Last year in February, Hitachi Data Systems (HDS) Corporation -- a wholly owned subsidiary of New York Stock Exchange (NYSE) listed firm Hitachi -- acquired South Africa’s Shoden Data Systems, a provider of data centre technology solutions in South Africa and across sub-Saharan Africa.

At the time, the acquisition followed on from an 11-year partnership between the two companies.

And now, Hitachi Data Systems plans to drive a stronger African expansion via its South Africa acquisition.

Editor of ITWeb Africa, Gareth van Zyl, has sat down with Shaun Barendsen, the country manager for HDS South Africa, to chat about current and future business prospects on the continent.

GARETH VAN ZYL: Can you give me overview of your African operations?

SHAUN BARENDSEN: Basically Shoden was born in July 2000 and really it came out of the people that were representing Hitachi in the country decided to go for an alternative product. So, there were a bunch of effectively engineers sitting in the organisation who thought this brand is too strong in the country and there’s really great market opportunity. And they decided they’re going to start up their own company and drive this brand into South Africa. And so basically, it started from zero and grew it into a multi-hundred million rand business over 10 years, focusing predominantly on the storage side, later moved into the backup environment and later into the server side as well. So, a hugely successful company: grew from zero. Basically 12 people starting an organisation. And grew it up to around 180 people now.

GARETH VAN ZYL: Is that the size of your staff in South Africa only?

SHAUN BARENDSEN: No, that’s across the continent.

(BARENDSEN continues) So, about a year ago HDS acquired us, February last year. And I think the main reasons for that was, you know the relationships we’ve got with the company, with our customers, with the market share that we had with the organisation and of course us being the only people that represented Hitachi Data Systems in the country. Obviously there was a bit of a risk factor in that as well. But it really was about the market share and they wanted to now expand that market share, grow the market share into larger parts of Africa... .As with all mergers and acquisitions I’m yet to hear of one that’s gone completely smoothly. But I think we’ve done pretty well you know: we’ve come through the integration process. We were pretty much aligned … more than 75% of our business was HDS business anyway. We were so close with them anyway; we had a 12 year relationship with them.

So, the integration was probably less painful than most acquisitions would be. So, that went really well.

Obviously being bought by HDS we were 170/180 people now becoming part of a really large corporate of 5900 employees, which is part of a larger organisation, Hitachi Limited, which is 180,000 people.

Hitachi Limited, I’m sure as you know, produces all sorts of things such as bullet trains, electronics, construction, machinery.

GARETH VAN ZYL: Yeah, it’s pretty much across the board isn’t it.

SHAUN BARENDSEN: And that’s a big benefit for us as HDS is that there’s all these research and development (R&D) areas that we can leverage off each other. So, as an example, in the ICT area, some of the advanced networking development that’s happened has actually been brought into the storage environment. So, high performance switching in the storage infrastructure: it’s something that’s come out of the network R&D. So, they’ve got the ability at the top level to leverage off the different R&D centres across the organisation.

GARETH VAN ZYL: Have you got R&D efforts in Africa, especially as the continent presents its own challenges?

SHAUN BARENDSEN: Look, I think the challenges in Africa are not that dissimilar to the other areas... Of course, reliability , scalability, low power usage, green environment: all of those things, which are built into the technology are very pertinent to the African market. So, whether there’s R&D specific for the African market, I would say no. But the R&D that’s being put into the environment or into our offerings is kind of universal across the world.

GARETH VAN ZYL: Where do you guys have an office presence in Africa?

SHAUN BARENDSEN: So, we effectively have three sales regions. The first being our north region, which is really Gauteng and it includes Durban. Really, this our head office operation here in Bryanston (Johannesburg), where the majority of our people are. We also service the Durban area out of this office, but we do have people located in Durban as well. And then our southern region which is Cape Town, so, really Cape Town and the Eastern Cape. The Eastern Cape is new for us, but the Cape Town region has been going for quite a while. Of course, most of the GDP (gross domestic profit) generation resides in Johannesburg, in South Africa. So, the focus is obviously here. Our target market in South Africa has always been the top organisations: the big banks, the large retailers, the telcos. That’s really been the focus area. We’ve really focused on providing top-class enterprise solutions and unique solutions into data centres and backing it up with really good service and support. That’s really been the big part of our differentiation in the market is our services that we deliver to the large enterprises. So that kind of makes up the South African market with those two sales regions. And then we’ve got a ROSA region, which is ‘Rest of sub-Saharan Africa’. And that’s made of another three regions being West Africa. So, we’ve got offices in Nigeria, Lagos and that basically covers West Africa but the focus being in Nigeria at the moment. And then we have our East African hub, which is based in Nairobi, we’ve got offices in Nairobi and then looking after the East African countries. And then SADC (Southern African Development Community), so, not strictly the SADC countries but Malawi downwards -- Mozambique, Mauritius, Angola, Lesotho, Zambia etc -- that kind of southern region, which we operate from here. We actually service it from here.

