Friday, 3 October 2014

New Frontiers for Kenya’s Tech Ecosystem


By David Marete & Philip Mbugua



ICT has assumed an increasingly strategic role in the Kenyan economy in recent years.
 
The Kenyan tech scene has in recent past given significant media coverage to the concept of the Silicon Savanna. However, beneath the media coverage of OLX, M-Pesa, Rupu, Kopokopo, iHub, AkiraChix and so forth, there exists a sub-stratum of technology firms that I refer to as the unsung heroes of the Silicon Savanna. You may already have heard some of the names in this in-exhaustive list. What may not be immediately apparent is the significance of their stories. A large percentage of these people and their firms operate in financial services technology (FST) and have been instrumental in the growth and competitiveness of Kenya’s financial services industry.

Paul Kukubo and Ken Njoroge of 3M and Cellulant

Paul Kukubo set up 3Mice Interactive Media which handled digital branding and exposure (website management, digital campaign planning and so forth) way back when the majority of tech savvy people were catching up on what a mouse and a server does. At that time, one could make a clean 150,000 making a basic 3 page website. Mr. Kukubo also deserves special mention because it was under his watch at the Kenya ICT Authority that Kenya’s tech ecosystem began to receive international plaudits for its credentials. As we speak, he is breaking new ground as usual heading up East Africa’s first commodities exchange.


Paul Kukubo was the founding Chief Executive Officer of the Kenya Information and Communication Technology (ICT) Board. In his capacity, Kukubo led the team that developed the Kenya National ICT Masterplan 2017

Ken Njoroge of Cellulant was the first techpreneur to see the potential in Kenya’s nascent mobile revolution. All those ringtones and local digital content on mobile phones started out from Cellulant. Nowadays, there is a chance that several services that you use on your phone may be running on a Cellulant-provided backend. His list of clients includes Barclays, Kenya Airways, KCB and Standard Chartered among others. As a matter of fact when the Nigerian government wanted to bypass all middlemen in their fertilizer procurement process, it was none other than Cellulant which provided the necessary technical skills to enable them to do this.

Mike Macharia of Seven Seas technology

Back in 2004, working in Seven Seas Technologies was the equivalent of working at Twitter or Google today. An SST engineer would swagger onto campus, very likely to teach a class or give a talk. There would be hushed whispers of acknowledgement “This guy works at Seven Seas” to which the response would invariably be something along the lines of “Wacha!” Given SST’s early bent towards network-related products and services, it goes without saying that around this time there was massive investment by corporates in networking technology. It could be that it is around this time that the concept of branchless banking came into vogue.
Kenya has since developed the capacity to produce trained networking engineers which has marginally driven down the pizzazz associated with this sector of IT. Be that as it may, it is rumoured that Mike Macharia turned down an opportunity to study in the USA to chase down a business opportunity in Rwanda. It was a case of two tickets and only one choice, with one ticket more likely favoured by his parents. And here we are, several years down the line, discussing Kenyan tech history.

Kamal Budhabhatti of Craft Silicon

This gentleman in my opinion could easily vie for the resident wizard of this group. Reason being that he developed an entire core banking system (CBS). From my point of view that is a massive undertaking. There are countless banking products, SWIFT formats, government regulations, multiple possible user configurations, different client-relationship structures and a whole myriad of things that go into a core banking system. In short, if you take away the people running a bank and its relationships, a bank is its CBS. And if you go the bank and the teller tells you (pun intended) “Sorry, systems are down,” it is most likely that their CBS is suffering from one form of flu or another. Craft Silicon has clients across Africa, Asia, Europe and the Americas. This is definitely a telling Kenyan success story.

As has been mentioned above, one of the reasons we don’t hear much about many of these people is because they serve behind the scenes in niche markets. Their primary sale is to enterprise buyers as opposed to the average Joe on the street. Another reason is that we have not been putting out enough local content on the internet which has resulted in these stories getting crowded out in the noise. It is said that in order to know where you are going, it is important to know where you are coming from.

The important thing is that these stories need to be told for the benefit of the new generation of students going through and emerging from our technology colleges and universities. During my time in campus, the stories of Yahoo, Amazon, E-bay, Paypal, Google, Facebook and LinkedIn had me enthralled. Much as that was the cutting edge of global tech innovation I was so enthralled that I overlooked the significance of these local stories happening right in front of my eyes. After entering the workplace and working the grind I forgot to dream. However, this same grind gave me a much higher appreciation for the significance of these local stories. It taught me that if I want to make a difference globally, I would have to start locally and solve local problems. In my opinion it is in understanding the stories of these gentlemen that we can figure out the next frontiers of opportunity.



The Financial Services Technology (FST) industry, which has traditionally employed a considerable portion of our best and our brightest, is maturing
Observing the valuations, profit margins and threat-of-new-entrants for most of these companies, it becomes apparent that the first-mover accrues serious incumbency benefits and in most cases is able to lock out other entrants from gaining a foothold. Most importantly, new applications and or services are forced into increasingly niche areas.

So how does this affect cocoa production in Ghana? It appears to me that the FST industry, which has traditionally employed a considerable portion of our best and our brightest, is maturing. The implication is that profit margins are narrowing together with the space for ground-breaking innovation.
Additionally new entrants are being forced to newer and more niche segments of the sector. This information coupled with the fact that Kenya should be moving to a cheaper energy regime in the next 2 years or so, could easily mean that the next frontier of opportunity for Kenya’s IT graduates, engineers and aspiring industrialists might finally lie in manufacturing. Additionally, taking full advantage of this information may well require conceptual leaps such as the gentlemen above have made.
David Marete is an entrepreneur and an anti-money laundering expert and Philip Mbugua is an IT Consultant

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