Lauri Elliott

Media sector driven by the shift to digital and mobile.

Instead of a shift to mainframes and big high-end systems and platforms, the media industry has largely benefited from the availability of cheap, entry-level consumer technology.

Publishing is benefiting from the shift to online, where content can be created on inexpensive personal computers, laptops and even mobile phones.

BMI-T public-sector consulting business unit manager Tertia Smit says that with the convergence, liberalisation and consolidation of the ICT sector, this market is becoming highly competitive and companies need to adapt to remain in the game.

Smit says that communications and media companies have a high percentage of knowledge workers.

BMI-T says the communication and media sectors’ ICT spend is driven by some large projects that are the result of convergence in these sectors, as well as the emergence of next-generation Internet Protocol networks.

Because of this convergence, it is difficult to look at the media industry in isolation. It is heavily impacted by trends in the communications sector.

In a talk at the University of Stellenbosch Business School earlier this year, Martin Butler, Information Systems Management lecturer, also pointed to convergence as a key.

“Increasingly we are seeing companies that once occupied very different spaces such as telecoms, entertainment and search engines beginning to encroach on each other’s markets.”

Technology companies are moving into the media space, media companies are moving into communication and vice versa.

South Africans are more reliant on mobile than fixed-line as a means to connect to the internet. This means that from a consumer point of view, there is a shift to mobility.

The media industry, therefore, has moved to ensure that content is available on mobile devices. Specific mobile websites are common, with content being tailored exclusively for the small screen.

In its Media Predictions 2010, Deloitte says that the impact of ICT on the media industry is being shaped by two factors.

First, the global economy. Deloitte says that making predictions for 2009 was easy – most economies would fall into recession. “In 2010, the picture is far more mixed.”

BMI-T says that the 2010 Fifa World Cup has helped ease the effects of the global economic downturn in media sectors. The SABC and Supersport have invested hundreds of millions of rands in readying themselves for high-definition TV. Both broadcasters have acquired outside HD units. The broadcasters have also invested billions in HD equipment and full HD studios.

Digitisation also continues to be a force, argues Deloitte. “It is contributing to a reinvention of the … media sector.

“This fundamentally simple transition – the conversion of analogue data into digital form and its distribution via digital networks – not only changes the balance of power within the industry, but can also reset the scope in other sectors.”

BMI-T’s Smit says that capital projects are also driven by the need for more bandwidth and platforms for integrated billing, content management and provision and more customer-driven applications.

Democratising media

Thanks to technology, media has evolved from just traditional media to include alternative media and citizen media. Alternative media can use the same technical platforms, but consider themselves an alternative to traditional media. And citizen media is content produced by private citizens who are not considered professional writers or journalists.

Citizen media is an interesting space. It allows people to have a voice, as well as gain fame, popularity, and credibility. CNN has iReporters, who report on local news they observe. If CNN is able to verify the story and likes the content, the story is featured.

While the concept of citizen media may not be hard to grasp, appropriate business models are. Citizen media has a similar dilemma as social entrepreneurship. Should business models be for profit, non-profit, or a mix? OhmyNews in South Korea has found a for-profit business model that works around citizen journalists.

OhmyNews has over 60 000 citizen journalists. Its motto is “Every Citizen is a Reporter”. Oh Yeon-ho, OhmyNews CEO, said at the LIFT Conference in Geneva in May 2010 that citizen journalists who make it are not those that do it for fame but are looking to make society better, interestingly enough.

OhmyNews’ business model combines citizen journalists with a team of staff writers, who edit content of, team up with, and support the citizen journalists. OhmyNews sends teams of staff writers and citizen journalists to report. Yeon-ho indicated that there are places to which citizen journalists cannot go, like press rooms, so there is a need for staff writers.

OhmyNews’ revenue model, however, relies heavily on advertising, accounting for 70 percent of revenue. OhmyNews has introduced new revenue streams like the 100 000 Club in which users pay about R70 per month for learning opportunities offered by OhmyNews. The goal is to reduce the advertising mix to 50 percent of revenue.

In the report Business Models and Road Maps of Citizen Media Type Applications by Information Society Technologies in 2009, it was noted that business models for citizen media platforms have not matured. This was based on research of the Dutch citizen media industry.

