SA-developed software: From isolation to inspiration

Years of isolation as a result of apartheid forced SA to develop its own IT skills base as local buyers struggled to source the software they needed from overseas. Now, with the country`s return to the international fold, several local software development firms are successfully taking their products into foreign markets.

Offshore markets have also changed, no longer being the exclusive domain of the US and western Europe. Other significant players are Japan, India, Israel, Ireland, and even Russia. Although SA would like to be included on that list, the country is still a marginalised technology player, with only a few local companies having made a success offshore.

Despite having many things in its favour, the country`s share of the more than $300 billion global software market is estimated at less than 5%. Where is it going wrong?

SA certainly possesses the skills base to be a serious contender in the international markets. And the fact that those skills cost less than in many other countries gives it an edge.

According to a global IT IQ report by US online testing company Brainbench, SA has the highest concentration in Africa of certified professionals in 30 of the most critical IT skill areas, and ranks among the top 25 IT IQ countries in the world.

"It used to be that we were 18 months behind Europe and the US, but with the Internet the time lag is now nothing," says Softline COO Steven Cohen. "The training tools are there and we can now download a 50MB file where in the past we had to go to Connection, order it, and wait.

"We still make sure people attend some conferences overseas. It used to be so that they didn`t fall behind, but now it`s mainly for motivation rather than knowledge."

However, Adriaan van Wyk, CEO of SourceCode, says people with good software skills are not always easy to find. "The skills base here is very mainstream technology, and by that I mean technology to build solutions. It`s not product-driven. And it`s extremely difficult to find such people here, and our experience with that is when we have found them they get taken by the UK.

I believe SA does carry some of the best IT skills in the world, and our ability to innovate is unmatched.

Adriaan van Wyk, CEO, SourceCode

"But I believe SA does carry some of the best IT skills in the world, and our ability to innovate is unmatched."

Richard Firth, CEO of open source software developer MIP Holdings, says the country enjoys a reputation for being at the forefront of the technology curve, despite its location and legacy of isolation from the rest of the world.

"As a result of years of isolation, SA had to become well-equipped to address the demands of business and deal with the country`s technology requirements. At the same time, the South African market has always been characterised by entrepreneurship, probably as a result of this isolation and due to the fact that we have limited resources. We do not have the exchange rate required to enable us to employ top technical people from foreign countries, so many corporate organisations developed large internal IT departments to cater for their technology requirements.

"It is against this backdrop that local IT people developed experience in a broad range of IT skills, unlike their foreign counterparts, who often have far greater levels of specialisation in their chosen focus areas."

The weakness of the local currency also benefits software developers, as it lowers the cost of development relative to other countries against which SA competes. There are two aspects of this. First, local developers selling into the South African market could benefit as imported software becomes increasingly expensive in rand terms and, second, South African developers selling overseas are more likely to undercut offshore competitors` prices.

"As the rand continues to reach new historical lows almost on a daily basis, many organisations are hesitating before investing their money in an overseas offering, simply because it`s becoming too expensive," says EmSoft MD Gilbert Parsons. "Consequently, local software offerings should finally start receiving the attention they deserve."

Cohen says the exchange rate makes SA a compelling location to have developers placed. "The quality of people here is just as good as overseas. In fact, our best developer sits in SA and our best development team is also in SA. We do have others around the globe, but the teams in SA are the most focused and innovative.

"In the US a good developer earns $100 000 to $120 000. If you take that as R1 million, the equivalent developer here earns about 40% of that. The top guys earn about R400 000 and they are just as good, if not better."

The weakness of the rand and the resident skills base also has the potential to open new markets to SA. "The Middle East, for example, is reluctant now to use US products and they are turning to other markets," says Ability Solutions CEO Shoaib Patel. "I believe SA will be one of those. India is seen as unstable politically, so multinationals will be looking elsewhere, and SA will be one of the markets they look at. SA has proved it is a technological force and the world is becoming aware of that."

The Middle East, for example, is reluctant now to use US products and they are turning to other markets. I believe SA will be one of those.

Shoaib Patel, CEO, Ability Solutions

Other advantages include location, with SA`s time zone in line with Europe and overlapping with major economies in the west and east making real-time support viable, and a good education system.

Most local developers selling into international markets praise the standards at South African tertiary institutions, although they say there are shortcomings that IT companies can help overcome. "Our ability to research is far behind other countries because it`s not a big industry here," says Van Wyk. "People want to do their three years at a university and then start making money. In the US there is a lot of company-sponsored research and I`d like to see that develop here."

Says Cohen: "The tertiary institutions need to get guys like us to lecture people there for a few hours, industry people who are prepared to be honest, not punt their companies but admit they made mistakes and help others learn from them."

Several local developers have internship programmes in place, and most believe this serves well to supplement the academic training received at tertiary educational institutions.

Despite all the factors in SA`s favour, it is still not a major player in the international market. Dean Jordaan, software development manager at Mosaic Software, says SA`s share of the more than $300 billion global software market is estimated at less than 5%. With a high level of skills, applications with global potential, good education standards, currency weakness and location in our favour, what holds us back?

Spescom chief technology officer Viv Crone believes the high cost of telecommunications is a major factor. He says software developers operating globally need to be able to move big blocks of data around the world, but to do so is expensive. "Any enterprise trying to achieve international status needs to have geographical distances that have the appearance of being invisible. You need to build big pipes because if you have an office in London it needs to be able to communicate instantly with the people in SA as if they were next door." He says developers in India have an advantage as that country`s telecommunications costs are subsidised.

