Software in Africa: more, better, different

by Dirk Knemeyer

This series on technology in Africa is written by Involution friends and emerging markets experts Niti Bhan and Muchiri Nyaggah.

It may come as a surprise that great software has been coming out of Africa for some time. By 2007, South Africa was already on Gartner's global top 30 software development outsourcing destinations list, while as far back as 2002 Footman-Walker Associates had deployed parts of its development and support to Nairobi. Softline Pastel was founded in 1989 as a financial software development business in Durban, South Africa. It grew to become Africa's largest business software vendor, eventually acquired by the UK based Sage Group. Craft Silicon is a Kenyan software company that has provided software for financial institutions from core banking to ATM and EFT switch platforms since 1998. Today they have clients in 7 African countries and offices on three continents. Open source crisis information crowdsourcing platform Ushahidi has been making a global name for itself as its use around the world grows to track crises from Haiti to Palestine.

Local developers in Sub Saharan Africa are creating solutions or customizing existing ones for the unique needs found in different countries on the continent: the days of importing all the technology are far behind. Within Africa's software development hotspots - South Africa, Kenya, Nigeria and Egypt - there is ample talent for advanced software products. Egypt's current political situation has led to a hiatus for international software houses such as Infosys and Tata - many of whom were offered significant incentives by the previous government for setting up outsourcing hubs to support the Middle East and Europe. While some are in a 'wait and see' mode, others are evaluating alternative locations on the continent.

As African governments begin to computerize their operations to improve transparency, efficiency and counter corruption, software platforms for e-government are becoming an attraction drawing vendors such as Microsoft, Oracle and SAP - each of whom have multiple offices on the continent. The rapid expansion of the telecommunications sector, with the concurrent needs for outsourcing back office operations and infrastructure management have captured the attention of experienced firms like Wipro Infotech. This appetite for efficiency and speed is growing quickly in the private sector as well, but the solutions and platforms selected for deployment may be changing in response to the digital revolution taking place today.

Towards the consumer end of the market, software piracy presents an immense challenge for many software vendors. Even as hardware prices have fallen over the years - a basic netbook can be had for around $300 - the cost of software hasn't kept pace. By 2005, Microsoft's Windows and Office Professional together cost more than an entry level PC. This drastic difference in cost and the ease with which pirated versions can be acquired have ensured that fighting piracy remains an uphill task. However, Microsoft recently released a Swahili interface pack for Windows 7 for free in an effort to encourage greater regional adoption. Efforts to clamp down on piracy coupled with improved access to the Internet have had some positive result on free and open source software (FOSS), driving adoption of Linux up by as much as 100% to 0.5% market share according to StatCounter. As open source operating systems such as Ubuntu mature and their productivity suite counterparts like OpenOffice begin to provide the same level of functionality as Microsoft products, these statistics are bound to shift in favor of FOSS.

On the other hand, mobile phone penetration has significantly overtaken the PC among African consumers. This has a great impact on some sectors of industry and how they source software. For example, with SMS banking quickly becoming a default service offered by Kenyan banks, the decision of which core banking platforms or middleware to acquire has to be informed by the ability of the product to provide interfaces for mobile access. Mumias Sugar Company of Kenya just rationalized their payroll management for daily wages sugarcane cutters by implementing an unusual yet highly relevant and effective solution jointly with Family Bank and Electronic Commerce Solutions Ltd. Cane cutters without mobile phones were advanced the equivalent of USD 25 to purchase one and asked to choose between two mobile money providers with whom they would register and receive their payments. This solution to secure and efficient cash handling for both the company and workers would be impossible to find in developed markets where the penetration and maturity of formal financial systems is high. Payroll systems in the west provide capabilities for transfers between banks or from banks to checks. In Africa, where there are twice the number of mobile phones compared to bank accounts, this is a far more practical implementation for wage transfers.

This has also opened up new business opportunities for vendors in the mobile messaging space, and those who custom build specialized middleware and services that allow consumers to directly interact with the systems via their phones. Cellulant, Mobile Planet and Mobipay are examples of sub-Sahara companies who have evolved to respond to the need for secure transactions between institutions and mobile networks. Just 5 years ago, Cellulant and Mobile Planet were providers of ringtones and wallpapers. Today the integration of the mobile platform and conventional computer systems is a growing business. Text based interaction on the SMS and USSD platform will remain the primary need in the near term as mobile apps, while flexible and convenient, have yet to establish a foothold to the same extent as basic services.

This shift toward mobile-enabled platforms for consumer oriented applications and services may have little effect on tasks traditionally carried out on PC. Desktop productivity software such as Microsoft Office and OpenOffice are bound to continue being popular, while cloud based alternatives like Google Docs will have to contend with low adoption as Internet access remains limited in comparison to developed markets. Many software applications which take "always on" connectivity for granted as part of their evolution may not be wholly realistic in Africa for quite some time to come. The software industry reflects the uneven progress seen recently in the previous article on mobiles - pushing the envelope with new ways of transacting everyday activities like paying wages by SMS, even while dealing with challenges of piracy, localization and inadequate computing infrastructure. Still, it is this environment in which some of the most creative and innovative solutions for low cost technology deployment have been tried and tested. Ushahidi cofounder Erik Hersman put it well: "If it works in Africa, it will work anywhere."

Niti Bhan and Muchiri Nyaggah collaborate to offer real world expertise and a holistic understanding of the emerging markets of Africa. Semacraft Consulting Group focuses on understanding the mindset and customer behaviour, market segmentation and archetypes that drive effective product and service concept design as well as the supporting business and transaction models.

Topics: africa, Analysis, Blog, software