Typically, social entrepreneurs start “with a small group of trusted peers or organisations, who act as the (initial) prosumer part of the community,” according to the report. The audience is bound by a common interest, and “quality” content and conversation are essential.

The revenue models tend to differ from the global Web 2.0 platforms like Facebook and YouTube. Citizen media platforms use cross media business models, which include offline activities like training and on-demand media production.

In Africa, the concept of citizen media as a viable for-profit business model still lags behind for a different reason. In general, “socially” oriented endeavors are still seen as the space of non-profit organisations. This blind spot actually leaves a good opening for innovative entrepreneurs in Africa.

This article was commissioned by ITWeb/Brainstorm of South Africa.  It was co-authored with Hilton Tarrant.  Permission was granted to reprint.

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.

Media is such a major issue for Africa at this time.  There is a general perception that western media is doing a disservice to the image of Africa.  I agree and disagree.

I agree that western media has painted a particular view of Africa as needy, poor, corrupt, and in conflict historically.  But there are also those who do Africa a good service.

But to me this argument is no longer the primary relevant issue.  Now with the technology tools and the connected society, everyone is media.  That is called citizen media.  Individuals, groups, and organizations need to use this shift to make media that is appropriate for Africa.

The new configurations of media will be infinite, but open.  This is what we have to focus on.  There are still people who need to work with in traditional media who can help change what is being reported and how.  But most of us, whether professional media or public media don’t have to what for things to change, we can make the change.

I had a brief opportunity to share these thoughts and others at the Rwanda Convention 2010 (www.rwandaconvention.org) in Boston, Massachusetts on May 29, 2010.  And living  up to the potential in technology, I participated via videoconferencing from my home!

You can download my slide presentation – Evolving Media Presentation 2010 (37). 

Feel free to start up a conversation on this.

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.

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 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 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.”

This is a part of the ongoing series I write on ICT across sectors for ITWEB/Brainstorm Magazine South Africa.  This article is on manufacturing.  It was a collaborative piece with Hilton Tarrant who focused on South Africa while I focused on the African continent and global trends.  Enjoy!

Originally posted online at Brainstorm Magazine.

ICT is a key enabler for the manufacturing sector. It’s transforming the global manufacturing arena while opening opportunities in the African market.

Africa lags behind its global counterparts in industrial and manufacturing development. Even when comparing the percentage manufacturing contributes to the gross domestic product (GDP) in African countries to other developing countries, manufacturing contributes about ten percent in African countries and 21 percent in other developing countries.

In Africa, but outside South Africa, there are pockets of manufacturing success stories. The Ethiopian leather industry has made a name for itself in global niche markets. Robert Parker, group VP of research for IDC Manufacturing Insights, says the one significant manufacturing segment in Africa is the remanufacturing of computer and electronics.

However, the picture is getting brighter. Globalisation, innovation and ICT are transforming many sectors to anywhere, anytime platforms. In the manufacturing sector, the mantra is “design anywhere, make anywhere, sell anywhere,” says Parker.

One shift is product manufacturing, separated into tasks and spread across manufacturing facilities. This is seen as a huge opportunity for new, smaller manufacturing entrants in low income countries, including Africa, according to the Industrial Development Report 2009 by the United Nations Industrial Development Organization (UNIDO).

Parker speaks of a similar shift from mass to micro to pod manufacturing. Historically, manufacturers built one facility to serve the world. With pod manufacturing, manufacturers can download designs and methods from anywhere to localised manufacturing equipment to serve the local economy.

Pod manufacturing has reduced cost tremendously and increased flexibility. For example, there is equipment to manufacture wine, starting at $3 500.

Parker also says that local African manufacturers will be able to “bring more diversified and custom products to their local consumers”. For example, Digiskin allows customers to go online to design skins to cover gadgets, including cellphones.  A company can purchase a production machine to provide some of these skins locally to customers.

For a long-term opportunity, Parker says that African governments need to leverage access to their abundant resources and require firms to develop manufacturing and processing facilities locally alongside extraction operations. In some instances, deposits in Africa may account for 80 to 90 percent of global deposits of certain precious minerals or metals. They need to play the leverage game like China. China recently limited the export of rare metals to boost the price. African governments can use the same principle in a different way.

In every aspect, ICT is embedded in the manufacturing value chain from infrastructure to intelligent manufacturing. Without sufficient broadband infrastructure, approaches like pod manufacturing might not be possible.

