According to Mr. Austin Okere, the CEO of Computer Warehouse Group (CWG) who spoke shortly after the commissioning of the company’s multi-million dollar 50-rack capacity three-tier data centre in Lagos, this could be achieved if the government can become a regulator and relinquish its hold on the business to allow the private operators run the sector. His words: “If government has a company that is competing with the private sector, it is an unfair advantage.
With over 21 years experience in managing businesses, Okere disclosed that the secret of any thriving business is innovation backed by learning, experience and intuition.
Excerpts:
Listing
I think the most important thing to us is succession. If you look at many Nigerian businesses owned by Odutola, the late MKO Abiola and many others, once the founder passes on, the business also collapses. But we have had a situation where the CEO of GTBank died and there was a smooth succession because there was governance. It was listed and global standard was guiding it. There was no fighting. For us, the first thing was succession. We have had an entrepreneurial business for 21 years and we need to institutionalise it into a corporate organisation that is globally recognised with many shareholders controlling it and not just one small family controlling. That was what really informed the listing decision.
But secondly, you would see that companies on the Stock Exchange are open to more scrutiny and they are also open to more governance. They have to put their forecast out there and they would have to say why they don’t meet it. And if the shareholders don’t like what is happening, they punish it by dumping its shares and the share price goes down and this is touching the company directly in its pocket. At the end of the day, it also makes us more cautious and enables us to play by the rules because we know that we are being watched, not just locally but globally.
We can’t even afford any scandal or non-governance. That holds us highly accountable. But that accountability also makes people trust you more. People trust a listed company more and we do business with it. We were able to attract foreign partners, local customers and the last one, of course, is that getting listed gives opportunity for liquidity. The shares are listed and it’s not just a list of papers in your pocket, it is currency. If you have 100 shares at N6, that is N600. So, it is no longer paper, it is money. Also, when you want to do all these projects I earlier talked about and you want to raise money, it becomes easier, because if you are able to convince the Stock Exchange about the validity of your investment, the Exchange can easily help you to raise funds from subscription shares to do that project but if you are not listed, you would have to go and beg the owners.
ICT growth
We need to measure the growth in the industry with respect to Gross Domestic Product (GDP) growth. In 2010, the ICT market was about $7 billion and we targeted $25 billion for 2020. And that is where we are, but what has happened is that these figures are verified because the Minister of Communication Technology has set a new standard to say that she wanted us to reach 25 per cent of GDP in the next five years. I would say we are probably at about $10 billion right now, which is between 40 and 50 per cent above the $7 billion where we were before.
But the question is, are we on course to achieve the $25 billion target in the next five years? I think we can do more of that and the reason is simple: look at the boom that came with the telecommunications liberalisation and GSM companies that came in. We are going to experience the same boom with the power sector that has been privatised. The new handlers of the power sector will need Information Technology (IT) equipment to run their operations and I think the $25 billion we are talking about in the next five years is quite competitive and we would probably double that.
In terms of GDP contribution, Nigeria GDP today is about $510 billion and if you take 10 per cent of that, it’s $55 billion. This is what we were targeting before. But the Minister of Communications Technology said we are going to do 25 per cent. Twenty-five per cent of that is going to be double of $56 billion, which is about $50 billion and I am saying we would probably be about $50 billion in GDP in the next five years.
Challenges
The challenges are known and are being resolved. The major challenge, if you ask anybody, is power and once you solve that, you’ll be surprised how the economy will take up. Even small businesses such as vulcanising, hairdressing and barbing all rely on power. So, our businesses rely on power. If I show you the power firm we have as an IT company, you will be surprised that we are not a power company. If we solved this power issue, which is on the verge of being solved, then we will have more Small and Medium Enterprises coming.
Today, there are 17 million micro, small and medium enterprises companies that cannot access bank loans for two reasons: They do not have transparent books and they do not have collateral. So, when they go to banks for capital to invest in their businesses, the banks cannot give them because the banks are spending people’s money and it cannot be spent when they are not sure the money would come back. So, what would unleash the businesses is the capital, which the banks have.
Financial institutions
To solve these problems for banks, CWG, as a company, has launched CWG 2.0 technology. The CWG 2.0 is to tell those 17 million companies that they should not bother to buy their own computer systems to do their accounting because this approach is very expensive. So, just like Google, Twitter and others, we would put Enterprise Resource Planning (ERP) applications in the cloud, which the SMEs would pay for on a subscription basis to run their businesses.