SA developers say competition offshore is tough, but their toughest competition comes not from multinationals, but companies based in the countries they are trying to penetrate. "Competition is very tough overseas," says Patel. "Our advantage is price, but our disadvantage is lack of awareness. Our main competition offshore comes from local companies, companies based in those countries." He says this is because people usually prefer doing business with firms they know, and where support is local.

"Taking your product overseas takes a lot of strategy and planning," Van Wyk says. "Quality is not enough. There are people there with products that have half the functionality of yours but they`ll outsell you because they`re local."

The US is very parochial and it`s hard for them to understand that African products can be as good as theirs.

Viv Crone, CTO, Spescom

Most industry participants believe Europe and Australia are generally easier to break into than the US.

"Getting into Europe in a small way is not that difficult, but in the US it takes a huge investment, beyond what most small organisations can afford, so they need support to market," says Crone. "In some cases it`s difficult to market African products into a hi-tech place. The US is very parochial and it`s hard for them to understand that African products can be as good as theirs. Europe is more accepting."

However, Van Wyk says the US is an important market because it is the biggest one. "There`s also the credibility factor, because your credibility, if you are successful there, goes right up. And the revenue of course is very significant.`

Almost all the developers surveyed say that losing skilled people is one of their biggest challenges, as local developers find it attractive to work overseas. However, the pressure now is not nearly as high as it was in the 1990s. Many also list being associated with the Third World, and as a result political and economic instability, as a major hindrance they are powerless to overcome. Software piracy also featured on the list.

There is some disagreement on quality of South African-developed software, with developers on the one side and quality assurance firms on the other.

"The quality of locally developed products is far under-rated," says Parsons. "SA has many world-class products to offer, and possesses high-level business development skills which include extensive implementation experience at local, high-profile sites."

However, Debbie Nelson, MD of quality assurance firm iLab Project Services, has a different view.

"I don`t think we are even on a par [with quality overseas]. I`m not making a judgment; this is just how it is given the level of maturity in international players and we have to realise that we need to do something about it quickly." She says the problem is that many local developers are not process-oriented. "There are a lot of self-trained people in software. People moved into software easily but didn`t bring the discipline of the old mainframe environment with them. You couldn`t take a mainframe live with no process. Young developers haven`t been exposed to the academic side and don`t demonstrate the same capability level.

"Nothing`s formal or documented and standards are not published. There`s an evolution taking place, but we`re still learning."

Nothing`s formal or documented and standards are not published. There`s an evolution taking place, but we`re still learning.

Debbie Nelson, MD, iLab Project Services

Most developers believe that government is not doing enough to incentivise the local IT industry.

"The whole environment doesn`t give local developers the opportunity to compete internationally," Patel says. "There is nothing from government or the market saying 'Give local products a chance`. So we use SAP and JDE and so on, and the money goes overseas. We need an incentive to use local products, not just around BEE [black economic empowerment]. We need a combined initiative from government and the local IT sector. Export incentives are definitely a need."

Van Wyk says in Singapore, where SourceCode has an office, the government does everything it can to back up local intellectual property (IP) export because it knows it will get its money back. "If we want to extend SA out of SA, the government needs to do a lot more. Singapore gives tax grants and so on. There is also a lot of development going on in Ireland because of the backing the government is giving to host IP there and export from there. There`s a lot more that can be done here."

However, Cohen says there are incentives in place, but they are not well advertised. "For eight years I didn`t know there were export incentives. The problem is not the absence of incentives, but the poor communication around them." He sees the sector education and training authorities as a positive development but says "it`s a minefield trying to find them".

The industry believes that a number of things should be done to boost SA as a software development location. Companies developing products for export should have their bandwidth subsidised and tax relief or infrastructure subsidies should also be considered. Some developers are even calling for import duties to be imposed on software so that local users are more willing to consider South African offerings. Most agree that the formation of small and medium enterprises should be encouraged more than at present, and they should be given some degree of support in marketing their products overseas.

There is a need for a coherent message and approach to marketing the South African technology industry abroad, says The IQ Business Group executive Andr'e Sharpe.

"We need quality marketing that differentiates SA from software development countries such as India. We`re a small nation - not quite as small as Singapore or India - but we need to start working together collectively and build a brand. This requires using our resources onshore and South African ambassadors offshore to help us start competing against nations instead of each other," Sharpe says.

But the IT industry admits that it also has a key role to play. The adoption of an internship programme will go a long way to ensuring that practical training hones the skills of students and graduates in live situations. The ability of software development companies to understand business and not just technology is also key, not only because they plan to take their business offshore, but because software developed around the needs of business will go further than technology-driven products. An emphasis on quality at all levels of development is also vital.

We need quality marketing that differentiates SA from software development countries such as India.

Andr'e Sharpe, executive, The IQ Business Group

"We have some smart business people in SA, and they need to be more demanding," says Nelson. "Businesses should start taking responsibility and educate themselves about what their needs are. If business educates itself more about what goes into software at the quality level, then it can add more value. Don`t abrogate the responsibility of giving input."

SA has some way to go before it can be considered one of the world`s software development hotspots. But the potential is there. There are many companies that have made a success of it and compete against world leaders. Companies such as those quoted above, as well as others like Global Technology, OpenIT Solutions, The IQ Business Group, Interdyne Technologies, ACCtivity Software and Unison Communications, to mention only a few, have ventured successfully into the international market. But there are still many more local software development companies with world-class applications that have yet to break into the world markets.

Jordaan, voicing the opinion of many in the industry, says he believes the country will see a strong trend towards increased software development activity in future. The industry is still young, but it is set to make its mark.