The challenge of being an ICT entrepreneur

ICT entrepreneurs face a myriad of challenges. But as Zachary Ochieng finds out, it is not all doom and gloom for those who have the spirit to soldier on.
The Information and Communication Technology (ICT) sector has been one of the key contributors to the impressive growth performance in Africa over the last decade. To sustain this growth momentum, it is imperative that African governments, besides fostering peace and stability, create an environment that would be conducive to the growth and development of ICT entrepreneurs and nurturing young talents similar to the Silicon Valleys in India, United States, Israel and other countries. Recognising the economic potential of ICTs for Small and Medium-Sized Enterprises (SMEs), they should be assisted in increasing their competitiveness by streamlining administrative procedures, facilitating their access to capital and enhancing their capacity to participate in ICT-related projects. An example would be to offer incentives in form of tax rebates to ICT entrepreneurs who export their goods or services out of the country, inorder to encourage export of ICT services.
Private equity always expensive
Michael Macharia, founder & Group CEO, Seven Seas Technologies (SST), the top local ICT integrator and provider of integrated business and technology solutions, says today the only source of capital is private equity or loans from commercial banks which are always expensive and hence it is time the Government invested in a pool of funds to support ICT entrepreneurs in  form of Government private equity either by teaming up with  private quity firms that are well established, who would then manage the fund and also guide and mentor the enterpreneurs in their Boards  to ensure proper deployment and utilization of the funds for growth .
“Entrepreneurs would be encouraged to develop products for export if, for instance, the Government offers them loans which can be written off later and  tax rebates on the revenues generated from exports. Countries like China and the Philippines are offering 10-year tax holidays to their IT companies. This way, Kenya can become a regional ICT hub”, Macharia says, adding: “As an ICT company, our largest overhead cost is the people element of our business in terms of salaries, travel and training. If these people develop and offer unique  products and services to the regional and international market, then we should qualify to get rebates!.. Otherwise what motivation do we have to innovate and be the next Silicon Valley beyond personal sheer determination and will?” Access to capital remains a major constraint
While appreciating that Kenyan entrepreneurs have great ideas with more young talents waiting to be nurtured, Macharia says access to capital remains a major constraint. Arguably one of the most successful ICT entrepreneurs in the region, Macharia, 34, ventured into business at the age of 24 using his own capital, later bringing on board a venture capitalist and evenutally a leading private equity firm and has since transformed the  SST group into a billion shilling plus business.
Macharia cites the Indian ICT industry that has witnessed excellent growth in the past two decades. Capitalizing on its advantages of talent pool, lower cost of operation and the innovative remote delivery model, India has established itself as a global leader in the ICT sector.
Collaboration fostered between new innovation destinations
Today, India is clearly acknowledged as the global services hub. He adds the foremost implication of innovations in the India ICT space was the collaboration that it fostered between the new innovation destinations like US, China and Israel. Between countries, there are lots of collaborative efforts towards raising funds to invest in state-of-the-art technology companies that will benefit both the countries. This leads to the development of the entire innovation ecosystem comprising of entrepreneurs, high-tech companies, startups and possible buyers .To achieve the same they created a culture or innovation and an ecosystem to nurture and encourage entrepreneurs. The Government, industry, institutes, investors and other stakeholders came together to create such an ecosystem.
“In Kenya, if we foster and encourage a culture of innovation and entrepreneurship, we could enable global competitiveness and equitable growth a reality in the ICT industry and other related Industry sectors”, Macharia adds.
Bitange Ndemo, Kenya’s Information and Communications Permanent Secretary concurs: “The speed of technological changes always is a problem in developing countries where capital is scarce.  It is often very difficult to catch up when enterprises are undercapitalised with less returns that take far too long to achieve the pay back before technology changes.”
Ndemo agrees that partnerships are necessary in order to inject optimal resources that can assure better returns and a shorter pay back period.
“One of the challenges we face as entrepreneurs is the acceptance of your own product in the market. The other challenge is the time it takes to be accepted as a successful entrepreneur”, Macharia observes.
Not enough role models in the market
Then there are also historical challenges. According to Macharia, there are not enough role models in the market or there is little or no effort  given by the media to showcase such success stories .The enterprenuers themselves also need to make an effort to showcase their successes. 
Moses Kemibaro, Business Development Director and co-founder of Dotsavvy Limited, shares similar sentiments.