Parker also sees another opportunity with the pervasive wireless infrastructure in Africa, allowing African firms to tap into and manage the full manufacturing value chain almost anywhere with technology like remote sensing and radio-frequency identification (RFID).

While there may only be pockets of manufacturing on the continent, the global manufacturing shift opens new, even immediate, opportunities for ICT firms looking for new pastures, e.g. industrial clusters in Uganda and Tanzania, as they develop. It will be important for ICT firms to continually scan the environment to take advantage of these emerging opportunities.

Manufacturing convergence

Further south, leveraging information, communication, control and power is helping South African manufacturers innovate and compete.  Manufacturers have two options during the global economic downturn: cut back and try to weather the storm, or take the opportunity to be more innovative and aggressive. However, because South African factories struggle to manufacture products at the same cost as is possible elsewhere in the world, and due to a strong currency, local manufacturing concerns face these two options all the time.

Rockwell Automation believes that even though convergence has become a cliché over the past decade, “today the combination of technology maturity and economic necessity has made manufacturing convergence a manufacturing reality”. Manufacturing convergence sees the merging of functions and systems that have been separate. The theory is that with people, processes and technology working together, manufacturers can perform better.

Convergence within manufacturing leverages information, communication, control and power.  It’s no use simply having systems and machines recording data. Information must be in a manageable form: the new goal is presenting information in context.

Sources of information can be “streamlined to allow configuration, visualisation, maintenance and optimisation of manufacturing processes and plant assets,” Rockwell says.

Immense value is created when IT and manufacturing departments are able to share information seamlessly and securely, while running multiple applications over the same network. An enterprise manufacturing approach that is particularly suited to larger distributed companies envisions the enterprise as a “virtual manufacturing network”.

EOH, during an implementation at Coca-Cola’s greenfields Bloemfontein plant, was able to capitalise on available technologies while the rest of the group used mostly manual or semi-automatic systems. In time, improvements to its other factories will mean that they can join the network across the Coca-Cola SABCO enterprise.

The trend nowadays sees standard, unmodified Ethernet being adopted broadly across the plant and enterprise for data collection and real-time control. Add to this newer functionality such as voice, video and mobility, which are beginning to appear in the plant environment.

However, despite these advances, manufacturing convergence is a complex environment and cannot be delivered by a single supplier. Locally, system integrators like Bytes and EOH implement solutions from companies as varied as Cisco, Microsoft, SAP, Wonderware and Dassault Systems.

Beyond this, original equipment manufacturers are embracing new so-called “smart” service business models enabled through embedded software, wireless connectivity and online services.  This shift has significant implications for manufacturers.

Lifecycles of products are becoming ever shorter as releases will begin to ship in “real-time” with software devices delivered to products over networks when needed. Oracle’s manufacturing VP, Manish Modi, reckons it’s hard to accurately predict what manufacturing operations will look like five years from now, but “factors we experience today are likely to have a residual effect on the supply chains of tomorrow.”

Modi says that many of the top manufacturers will have leading “service-oriented architecture suites in place to enable supply chain evolution as well as needed flexibility to quickly respond to changing markets and inevitable shifts in buying patterns”.

He also suggests that most manufacturing systems will support Web or Enterprise 2.0. “The future adoption of tools like wikis, blogs and mash-ups to create store, and collaborate on information by skilled manufacturing users should not come as a surprise. Touch screens and sophisticated wireless devices should be a common part of leading factory floors.”

But, the biggest problem in converged manufacturing is not the availability or implementation of technology: it’s changing the mindset of the people themselves.

This piece was commissioned by ITWeb/Brainstorm of South Africa for August 2009.  It expresses another strategic view of competitiveness, which places Africa, or anyone, as a competitive leader when fighting in their own unique space.  It’s about creating more value through innovation in your unique competitive space.  It reflects the paradigm of the Vision Society in which everyone, including organizations, is designed for a purpose and has a unique space on this earth.  Let it influence your mindset about approaching your own competitive space.

Is Africa ready to compete globally? If you read the Africa Competitiveness Report 2009 by the World Economic Forum, you get the sense that it isn’t. Although progress is being made, we still hear about the need to address the same issues around infrastructure, health, education, etc.

