which coordinates the entire mining value chain, from locating to divesting minerals. Think of radio-frequency identification (RFID) and global positioning system (GPS) technologies, which track the movement of minerals and equipment.

There are also examples of technology specific to the mining sector. The oil sector is demonstrating the potential of ultra-deep water drilling technology, which drills and extracts oil from greater water depths.

The technology is creating and extending market opportunities to the industry by accessing previously unreachable deposits. For example, new oil operations were recently announced off the coasts of Ghana and Sierre Leone.

Dr Greg Baiden, director of Penguin ASI and a global expert on automation, says: “Automation in the mining industry will follow similar trends to those in the manufacturing industry.”

It starts with a person using an automated machine to handle multiple tasks and eventually evolves to artificially intelligent, autonomous machines. Baiden says the future includes intelligent machines that can heal themselves.

For now though, automation has not reached critical mass in the sector. Large mining companies like Rio Tinto and BHP Billiton are considered early adopters. Teleoperations, or telerobotics, is the operation of a machine at a distance.

Penguin ASI’s wireless technology, which communicates with robotic equipment under water, gives a glimpse of the potential of telerobotics in solving some of the mining sector’s sustainability issues. This wireless technology will enable mining companies to extend the life of their mining operations on land. Imagine flooding mines with water to double their mining depth, and using telerobotics equipment to run the operations.

One natural result of using better technology and innovation is cost reduction in the mining value chain. This will eventually serve the economic development of Africa well. As the cost of mining decreases, it allows smaller mining firms to establish themselves.

The business opportunities for ICT providers in the mining sector can be found in the corporate, technical and value chain systems. Historically, ICT providers focus on mining as a niche. However, as enabling technologies provide broader benefit to the sector and new mining entities arise, there are increased opportunities for the ICT sector.

Mining of Data

Also, the mining sector faces serious challenges to its long-term sustainability. ICT firms, which identify gaps in the value chain and create solutions that close the gaps, leverage the value chain and contribute to sustainability, will carve their own space.

While there is undeniably a lot of technology used in the underground oreextraction part of mining, more focus is currently being put on the processing side of productions.

MD of Softline Accpac, Jeremy Waterman, says that “inherently it’s a reasonably simple business”. With mining, “you’re putting a whole lot of resources in and you’re taking production out”.

But there has traditionally been a disconnect between production and what Waterman terms the “financial side of things”, particularly among smaller miners. This has been a cause of frustration within the industry, and a number of solutions now seek to marry the two elements.

This is a classic implementation of an enterprise resource planning (ERP) system, but up until recently, “marrying the elements” was simply absent.

“In the past it was tended to be done more on a kind of matchbox,” says Waterman. “You had a whole lot of costs and you had a lot of production and you subtracted one from the other and you made a profit.”

Nowadays it’s a lot more complicated. Waterman describes how workflow management systems can be used for control, and to “capture production data that’s coming back” into the system. The real difference is made by the layering business intelligence on top of these systems.

Ugan Maistry, business unit head of Mining & Manufacturing at EOH, agrees: “Over the years, there’s been this maturity in terms of process-control and automation systems to be able to execute. There is now maturity in business systems like ERP.”

But over the past few years, Maistry says there is a newfound maturity around the systems in between the parts. He calls it ‘mining execution systems’, and describes it as very similar to manufacturing execution systems.

He likens many of the processes in mining to inventory management. “Previously, people only knew what they had and what they produced if they actually stopped their operations and took stock.”

“Questions like, ‘Where is the actual material in their value chain?’” adds Maistry.

He says some customers have been spending considerable amounts of money in the last two or three years on exactly this: business intelligence systems, which he likens to “enterprise manufacturing intelligence”.

“But,” says Maistry, “what they haven’t explored is how to extract value out of that information.”

This is the next frontier. Now, “our customers need to mine the data, and I’m talking end-to-end,” says Maistry. “It’s about looking at information in context, not just in terms of volumes and quantities, but in costs as well.” Waterman takes it one step further: “We [South Africa] are trend-setters in mining as a whole.

“There’s been an explosion of midcap miners, and that is where we’re seeing the real growth.”

Aside from ERP and workflow management systems, the back office sees similar ICT trends to those in pretty much every industry. Working costs are being rationalised, with single vendor outsourcing one way of saving money.

Licensing rationalisation is being looked at, says Maistry, and providers like Microsoft and SAP are “coming to the party.”