“By far the hardest challenge when getting started is funding. Most ICT entrepreneurs in Kenya and regionally normally have to start using their own savings as well as funds from friends and families. This is how we started. We also aggressively pursued business when we started to keep moving and asked for referrals all the time. Networking was also key by looking for business everywhere - you would be amazed that business is indeed everywhere if you network a lot and ask for it”, Kemibaro says.
According to him,  another challenge is that of building brand awareness and visibility for your business - being unknown and unproven makes securing business really hard.
Competitive poaching is commonplace
“There are many challenges. The beginning is the hardest! Cash flow is by far the biggest one – ensuring you get paid is absolutely essential for the business to keep running. Securing and maintaining top notch talent is another - employees leave for better pay and competitive poaching is commonplace in ICT businesses. Establishing and maintaining good business practices and processes is another. I find that lately innovation in terms of offerings to be challenging since there is so much competition and you have to stay ahead of the curve to remain relevant when competitors are trying to win your customers.” 
Inappropriate curriculum
Timothy Waema, Associate Professor, University of Nairobi’s School of Computing and Informatics, says inappriate curriculum remains a major challenge.
 “The Computer Science/IT curriculum does not have adequate business courses while the Business curriculum does not have adequate IT/computer science courses. There is also lack of Government policy on incentives for ICT entrepreneurs, e.g. software developers or IT consultants. Then there is the widespread perception among university students that they are being trained to get a good-paying job”.
All the 7 public universities, more than 10 of the newly created university colleges and over 14 private universities offer a degree in computer science, IT or equivalent. They in total have a total enrolment of over 2,000 CSs/IT students and producing over 500 graduates year to year. This excludes the Diploma graduates. In addition, there are very many business schools that have Information Systems as a specialization - over 30 academic units train in business studies or related disciplines (e.g. economics) with some IT specialization. This is where other entrepreneurs come from.
“That is what universities are doing. Whether these are enterpreneurs or not is another discussion, which will involve examination of curriculum. But suffice it to say that anecdotal evidence shows that fresh graduates are increasingly creating their own companies and running them”, Waema says.
 
Challenges are surmountable
Though challenges abound, they are surmountable. According to Macharia, one of the ways of overcoming the challenges is to create an incubation platform that is sustainable. One of the reasons behind SST Group’s  success has been its credibility in the development of local talent.
“We have about 70-80 percent talent from local universities and polytechnics. We have a very clear recruitment programme in which we hire staff and train them, before eventually giving them proper career roadmaps and certification”, Macharia offers. Again retention is always a challenge .
With a young workforce, companies face the challenge of meeting expectations in a market where talent is in the driving seat. The biggest problem that brings about talent shortages is the increasing gap between what universities provide and what the industry needs. So all companies in need of the talent should build close relationships with these institutions to help build a pipeline of skilled employees that can fill talent gaps quickly and cost effectively .
Knowledge 4 Life
 “At SST we have created a platform that allows this kind of training to be available to those who need it. That is why we came up with the concept ‘Knowledge 4 life’. Knowledge  4 life is an initiative available on the social media networks too that allows us to train pre-screened university students when they are on holidays or weekends at our training centre for free”, Macharia says.
“We use our own already highly trained, experienced and specialised experts who we recruited from the same universities to train and mentor them. We then team up with corporates, integrators and competitors who are in need of these resources. In that way, we hope to have a vetted pool of staff available for the whole ecosystem and the cost of labour is maintained at realistic levels”.
 SST came up with the idea of recruiting students after realising that the labour costs in the open market are exorbitant while the relevant supply is not available. While acknowledging that staff retention remains a big challenge as employees leave for greener pastures, Macharia says he works closely with the company’s Chief Talent Officer who devotes considerable time in talent management  because talent is key to the company’s success, not to mention that great talent is willing to work for a company if it has a great and inspiring vision they can relate to, and a clear employee value proposition.
Share options for staff
“We have come up with share options for our staff to enable them own equity and create long term view of wealth creation. We see that as a way to keep them focused on the business and long term objectives rather than short term benefits .It does not mean we dont encourage the talent to leave and see what the world has to offer but we always leave the door open for them to return and this happened in several cases and they return with much more knowledge and experience”, Macharia offers.
The challenge, Macharia says, is to ensure  that the company gets enough projects to keep talent motivated since most large organisations including government are  risk averse to local organisations in terms of delivering complex projects .