Malik Fal, MD of Endeavor South Africa, says these are “tangible issues but not the real issue”. And competitiveness is more about creating ‘unique’ value than productivity.

The Africa Competitiveness Report suggests that nations compete and evolve along a continuum, moving from basic factors to efficiency to innovation. Dr Paul Romer, Senior Fellow at Stanford Institute for Economic Policy Research, says: “Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable.”

In the end, it is innovation-driven economies that are best able to raise and sustain the living standards of their people.

Says Fal: “Africa’s mistake has been competing on basic factors like natural resources and cheap labour, which promotes poverty instead of prosperity.”

He strongly believes that if African nations, industries and firms compete on their assets in innovative ways, they can compete head to head globally, and regionally. In the book he co-authored, In the River They Swim: Essays from Around the World on Enterprise Solutions to Poverty, there are several examples of industries across the globe – Cuban

Cigars, Rwandan Coffee, Afghan Dried Fruit and Nuts – providing unique value while operating amid political, social and economic upheavals.

Fal states that economies prosper if the focus is on a pragmatic, strategic approach to create more value on the assets inherent in industries and firms. With the Rwandan Coffee industry, the government augmented and filled gaps to help the industry deliver more value by building roads to and from plantations, as well as improving airport infrastructure. One lesson is that focusing on innovation to deliver more value increases economic growth and can simultaneously deal with the tangible issues, if approached correctly.

There is no better example for the ICT sector in Africa than the mobile industry in Africa. Think how it not only opened economic opportunities to the operators but to an entire ecosystem. At the same time, mobile infrastructure development has incrementally pushed overall infrastructure development, according to Ethan Zuckerman, founder of Geekcorps.

At the World Economic Forum on Africa in June 2009, the African mobile market was recognised as one of the fastest growing in the world. The future isn’t written yet, but already there is diversification in mobile applications, e.g. mobile payment systems, agriculture, health, reporting. The social benefits of mobile phones are being experienced by communities that were formerly disconnected.

This is also translating into a larger market for the ICT sector. The benefit is not only to African firms, but also to global firms that are able to gather more real-time data in developing markets because of the proliferation of mobile phones.

Delivering on unique value also results in sustainability. Even during the economic downturn, the ICT sector in Africa continues to grow. Some, like computer manufacturers, have had to change how that value is delivered.

For example, instead of focusing on the laptop market, many firms have grabbed a hold on the netbook market, which is the fastest growing computer equipment segment globally .

Ory Okolloh, executive director of Ushahidi, emphasises that Africans should be creators of the technology for this mobile revolution, not just its consumers. Fortunately, there exists an ecosystem of diverse stakeholders based on innovation and collaboration that supports this idea.

This ecosystem reflects a strong, intangible asset of the African business culture – the social fabric of community interwoven in all aspects of society. How to leverage this asset to increase a firm’s unique value still poses a challenge for many, though. Verna Allee, president of ValueNetworks.com and author of the Future of Knowledge, stresses the increasing importance of leveraging the social dimension in the business context to be more competitive. She adds that, “Intangible assets account for 50 to 70 percent of a business’ (economic) value.”

Both Allee and Fal agree that company and industry competitiveness starts with knowing the full value, tangible and intangible, a company brings. Then, developing the space to deliver and leverage that value. The African mobile industry has demonstrated its unique value in many ways. Business models like pre-paid services, started in Africa, are gaining ground in the United States. The key for the African ICT sector to increase its leadership competitively is to continue in the same vein – concentrating on unique value.

In a bid to help companies realise their full value, Allee developed the value network methodology, which helps to map and leverage both the tangible and intangible assets of organisations.

According to Allee, a value network “is any web of relationships that generates tangible and intangible value through complex dynamic exchanges between two or more individuals, groups, or organisations. Any organisation or group of organisations engaged in both tangible and intangible exchanges can be viewed as a value network, whether private industry, government or public sector.”

A value network is structured by the roles people play. Figure 1 (above) illustrates the rich set of value exchanges within the value network of a technology firm.

In the end, African ICT firms will gain competitiveness due to innovation. While basic factors and efficiency augment innovation, innovation finds ways to trump them on the competitive field. In other words, African companies will remain economically viable and competitive if they are able to deliver on their unique value amid the turbulence of the business environment.

Original publication