With ERP in the cloud, it means the ERP system is going to sit in our data centre and businesses can subscribe to it to do their accounting, inventory, access management and so on. So, automatically, as a business owner, you then have enough time to concentrate on your key business operations. Also, with the ERP and at any point in time, your stocks and sales are being managed so that when the banks come and look at your books over the last three years, they would know exactly what has been going on. Invariably, we solve the problem of transparency of books with the CWG/SME ERP, as we call it.
Collateral
The next problem that needs to be solved, as I earlier said, is the issue of collateral. Now that the banks know your books are clean, how can they lend SMEs money without collateral? To address this, we are saying directly to the government and its agencies such as the National Information Technology Development Agency (NITDA), not to give money directly to the entrepreneur because it is not sustainable. When the money finishes, the business finishes. Rather, we are telling government to set up a collateral guarantee for them. For instance, we are advocating that the N9 billion raised by the government for MSMEs funding be put as collateral to the bank and we would say ‘lend money to so-and-so enterprises’ because their books are clean. Such enterprises have also done due diligence and they would stand guaranteed. Even if they are in a case where they don’t have collateral, they would stand guaranteed.
That way, all entrepreneurs will benefit from this small money and it’s sustainable. If you take N9 billion and share among 17 million businesses, how much will each person get? Of course, it’s a little money. For me, this one is a huge problem if they now had power to add to it, what then do you think would be left for them to run their businesses? Their businesses need soft loan, which they can get, if the two problems have been solved. Aside the loan, they also need broadband because they would need to take their businesses on the internet for wider customer reach. The reality is that, just like Jumia and Konga, all businesses need the internet to enable other people to do business with them. They don’t need to maintain a big shop.
By so doing, you will start witnessing growth among the 17 million SMEs. For instance, if 10 per cent of them is able to bring themselves to a point where banks can invest in them; that is about 1.7 million people or companies and out of these, if we are able to take 10 per cent to become companies that could be listed on the Stock Exchange, the equivalence of that will be 170 companies.
Currently, records show that there are about 200 companies listed on the Nigerian Stock Exchange. So, by what I have just described, we can double the number and a large number of people can easily get jobs through expansion arising from the growth of those companies.
So, we at CWG believe that instead of having 10 billionaires, it is better to have a thousand millionaires, or, better still, have a million people with $100,000 and you would see the wonders they can do. We started with less than that. CWG started with $16,000 and that is 21 years ago and today, we are doing a turnover of $130 million a year.
Secret
I think the first thing is to try to learn, through experience, innovation and intuition. Intuition is basically what you cannot explain when you are at the right place at the right time, and innovation is important because everything works for a while, in the next time it doesn’t work. If you could remember, there was a time everywhere in Lagos was full of cyber cafés and then today, they are not there because they did not innovate.
There was a time when there were travel agencies everywhere. Now, you can book your flights directly on the internet. To still be in business, the travel agencies had to innovate and that is why we came up with CWG 2.0 platform.
If you can recollect, CWG started as a Dell PC supplier and supporter but now, everybody can buy Dell PCs and maintain them. So, we now went into what we call ‘Enterprise System’, which is big data for banks. But today, everybody can do that also. The next step we took as a company was to go into Managed Services where, as I talk to you, we have over 100 people that resume and close at MTN, working as if they are MTN staff but they are our staff. They look at all our clients’ IT facilities. They are the ones that make all the calls we make as telecoms subscribers work. They work in the data centres and today, we are taking step forward by talking about cloud computing, putting software as ERP to use. That becomes the purpose but the issue is in helping reducing IT expenditure for businesses for them to become better entrepreneurs.
So, we are going much into social impact investment and if, out of the 17 million SMEs, we are able to uplift 1.7 million to get loan, then out of these 1.7 million, we are able to make 170 list-able on the Exchange, then we are happy. So, through the service we offer at CWG, money making is not our objective but to make social impact investment and money would definitely come. So the secret is to continue to innovate.
I will give you a good example: Nokia was into rubber business (tree and paper) and it realised that paper could be used for communication and began phone business. It ruled the mobile industry until it stopped innovating and it started dying.
