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The smart money is on local tech, especially for 4IR


Johannesburg, 28 Nov 2019
Read time 5min 30sec
Richard Firth, CEO, MIP Holdings
Richard Firth, CEO, MIP Holdings

Not so long ago, at the end of the 90s, locally developed software was commonplace, particularly among South Africa’s public and private organisations. 

Then a blitz of international providers changed the picture. 

Roadshows, overseas trips and constant marketing turned the market’s appetite towards overseas products. Yet it still took considerable effort from local skills to fit these solutions into the South African context.

Companies today are again modernising, now shifting away from those major technology investments of the past two decades. They can flex their muscles more, thanks to the rise of services, modular integration of independent systems and flexible payment models. Yet many are still ignoring the benefits of locally developed solutions, despite the promise of lower costs, greater relevance to their environments and bolstering of local skills towards economic development.

Imported technologies have an uncomfortable hold on the market. Nearly 58% of respondents to the latest Margin Channel Survey cited exchange rates as a major threat. This gives some indication of how reliant our market has become on solutions brought in from abroad. This should stir major concern, as Richard Firth, CEO of MIP Holdings, explains:

“As international systems started replacing local solutions, the local skills base began to erode. Many software engineers would end up working on international systems and, as opportunities became fewer locally, they started moving overseas. Technology profits also leave South Africa and the continent, lining the pockets of overseas vendors while local support dwindles.”

Why buy local?

There are several reasons why a local solution trumps international alternatives.

Cost is an obvious one. South African systems don’t rise and fall on the fluctuations of international currency. Stable margins allow them to also keep prices stable and invest in development. Local providers can charge much lower prices, sometimes as little as a tenth of international peers.

This links to the second reason: international solutions are rarely suited for local conditions. For example, an ‘offline’ feature for an app is a rare consideration in regions where connectivity is taken for granted. South African and African innovations tend to deal with connectivity redundancy as a top priority.

The third reason related to modern solutions methodology, which has been a boon for local services. They can leverage the seamless scale, economics, management and deployment capabilities of the cloud, platforms and integration. Though most modern solutions could claim this reason as well, it’s nonetheless a major advantage for local providers, particularly in terms of costs and establishing customer context.

Lastly, local is great for the fourth industrial revolution (4IR). The virtues of 4IR rely on being locally contextual and relevant. Cost, localisation and simplified deployment are all crucial aspects to a successful 4IR solution. This makes it particularly important to support the resurgence of our local technology industry.

“The more we offshore our technology products and skills, the more our local capability shrinks,” says Firth. “The more this happens, the less likely it is that local companies will develop 4IR IP that they can maintain. If we want to create locally-relevant 4IR solutions, we need a growing local industry that can chase that innovation.”

Endangering SA’s 4IR ecosystem

By not supporting local technology providers with home-grown services and capabilities, South Africa is relinquishing control of its 4IR future. This isn’t a cry for charity: local services can compete with the best in the market. The issue is rather one of perception.

Why are local organisations not supporting South African software and services? It may be the persistent myth that buying from a large, well-known brand won’t get you fired. Yet those days are gone - big bang has been replaced with agile and modular projects.

Procurers of technology might also not realise that South African providers can and do apply the same best-of-breed practices as their overseas counterparts. Additionally, despite all the glamour of an international brand, it still requires considerable local effort to align those systems with colloquial needs.

Technology buyers are already feeling the sting of this neglect, even if they don’t notice the correlation. Demand for skills exists across the globe, but South Africa has an acute situation. Not only do we have a shortage, but the market - particularly the financial sector - tends to headhunt talent instead of developing it. This, combined with the consistent departure of local technology professionals to more interesting pastures, is inviting disaster.

“In my experience, software engineers aren’t leaving SA for better salaries. They can make a good living here. But they aren’t challenged enough and the interesting work is often with the major brands because they can aggressively drive innovation. More support for local brands will encourage our best to stay. We should also not forget about our social realities: there are many people without jobs who want to learn technology skills. Our internship programme is so flooded with interested parties that we use games and quizzes to find the best candidates. There is a real hunger and need to develop local skills, but we can’t meet that demand if we become a net importer of technology.”

Net importer - this is a bad concept in economic terms. Self-sufficiency and the capability to export services are major distinctions for strong economies. Firth believes the market has the power to improve our current situation.

“Look at South African alternatives for services. You’ll realise they are of very high quality, very reliable and very responsive to local needs. The local market has capabilities in everything from financial software platforms to artificial intelligence. We must nurture our capabilities and support them. But if technology profits keep leaving our borders, the talent will follow and we won’t be able to reinvest in the next generation of innovators.”

This is already happening. But it’s not too late. The smart money is on local tech, especially for 4IR.

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