“We, however, have come to understand this view and overcome it by stragetically teaming up with global delivery partners where we insist to be part of the team deploying projects so we can get the experience. In a recent case, we had an exchange programme where our staff were based in Portugal for a year to shadow and learn from the more experienced companies as we worked on a very strategic project for one of our key customers . The customers was happy with the arrangement and it has worked quite well for all parties.”
Indeed, the challenges facing ICT entrepreneurs are numerous. However, Kemibaro, who has been an entrepreneur for seven years, says in terms of beating or managing challenges, it requires first and foremost an unrelenting tenacity to build your dream - even when you do not have money to fuel your car or pay your rent.
“This is the key to being successful in the face of entrepreneurial challenges. Thereafter you can then engage strategies and tactics that will then keep you going. For cash flow, making sure services are delivered on time and quality is key. It is also important to hire competent team members who can deliver to client expectations. Sometimes it’s not just a better salary that keeps staff but other motivators like a good working environment and work-related travel for instance”, Kemibaro observes, adding: “I think branding is a key differentiator for business development as is having a good customer portfolio and testimonials that ensure you can get the job done. Another key factor is having technology that gives you an edge in the business market as well as business processes that add value across the board.”
Strong brand a powerful magnet
Macharia concurs with Kemibaro that a strong brand is a powerful magnet for potential employees and talent retention.
“As enterprenuers, we dont spend money and enough time on the image our companies project and clarity in what we stand for. Nurturing loyalty to the company’s brand and values is an increasinly important factor in talent attraction and retention since the fundamental backbone of our business is talent. And as SST continues moving up the value chain in Application Integration ,consulting and Outsourcing services where margins are more sustainable ,people are the number one priority.”
Sharing his experience with CIO East Africa, Macharia says SST  was incorporated ten years ago and has a staff complement of 90 globally, with the number increasing by 25 percent every year. Besides Kenya, the company has branches in Uganda, Ethiopia and project offices in Rwanda. The company has undertaken significant and critical projects for some of the largest corparations, government institutions  in the region and with a key focus in establishing some deals in Nigeria this year .
“Today we are a billion Shillings Plus business, we used our own sweat capital at the start of this business. It was a major sacrifice but at 24 years what did I have to lose ?. I was fortunate to meet a venture capitalist, by the name James Gachui, who later became a great mentor, and invested in the business after 3 years without looking at any balance sheet. Both our companies took a business trip to India and he was inspired by the energy and vision I had for the business and industry. Eighteen months ago, we raised money through Aureos Capital, a global private equity firm with offices in Kenya. The Private equity investors coming on board have assisted us grow and bring a high level of financial reporting discipline required  for enterprenual business to scale and go public”.

Macharia is upbeat about the future of the company.
“Our dream is to really create a pan-African ICT organisation through collaborative synergy brought together by private equity fund with their other strategic investments in other ICT companies in South Africa and Nigeria”, says an upbeat Macharia, adding: “We want to become the biggest outsourcing and application integration business in this market. “Our destiny is simple. We want to be a pan-African organisation delivering IT services in the consulting, applications and  infrastructure outsourcing arena.  In my mind I am clear that we want to be efficient, more agile, using our own local skills utilizing a consistent geographic neutral delivery plaform and our own IP and I am extremely bullish we will achieve this through strategic partnerships, talent management and gradually shifting from a‘box’ to a service oriented organisation, hence our positioning statement “Service Excellence Delivered.”
Incubation arm to nurture entrepreneurship
The company is in the process creating an incubation arm to nature entrepreneurship and innovation within the organisation .
“In two to three years, we’ll have gone  IPO or a synergystic merger or acquisition with a global organisation.  We’ll look for organisations that share a common vision with us”.
Macharia says one issue that needs to be addressed is the need to adopt quality frameworks in the region.
“We don’t have standards. I would say the standards of ICT are controlled by vendors. We need to have standards, like those of engineering where all technological courses have a standard qualification. Just like in other global markets, we need to harmonise standards in the region in terms of software development, infratsructure and security management. Some of the standards include and not limited to (CMMI, ITIL , ISO ,PMI ),  but these will have to be driven by customers and the organisations like the Kenya ICT Board . They have to insist on a level of certification and competence and in turn the local companies will sharpen their internal delivery process in order to compete at a global leval .”