In terms of the model, in terms of the South African model, we did represent HDS in South Africa as a reseller, as an authorised service provider, so we did everything direct in the market. So, in South Africa, for our large clients, our reputation of superior services, support of delivering really quality solutions, we need to protect that as best we possibly can. So, we’re going to maintain that direct relationship with our larger customers. And that’s been our niche and our focus area: it’s been where we really have been succesful. But having said that we do realise that there is a huge market opportunity out there for us kind of at the next tier of organisation. And we really want to develop that.

GARETH VAN ZYL: So, are you talking about the likes of SMEs or more mid-market players?

SHAUN BARENDSEN: Slightly larger than SMEs. So, just below, I don’t want to categorise in terms of top 40, but just below that segment. And there we don’t have the breadth of support we need or resources to go and support that. So, we absolutely understand we need to drive that through the channel. So, we’ve been quite selective about who we’ve been partnering with in the South African market. What we certainly don’t want to do is create an immense amount of channel conflict out there. We want to make sure that the partners we are selecting can provide the same value add and value proposition that our technology brings: they’ve got to be able to provide that to the client base. If they’re not adding the value for the client, what we’re going to get is price wars. And we’re not about that. We’re about trying to find ways to give our clients competitive advantage in their respective areas.

GARETH VAN ZYL: How do you then approach that, because that’s quite a tricky thing to do? Do you just work with a handful of partners then?

SHAUN BARENDSEN: Exactly that. We’ve got a handful of very select partners. And you know, what we have looked for is niche partners. So, we have looked at appointing partners that specialise in broadcasting as an example. We’ve looked at partners that specialise in healthcare. So, we’re really looking for those niche partners. There will be some general re-sellers. But where we looking for partners is where they’re focusing on specific solutions out there. So, for example, one of our partners is very strong in the call centre business, but they do provide general infrastructure solutions elsewhere. So, obviously through the whole partner registration process, there’s another level of protection against channel conflict in there as well.

Another one is that we’ve appointed a partner in the Eastern Cape, where historically, we’ve never played before. So, that’s a whole brand new area for us. So, we’re really looking for that incremental business and to really protect against direct-indirect conflict, as well as indirect-direct conflict.

GARETH VAN ZYL: One doesn’t normally think of the Eastern Cape as a potential spot for your kind of business. What’s the prospects like in that market?

SHAUN BARENDSEN: Well there certainly are a number of data centres there, but absolutely not to the scale of the kind of data centres that we’ve been focusing on here (Gauteng). So, what we do expect is more of our file and content solutions getting put in there, our next layer down in storage. A lot of these data centres, although not the biggest datacentres, they still require the highest levels of reliability, availability, scalability and performance in their environments. And our mid-range storage really has those qualities. I mean you’ll see some benchmarks coming out on our mid-range stuff that just blows away the rest of the market. We really are ahead of the curve. So, we do expect a big takeup of the midrange storage in those kinds of markets.

So, that’s pretty much the channel approach in South Africa. In the rest of sub-Saharan Africa, that is a completely indirect model. And we have looked at different models of going into that market and there’s no doubt that what we need to do is drive the business through partners in the rest of sub-Saharan Africa: the local presence. We of course will be putting guys up there with loads of experience, there’s a big training process that we’re going through in terms of skilling up the partners that we’ve selected. But all that business, the intention is for that all to be indirect.

GARETH VAN ZYL: It seems the indirect model is a popular one for firms looking to expand in Africa?

SHAUN BARENDSEN: Yes, what we did look at doing is creating our own service organisations up there. And we certainly do back them. But I think it is important to grow the skill base in our partners. They do understand the market well. And really if we can help them to make the difference in our clients, that’s really going to help them. It’s really about growing those busineses as well. It’s not just about growing our business.

GARETH VAN ZYL: In terms of the split in your revenues: I’m presuming that the rest of Africa would still be quite small for you guys compared to SA?

SHAUN BARENDSEN: Yes...we’ve been engaging in the ROSA market for about 4 years. Yes and it has; it’s really been a small portion of our revenue. We’ve just started to see some nice momentum gathering there now. We see some nice pipeline opportunity, and we saw reasonable growth out of there in the last quarter, which is really really encouraging for us. We really do expect our revenue growth to come out of ROSA, to come out of Rest of SSA. We know what the situation with the economy is here, and it’s not growing as fast. It’s a pretty saturated market in terms of that, but of course there’s huge opportunity in SSA, and we want to capitalise on that for obvious reasons. The opportunity is there. But having said that it’s not the easiest place to do work in. We had our regional vice president in Nairobi last week and that’s when the airport burnt down...

