IBM And Google Have Discovered A Massive New Market Opportunity
He went to New York, where he worked at Staples, an office-supplies chain, to finance his masters in statistics at Columbia University. A customer, impressed by Mr Ndiaye’s sales advice, suggested that the Senegalese apply for a job with his own employer, IBM. That was 15 years ago. Now Mr Ndiaye is back home, as manager of the office Big Blue opened in Dakar last May.
The office in Senegal is just one sign that IBM believes Africa will bring in billions. It is no newcomer: it sold its first gear there to South Africa’s railways in 1911 and a mainframe computer to Ghana’s central statistics bureau in 1964. Lately it has been paying special attention to the continent.
In July 2011 it won a ten-year, $1.5 billion contract to provide Bharti Airtel, an Indian mobile-phone company, with information-technology services in 16 African countries. Since mid-2011 it has set up shop in Angola, Mauritius and Tanzania, as well as Senegal. In all, it boasts a presence in more than 20 of Africa’s 54 countries. Last August it opened a research lab in Nairobi, one of only 12 in the world. And between February 5th and 7th Ginni Rometty, its chief executive, and all who report directly to her met dozens of African customers, actual and prospective, in Johannesburg and the Kenyan capital. It was, Mrs Rometty said, the first time the whole top brass had assembled outside New York since she became the boss just over a year ago.
Big Blue may be ahead, but it is not alone. Last month Eric Schmidt, Google’s chairman, spent a week in sub-Saharan cities. He enthused about Nairobi, which, he wrote, "has emerged as a serious tech hub and may become the African leader." Orange, a French mobile operator, and Baidu, China’s answer to Google, recently introduced a jointly branded smartphone browser in Africa and the Middle East. Orange also sponsored this year’s Africa Cup of Nations, a football tournament, in South Africa. (Nigeria won it, beating Burkina Faso in the final on February 10th.)
This month Microsoft, which has offices in 14 African countries, unveiled a smartphone to be sold in several African markets. It is made by China’s Huawei and uses Microsoft’s new operating system.
In Kenya Microsoft intends to bring broadband to places that do not yet have electricity, using solar power and "white spaces", or spare broadcast-television frequencies. Within a year, says Fernando de Sousa, the general manager for Microsoft in Africa, 6,000 people in the Rift Valley will have access to broadband. Similar projects are planned elsewhere. Since October Microsoft has been running "app factories" for programmers in Egypt and South Africa.
Mark Walker of IDC, a research firm, says that in the past three or four years multinational companies have adopted a "completely fresh approach". They have "a lot more skin in the game: investing in local people, so there’s proper knowledge transfer, investing in country offices." Companies are in it for the long term now, rather than quitting after a bad quarter or two.
Africa’s chief attraction is that it has been growing while richer regions have stalled (see chart 1). Its demographic prospects are promising, too. As America, Europe and China age, Africa can expect a bulge of workers in their productive prime. Though skills are in short supply, they are becoming more abundant. According to the McKinsey Global Institute, the consulting firm’s research unit, in 2002 only 32% of Africans had secondary or tertiary education, but by 2020, 48% will have. The continent can call on degree-laden expatriates such as Mr Ndiaye and Uyi Stewart, the Nigerian chief scientist of IBM’s Nairobi lab.
Some countries are better off, more stable or simply keener than others to make the most of IT. Kenya may be keenest. In 2006, frustrated by the slow progress of a regional plan to lay a fibre-optic cable along the east coast of the continent, Kenya negotiated its own link to the United Arab Emirates. The Gulf cable landed in 2009. The regional link, in which Kenya remains a partner, followed the next year.
The lion’s byte
Bitange Ndemo, a bigwig in the Ministry of Information and Communications and the man responsible for the cable from the Gulf, says he wants to see a rise in IT’s share of Kenyan GDP from about 5% now to 35% "within a very short period". He hopes for a mighty shift of employment away from agriculture. "But politicians must have the will," Mr Ndemo says.
If they are to create new markets and to profit from them, technology companies have to be on the spot. John Kelly, IBM’s head of research, says that after the firm set up labs in China in 1995 and in India in 1998, "we found that we were getting innovation out of those research labs which could only have occurred in those locations." The Indian lab, for example, produced the "spoken web", for illiterate people with cheap phones.
One of the Nairobi lab’s early challenges is traffic. The city has few traffic lights or cameras; hence the awful congestion. Signals from motorists’ mobile phones can help to track traffic, but planners have few data to work with. IBM’s lab will harness other sources, such as security cameras that are not aimed at the road but capture images of it anyway. IBM will then crunch all the data to help planners control traffic and decide where to build more roads.
The Nairobi lab is expected to earn its keep quickly. The Chinese and Indian labs, Mr Kelly says, took ten years to make a significant contribution technically and commercially. Kenya’s target is five. He says the lab has made a good start, drawing on work by an older sibling in Tokyo to tackle its traffic problem.
In many sectors, such as health care, education and water, as well as traffic, governments are sure to be important customers for IT companies. But private clients matter too, especially in telecoms and finance. The mobile phone, the first computer many Africans will own (see chart 2), is the bridge between the two.
To Westerners, "mobile banking" is a new way of doing something old. To many Africans, it is the obvious way of doing something new. In Kenya M-PESA, a system of transferring money over phones, is an everyday, reliable utility. Equity Bank, a fast-growing bank, most of whose customers have never had an account before, has come of age with mobile technology: its chief executive, James Mwangi, says his customers can use any of its 54 products on the move. For technology companies, all this means a growing demand for many things: reliable connectivity; software; analysis of data on spending, lending and repayment; and data centres.
Technology companies say they are keen to serve smaller businesses too. Microsoft has announced a programme called SME4Afrika, which is intended to bring 1m small and medium-sized enterprises online. Mr de Sousa points out that technology can also draw informal businesses into the formal economy. The ability to use software, computing power and storage online "as a service", paying only for what you need and only when you need it, may put the cost of information technology within the budget of many small African businesses. "The person who invented the cloud did it for Africa," says Mr Ndiaye of IBM in Senegal.
Mr Kelly makes a bolder claim, linking Africa’s emergence to that of "big data". IBM’s answer to how the world can cope with the rising torrent of exabytes is "cognitive computing". Instead of being given detailed instructions, cognitive computers are fed masses of data and use statistical analysis to answer complex questions. Watson, IBM’s first of this kind, was clever enough to win "Jeopardy", an American television quiz show, beating human champions hollow. The true purpose of a Watson, however, is not to show off on television but to sift data from radio telescopes or provide medical diagnoses.
From Jeopardy to epidemiology
Mr Kelly sees an opportunity "for Africa to move, and move first, to this new era of computing." It can leapfrog straight to the tech frontier, without worrying about adapting old systems to cope with the data it creates. At the Catholic University of Eastern Africa, which will eventually be the new lab’s home, a Kenyan asked Mr Kelly, "Will you bring Watson to Africa?" Yes, he replied, if someone suggests a problem for it to solve. Mr Ndemo spoke up: "Let us bring Watson here in nine months." Africa has plenty of problems. Computing power can help Africans solve them.
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