IT Sector in Kenya: IT Security Solutions, Hardware and Software by Dataguard and Isolutions

Interview with James Kinyua, CEO of Dataguard Distributors and Isolutions

How would you describe the IT sector in Kenya? We have seen amazing improvement in technology here and even some inventions that are surprising the whole world.

The IT sector in Kenya has seen a bit of growth. It’s very dynamic. We have many people coming who have a lot of ideas on how they will be able to develop home-grown solutions. From that specific perspective the biggest issue is that we may not have enough financial capacity for people at that level to be able to grow their solutions to an international level. Mobile money for instance was a good tool to grow to something that is somewhat on a global level based on the financial mass support of that company. But we have many other entrepreneurs around who do not have that capacity. They do not have the managerial expertise and the financial resources or the exposure. I would say that the market itself in terms of consumers is a very discerning market. You have the head of IT, the CIAOs or a consumer at home who knows specifically what they are looking for in an IT product. This means that the quality of service is expected to be very high. When people get into the market they have certain expectations. There are expectations in terms of the product and of the level of service. I would say that our consumer market on an enterprise level in the home section has a very high level of expectation. The challenge for business is to offer services at that level. We have a fairly dynamic market in that regard. We do have a lot of imports coming in from India, China, UK and the USA as manufacturing hubs and then distributors like us have the responsibility of getting the products into markets in Kenya and the region. There are also many distributors in South Africa but most of the technology here is home-grown technology and then a lot from China and India and now from the more traditional markets in the UK and USA. You won’t really see serious solutions coming from Uganda or Tanzania coming into Kenya. We haven’t seen much of that as yet.

Can you describe to us the differences in the two companies that you manage? What are they about? What do you bring to the market?

Being a small company allows us to be very hands on. If a client has a problem, there isn’t a delay in getting help. They don’t have to wait for someone to phone a supervisor or contact a manager, etc. It means decision making happens quickly and it also means that turnaround time for providing solutions is quick. We are very close to our clients.

I will start with the formation. The oldest company, Isolutions was started in 2004. In the beginning the chief focus was ICT security. Initially we started by actually distributing some of the products because the structure of the market in 2005-2006 did not go to the level where you could create a structure of channels with distributors and resellers. Over time that has evolved to the level where we are able to remove some of the products we were distributing and put them into a different company called Dataguard. That gave us an opportunity to create a new market that we didn’t have before. We were able to go to Uganda. We were able to go to Tanzania. We could go to Rwanda and Malawi because now in those countries we were able to create partners who would act for us. We would give them discounted goods, credit and market support. We have done this for a function tomorrow in Uganda. A launch of one of the products that we distribute over there. By separating the company and having one that is distribution focused, it has allowed us to create a fleet of foot soldiers in different countries and that in turn has enabled us to extend our reach. Isolutions has continued with an integration of enterprise products. So if it is a bank that has a co-banking system or it’s a manufacturing company that has an EIP, all of those have critical data that is sensitive such as financials and human resource information and it needs to be protected. We will go in and provide solutions that will assure that the data is protected from leaking to the public. We will keep it secure from tampering from internal members of staff who may want to steal it. We make sure it is available as and when it’s needed. For enterprising institutions we are basically helping them to get the best out of IT by instilling the confidence in them that the data is safe, confidential and available when needed. You will find that many institutions, banking, telecommunications and even the government can all say; we don’t need a branch there. We can appoint somebody to act on our behalf. That will require that the bank has some visibility in their interest there or a security awareness of that person that they enable as an agent. You will find the same happening in government where they can now say; you don’t have to come to us to renew your driver’s licence. You can do it online or you can apply for your passport online. These extension of services on the internet in itself present security challenges for many institutions and we are there to provide solutions for security and to ensure that there is confidence in those platforms. We find a lot of growth in Kenya. We have done a lot with IT in financial and banking institutions and we find a lot of growth in the region as well. The only thing that I would say could limit the market is the capacity to spend for many institutions, especially the government. Many governments in the region are highly donor funded so because of those structures and issues and also being affected by eternal forces like foreign exchange rates, you will find spending limited in some countries like Nigeria or Malawi or somewhere like Burundi where Forex becomes a problem and you cannot get paid in US dollars. Those are some of the issues that limit some countries spending. Other than that, we have seen very good growth at the rate of approximately 50% year to year. Isolutions has had a fairly similar level of growth. We are gearing up for something bigger. We would like to see if we are able to double the company’s position in terms of profitability and revenue. That will depend on the level of penetration we will be able to achieve in the region. Another thing that is interesting for us and especially for Isolutions from an integration perspective is that one of our partners; a company from the USA called Fastpoint, has picked us as a platinum partner in the sub-Saharan region. There is only one other company in South Africa and it opens up a lot of opportunities for us, not just in Kenya and the region but in places like West Africa. By being a platinum partner, you must be able to understand requirements in terms of security, provide solutions and integrate the required technologies to insure that clients get a return on their investment. These are some of the things that give us the confidence that we will achieve our objectives.

How do you handle the competition? What is your strategy at the moment? Do you try to do the same as your competitors or do you go your own way?

We always have to be aware of our competitors but we have tried to differentiate ourselves. With our distribution company, Dataguard, we are able to bring very innovative solutions into the market. We work through reseller companies and we work through entrepreneurs. When we work with them they have to see the benefit of working with us. They have to realise that they can make money with the products we are supplying them. Once they are able to appreciate that you can make them rich, they will be more than happy to support you.