BPOs collapse in quick succession
It is the lack of standards that is partly to blame for the collapse of BPOs in quick succession. According to Kemibaro, Kenya is relatively unknown and untrusted as a BPO destination. The firms in this sector have to discount services heavily and do not have the credibility to access key accounts directly  - instead working through intermediaries. Also, until the high speed cables arrived, bandwidth has been too expensive and unreliable so services being offered could not be done so efficiently or profitably. There is also the issue of service delivery - Kenya is relatively new to BPO work so the investment alone required to train and create high standards as well as processes is high - its a steep and expensive learning curve.
Waema says that while the collapse is expected with all start-ups, we still do not have an appropriate strategy and support to encourage growth rather than death of BPOs.

According to Ndemo, the problem with BPOs is less than optimal investment in the sector. 
“We plan to locate them in one area where resources can be optimised and each can grow.  You need at least a 250 seat capacity to succeed yet most Kenyan enterprises have less than 50 seats”.
Regional ICT hub
Despite teething problems, Kenya still has the potential of becoming a regional ICT hub.
“Like with banking, Kenya can become a regional ICT hub. Most of the big banks are now in Kenya. As for ICT, Kenya should tap its human resource and encourage local investors. The Government must be seen as a high adopter of technology and have the right incentives to make people invest”, Macharia observes.
Dotsavvy’s Kemibaro sees the need to  have centres of excellence for training and service delivery.
“Strategic partnerships with international businesses and countries who have achieved what we are trying to do is key. We also need to disconnect ICT services as meaning BPO - there are many ICT niches that Kenya can be successful at and not just BPO. We, for instance, export our web services to clients in the US, Ireland, Zambia, Tanzania and Uganda. Imagine the potential of ICT from this perspective - every Kenyan ICT business could be a global business from right here in Kenya even if its a small firm”, Kemibaro observes.
But while acknowledging that the Government has  done most of what needs to be done in the ICT sector, Ndemo says,   “we need to scale up the transport and energy sectors which impacts on what we do in the ICT sector”.
On his part, Waema says the Government should develop solid and quality infrastructure, take talent development seriously and prioritize it, create an enabling environment - especially political, policy, regulatory and institutional and have a high level leadership and championship of ICT in government that is cascaded at all levels of Government.
And therein lies the challenges and the opportunities for enterprenuers for Vision 2030.
 “There needs to be much more marketing at Government level through Public-Private Partnerships (PPP). This is already one of the reasons the BPO sector has challenges - there is a lot of work to be done and 2030 is just around the corner. But the process has begun and it’s getting better everyday. We can make it happen but so much more effort is needed right here and now”, Kemibaro observes.
Macharia agrees.
 “In his Jamhuri day speech, President Mwai Kibaki made reference to technology, mentioning about the digitisation of court and land registries. This is very encouraging as technology can be used to eliminate corruption. These are great strides and opportiunities for the local entrepreneurs to rise up to the challenge. We plan to play heavily in this sector. The government is always the largest spender”, Macharia says.
He further adds that a key learning that has always motivated him is Peter Drucker’s ‘The entrepreneur always searches for change, responds to it, and exploits it as an opportunity’.
Overall, the future of ICT looks bright in the region.
“There are so many prospects that it’s hard to tell. BPO has already been seen as key for Kenya and the region. But what about KPO? Not much has been done in this area (yet). There are many KPO prospects for the region for professional services. In many cases, KPO requires far less resources to set-up than an BPO business. As a region, it would seem that the rest of the world has run off with most of the opportunities but consider Ushahidi which was delevloped in Kenya for crisis reporting and is now a global phenomenon. There are many success stories waiting to happen”, Kemibaro says.
According to him,  we need more innovation centres for ICT as well as funding for  good ideas.
“We need to improve industry standards and practices. We need to tell our children that being a lawyer or a doctor is not  the only profession worth having and that they can make a living  as techies doing software and animation. There is a very very broad scope for the future in the region”.
On his part Ndemo says Kenya will soon be as competitive as India or the Philipines.
 “We shall soon be leaders in content production”, Ndemo enthuses.
As part of Vision 2030, the Government is looking for appropriate facility to develop incubation centres  for ICT young entrepreneurs.  This facility will be classified as an Export Processing Zone (EPZ) for the entrepreneurs to take advantage of the benefits in such a location.  The Government is also developing a Special Economic Zone (SEZ) that will have far greater benefits that before and will also embark on aggressive capacity building programme.