Another example is the Research-in-Motion, which later re-branded to Blackberry. At a point, Blackberry was the only one that could give you e-mail on your phone. With such service, you could take a picture and e-mail it and then, the company added the Blackberry Messenger but then, Blackberry didn’t do any innovation now that is available on all phones. The truth is Blackberry stopped innovating and that was how it started dying.
If CWG does not innovate, it will die. Dangote started not as a manufacturer; he was just trading but at a time, he started manufacturing sugar and cement and today, Dangote has innovated itself into one of the biggest companies in Africa. So, at the end of the day, the secret is how to innovate through learning, experience and intuition.
Tier-3 data centre
We truly got this idea about the data centre, first for our old products, which were going to need a data centre to host them. Then after that, we had more space and we brought in other companies to collocate with us and when we did that many major companies showed interest.
We had First Bank Mobile Money that we are hosting and we had MasterCard and more companies were looking for that opportunity. From there, we know from experience that people need data centre and our target was the disaster recovery of banks we commissioned, because banks have their primary data centres, where they process all their data. But because of the sensitive nature of their business, they also need disaster recovery data centre so that if anything happened to their data centre, they would be able to retrieve their data. As a result, we told them they didn’t need to build two primary data centres but should collocate on disaster recovery.
What we have at our data centre here is a 50-rack capacity data centre, which can, at least, take a space of seven banks to be collocated with just the cost of cooling of power and so on. We now discover that it was a brilliant idea because they are now buying into it. That was why we opened the data centre but the primary reason was because of the SME/ERP I have described. It is a state-of-the-art data centre because a lot of life-saving businesses are put in our hand. Today, we brought the businesses in here to see where we would be hosting their data from.
Most people have not seen the Google data centre, but they have g-mail account. How are you sure that one day, Google server would not just go down and then, what happens to all your e-mail? But we said people should come and see. That is why we opened the Tier-3 data centre. You may ask: ‘What makes it Tier-3?’ It is Tier-3 because it presents a global standard. For instance, it has two authentications for security; it has precision air conditioners and the data centre has power from two independent sources so that if something happens to one power source, the second takes over to prevent downtime.
As I speak to you, we have five generators that field two UPS that go into inverter and data centre. So, every rack has two power sources coming to it, which means that, if one power source fails, you can still be running on the other power source. Even if you still want to maintain one power source, you don’t have to take the system down. You can simply maintain with one power source while the system is still up and running. The whole idea is that it is designed for 99.99 per cent reliability, which means it never goes down.
More importantly, if you want to do something for your country or leave a legacy or footprint in the sand of time, that is where you get the most part of what you are doing, because you are not only making profit but also serving the people and that really fertilised the birth of our data centre project.
The backup for this data centre is in Ghana. This is necessary because if anything happens, we would scale over to Accra, Ghana, where we have our West Africa Data Centre.
Customers
As I said earlier, we have First Bank Mobile Money and MasterCard. We are our own customers too because we have a lot of things in our other data centre aside this. But our typical customers will be the banks that would want to collocate as a disaster recovery centre and companies such as Jumia, Konga and all those companies that want to do online business because they also need a data presence somewhere. Another place we are looking at is the Nigeria broadcasting sector. With broadcasting going digital now and all those pay-TVs springing up by the day, they also need where to keep their servers.
We also have interest from insurance, banks and technology companies. We are not marketing per se because the first rack is filled already. As I said, it’s 50-rack and once it’s taken, then it’s full and we have to build another one.
Extinction
The poor performance of earlier listed ICT companies is due to a lot of factors but you should know that the world is full of factors. There were factors yesterday, there are factors today and there will be factors tomorrow. The issue is that they are all back to the nominal value of 50 kobo. As I said before, it still boils down to your being happy in your state of comfort and not innovating.
These companies are basically one-legged companies. It is either they are hardware company or software company or they are technology company. But what we have at CWG Plc are hardware, software and communications. So we are able to mitigate risk. When the hardware is not doing well, we would shift. Let me give an example of Automated Teller Machine (ATM). What is important to the bank is the customers’ experience of the ATM. If the solution is being provided by two different persons, there may be problems. If somebody puts the ATM down and another person puts the inverter down, the link may be down and when the ATM is down, the company that provides the ATM and the second company that provides the inverters begin to point fingers as to who is responsible for the downtime. This may take time before service will be resuscitated. But because of the ubiquity of our company, we are able to put down the ATM, put down the inverter and battery, bring the link, providing a one-stop shop opportunity that prevents fraud.
