Don't rely on BEE credentials, warns IT entrepreneur
Empowerment credentials are not a passport to success for small, innovative IT companies, says Liquid Thought owner and managing director Zulfiq Isaacs. Particularly in the business software development and services market, small companies and start-ups will have to make it on their own merits or not at all.
"BEE is not a trump card," says Isaacs, who started Liquid Thought as a two-person show in 2001 and has seen it grow to a profitable 13-person company with annual turnover of more than R5 million. "It's not even a very good selling feature; nowadays we don't mention BEE in our introductory presentation."
Initially started to exploit a gap in the market for supplying specialised IT consulting services and technology to small and medium enterprises, Liquid Thought has now established a big enough reputation to land major corporate clients such as Vodacom, Foschini and Absa.
Isaacs credits Liquid Thought's success to a consistent and disciplined focus on innovation and growth. The company also benefited in its early days from the exposure, networking and mentorship provided by the Cape IT Initiative, whose Bandwidth Barn incubator housed Liquid Thought before it outgrew the available space. "Their focus was on empowering and growing SMMEs, which served us well in our incubation phase," he says.
"CITI also supported our Small Business Technology Forum, which was started with a few SMMEs and ICT bodies to pool our skills, resources and experience so we could pursue larger contracts with corporates and government than we could on our own. This remains important to us and our partners, who face the same challenges."
Although supportive of the broad aims of the ICT charter process, Isaacs is sceptical of its benefits for smaller companies. "Many black-owned SMMEs in the IT sector could actually be threatened by the charter," he says. "If it puts too much emphasis on deal-making and buy-in empowerment, SMMEs will find themselves squeezed out of the market by larger competitors who can attract high-profile black partners. It's much harder to start a company than to buy one."
The danger is most severe, he adds, for those in the increasingly commoditised markets for hardware supply and networking services, where many black-owned firms are concentrated.
Bigger companies can also offer better salaries and benefits, he notes, which means SMMEs all too often come last in the race to attract scarce skills. "If you're a small IT company, you need to make very sure you are developing and looking after your people - far more so than in a larger company," he says. "We've managed to attract and retain leading professionals and top graduates because we offer a great working environment and the chance to share in the success of building something new and successful."
Isaacs believes the lack of successful role models is one reason for the under-representation of black entrepreneurs in Liquid Thought's segment of the broader IT sector. "We need to see many more young black companies being successful in the software and technology delivery segment of the industry," he says. "We intend to be one of them."