How do you show that they will be making money by spending money on your security?

As a distributor, they will buy goods in bulk from one of our channels and we back split and we will give to resellers and our partners in the region. We will credit this individual for these products. You start to make a lot of money once you start to sell to this pool of clients in your market. If it is a security solution driven towards government, we show them how big the market is and how much better the margins are. Many companies that we work with are looking for that person who will be able to understand their biggest concern. Their biggest concern is to be able to make money as an entrepreneur. If I present the opportunity to them to make more money they are more than happy to work with us. Another area where we differentiate is the quality of service and turnaround time. If you need something from us, you can to be assured that it will be in the shortest time possible. More than that, there is an advisory component. We are not just pushing an item to you. We are going to work with you. We want to understand what you are looking for. Once we understand that, we are better placed to give you the correct solution. We take time to understand your issues. Another company may not be able to create the type of trust that we can in our customers. They know that if they work with us they will not have problems because they are working with a partner who takes the time to understand them and so they are in a better position to make the right decision as a distributor.

So what matters is customer service, being close to your customers, spending time with them, training and the quality of people that you employ.

Part of our DNA is to ensure that the customer comes first. You cannot say you are offering a solution if you don’t try to understand the customer. We work with our customers. We understand their budget issues. We know what timeline they are working on. We ensure that they are able to link up their objectives together with what they need to achieve through technology. Of course the culture of the company staff also appreciates that they need to take someone through that process. Not just senior management but also other members of staff know that we cannot just go out and fail to advise our customers. Whether it’s a job happening in Uganda, Ethiopia, Tanzania or here in Kenya, we try to ensure that the quality of the service remains the same.

How easy is it to approach large multinational companies that are coming to Kenya or the region and to be their partner? Are they open to that or do they come to Kenya with service providers from their own country?

In the beginning, we found that companies did come with their own solution providers that they had worked with in their native countries, but over time they have realised that there is a lack of quality in terms of service because the Kenyan market is unique. We have seen this in many companies that have come over here with a lot of external thinking and they have not been able to make it in this market. The capability to provide Kenyan solutions to Kenyan situations such as internet connections, power issues and even the way that employees relate to IT is unique. So unless you employ a local company that is able to have that frame of mind you will always find that the service level you seek as a company cannot be met. It also happens to local companies that grow big and then decide they want to outsource their requirements to a multinational because they have the capacity and the history of delivering services. Then you see them cancelling those contracts in 3 or 4 years because they couldn’t achieve the level of service needed. Being a small company allows us to be very hands on. If a client has a problem, there isn’t a delay in getting help. They don’t have to wait for someone to phone a supervisor or contact a manager, etc. It means decision making happens quickly and it also means that turnaround time for providing solutions is quick. We are very close to our clients.

How open are you to having a strategy partner in the company or partners for expansion abroad? How open are you to external investors?

From the beginning we have grown organically, ploughing back our retained earnings and using the same tools to grow into new markets, product lines and new ways of doing things. You do get to a point where your own resources and your own capabilities in terms of management capacity can only take you so far. We have had those situations and we have had opportunities in West Africa and our region where we can see that it may be time to start considering having the right partners to ensure we can take advantage of new opportunities. It could be the right time for a partner that will allow us to reach out to the West African market and the South African market. To be honest we have been discussing this over the last year or so. We are trying to evaluate what partner we would want and what we are looking for from them. Our position is that we don’t have a lot of time to spend on that. We don’t want to spend 5 years making that decision. We are trying to fast track it in terms of the criteria of the partner we need to look for. The people we represent also want a quick turnaround. They want to see growth. They want to see orders coming from South Africa or West Africa.

Could they be someone who just buys shares in the company? Or do you want someone that can expand your company into another company?

At the moment, we have a few joint venture agreements with companies in the region. We structure our joint venture agreements in such a way that we are able to leverage on the local contacts and relationships that the partner has. A lot of business in Africa is about whom you know and who knows you. Looking to the future, we are looking for an equity partner that is able to put in some capital and managerial experience as well as bringing in networks in terms of manufacturers and more. We will definitely continue with our joint ventures because even with an equity partner we are still going into some unique markets where language might be an issue especially if you are dealing with government. They want to work with people that they know. They want to work with people that understand the local political issues and landscape. For us, joint ventures will continue to play a key role of our African growth.

How far into the company will you allow an equity partner? How much of the company will you give to them?

It’s a bit early to mention that but as I said, we are working to define our criteria in regards to new partners. We are deciding what we want. Our 3 to 5 year plan is to ensure that we have a very solid footprint for both companies in Africa. We understand that we need to have investors or partners coming in to be able to open offices in other countries or to enable us to create a market for us in some of those countries. We also recognise that as we push for this growth, the need to attract the right talent and the right workforce will weigh heavily on us. That will mean that we will continue working with joint ventures and the local partners that we do have. Though I cannot give an exact figure now, we anticipate that in about 6 months we will complete our research and analysis of what we need in a partner.

Where do you want to see your company in 5 years? What do you want to have achieved?

Growth in terms of good returns to shareholders. Good returns to the employees in terms that they feel part of the growth. One of the things that we must have on-board by that time is a strong brand. Whether you are here in Kenya or Nigeria, when you find the brand name you must find the same level of service and the same culture. If you have an issue in Nigeria with your branch in Cameroon, you must know that it will be serviced as well even if we don’t have a physical office there. We try to prioritise issues such as returns to shareholders and returns to employees as well as returns to customers in our quality of service and value for money.