One stop shop
That one-stop shop helped even when the banks were consolidated in 2005. People bought our Finnacle software, which processes about 65 per cent of all banking transactions. They could get their banking software from us, their hardware and the communication links. So, it was simple, we could do an implementation between six months or less. Their hitherto banking solution providers were doing 18 months or less, that is why every bank is now obtaining from us.
We also did something: we said we won’t be everything to everybody but we are going to focus on the sectors such as telecommunications, banking and finance as well as oil and gas. When telecoms was down, banking was there leveraging, and the oil and gas, and this is apart from the hardware area. We now said even though we don’t pray for it, look at what happened in Egypt, but if a company only had an office in Egypt, that means it could have shut down but if it had office in Tunisia, it could have been operating from Tunisia office. We decided not to limit ourselves to one geographical area and that was why we went to Ghana for West Africa, Uganda for East Africa and Cameroon for Central Africa.
Again then, we put all these risk management business strategies in place to give the shareholders comfort and the strategies also give our staff comfort. Our business is people-oriented and people know that CWG is good and they come to us to put stuff and we say ‘how do we mitigate the risk?’ We create an academy where we train 200 people every year. It is not as if it is a school where you have teachers but these are people that are doing the work. They do more of practical work after one or two months in class. Otherwise, we would have been grounded. If you have all the ideas and you don’t have trained people that will do it, then, it’s meaningless.
Number three is what I told you – innovation. We are from hardware business going into managed services and now going to cloud businesses and I talked about 17 companies. Even if you are making $10 per company and you have only 10 per cent of the 17 million companies, that is $17 million per month and multiply that by the year (12 months) and this is just your margin. You like to get the minimum $190 million; there is no company in the Nigeria IT market that is even doing $190 million as turnover, not to talk of gross margin. There is no way we are going to have the same pay. The format of the Stock Exchange depends on your solid financial performance and your perfection of the market and the stakeholders about your potential viability. If you hear this story, will you not buy the share?
That is why, when we went to the market and rang the closing bell, we traded only for 15 minutes. Before we rang the closing bell, in those 15 minutes, 100 million shares were sold and it has already touched the 5 per cent uplift thresholds. We started at N5.48k and it reached N5.95k. The next morning, it went to N6.00 and the interesting story is that we started with $16,000 and by 2009; anybody that bought in a $1,000 had made $5,000 million. A 5,000 times yield.
Some people bought our private placement shares in 2009 at N3.40k and the day of listing, the same share they bought at N3.40k was N5.48k. So, I feel that if we continue to do these things I am talking about, in the next five years, those that even bought at N5.48k would probably be looking at a minimum of times two. That is why we believe we are not going to go in that fashion of those ICT companies that have been listed before us and which are not performing well at the bourse.
Telecoms industry 2014 crystal ball
Government should get out of business. Government should be a regulator. I have said it in many fora including when the people I am talking about are sighted. If government has a company that is competing with private sector, it is an unfair advantage. If I want to do business, I go and borrow money from the bank at 21-23 per cent. How much do you think Galaxy Backbone loans money at? It is you and I’s money. I mean it is public fund from government. So, how can I compete with such company? When it wins a project, it says it has won a project; you didn’t win a project, it was given to you. If I was running Galaxy, I will win all projects of the governments. In a nutshell, government needs to get out of the business where private sector is running.
There are some places where private sectors are not operating. If you take, for instance, the Universal Service Provision Fund (USPF), it is because people don’t want to go to rural areas to set up communication companies and because they won’t get back their money. Government can do business in those rural areas that are not commercially viable for private sectors. Again, if private sector would have to go there, then, leave them to do it and you regulate it. Like broadcasting; when we were born, there were just two stations, maybe the NTA at national level and states’ NTA stations but today, there are Channels, Silverbird and a whole lot of others. Is the government still going to compete with them? I will say government should get out of the business and regulate by providing a common level-playing field so that businesses can strive.
Government should only do business in the situation or area that is not ripe for commercial viability. If it does that, you would see that everything would be going on fine. Come to think of this: Why is it that we don’t have a government portal where we can do business with government? I think government should put services onto the portal so that citizenry can secure their drivers’ licence, pay their taxes, their utility bills, secure passport online and also register their companies online instead of spending three nights in Abuja.
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ICT’s contribution to Nigeria’s GDP ’ll hit $50bn by 2019 – Okere, CWG boss |
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