But having said that business in Africa, in ROSA, is not the easiest thing. And we’ve got to be very careful in terms of how we do that. So, in terms of our partners, we’re very clear that we do compliance training with our partners to make sure that we do business the right way: that’s absolutely imperative. We have to make sure that we are doing business the right way and that our partners are educated about how we approach business. So, it’s not just about the compliance training; it’s also about the operational side of the partner programme as well as the solution training. Those are three aspects that are really really important to grow the partner bases.

GARETH VAN ZYL: What are some key challenges you face in Africa?

SHAUN BARENDSEN: Always skills and resources is an issue. We’re on quite a strong recruitment drive to bolster our numbers up in Africa. But what we’re finding is that we do need to spend quite a bit of time on training and giving support. What we found is often the approach is about how many terabytes do you need or how many servers do you need, and what we don’t find is the solution selling in terms of understanding what are clients operations and business requirements. What are the challenges that the customers are actually facing so that we design solutions that give them the benefits that they’re looking for and give them the competitive advantage. So, what we’re finding is that we have to invest a lot of solution consultant services up into ROSA. And with that the benefit is that having guys from here go up there and do that solutions selling, we’re actually upskilling the local guys that we’re employing up there as well. So, there’s an added benefit to that but it is a big investment.

We kind of find that there’s need for these kind of skills as the guys go up there. We find that we send our top guys up there and they get pulled in all directions because guys up there are just crying out for the constant help. And you can only do so much from a remote location. You actually have to have the guys in there to have those conversations face to face with the clients.

GARETH VAN ZYL: And what about bandwidth. That would be one issue you surely face in your line of business?

SHAUN BARENDSEN: Yes, but you know, what we’re finding in Africa is there’s been a huge investment in network bandwidth with the Seacom cable. I think Kenya is an example. I think it’s got better bandwidth than we have back here, you know access to bandwidth. So, that for us is less of an issue. Good bandwidth infrastructure in place. Data centres are less quality up there, in the majority of clients we’re talking to. Having said that, we have seen data centres which are in containers...which are effective but probably not the best for equipment... so we’ve seen those kind of infrastructure challenges. But overall I mean the amount of FDI (foreign direct investment) going into African countries, a lot of that is being poured into infrastructure and I think it is improving all the time.

GARETH VAN ZYL: Even the terrestrial lines or the last mile?

SHAUN BARENDSEN: In the large cities where is predominantly where we will be servicing people, that’s kind of OK. Once you start getting out to remote locations: of course (it’s different).

We’re pretty much data centre focused.

GARETH VAN ZYL: What are your most popular offerings in SA and Africa?

SHAUN BARENDSEN: Historically, we’ve grown up providing really strong top-end storage solutions...so that is a large part of our business. But what we’re finding in terms of trends and what we’re seeing more and more. Everybody seems to have the same problems. We spend quite a lot of time spending, even at HDS global level, what are the challenges that customers are really facing. It boils down to three things: it’s this amount of data growth that is happening in the respective environments, and it’s not so much the data growth that’s the problem, it’s how do we derive value out of that data. How do we turn that data that we’re storing into competitive advantage, so that’s the big question...so, we’ve got a number of ways that we’re starting to address that area. The second big thing is around cost. I’m still looking for that customer who has an unlimited budget and cost is not an issue. Everybody is turnIng that penny over and making sure that they get the best value for their money. So, controlling cost is a big thing. So, being able to provide flexible financial solutions is as important as providing flexible technology solutions. Then of course, the last one, which is becoming more prevalent is complexity. There’s all these applications out there, especially among our larger customers, and in some ways they all link to each other and we don’t quite know what’s connected to what. There’s this huge amount of complexity in the environment, and we’ve got to constantly look for ways to reduce that complexity, so, one of the ways that we’re seeing is converge platforms and converged stacks. Our unified platform is really the servers and the storage and the networking all in one stack with orchestration across there. So, we’ve got specific solutions, in the VMWare space, in the Microsoft space, in the Oracle space, where we can go and provide complete solutions which allows the adminstrators to focus at a higher level, to focus on this as an environment and not the servers that need to fail over and this storage environment, it’s really a converged platform.

Another interesting solution that we’ve come up with is a file sync and share option, so a really good collaboration tool. What we found is that a lot of corporates: a lot of their data is being store in a consumer type cloud, which comes with a number of issues: security, ownership of the data, where is it residing, how is it being protected, all of those things. So,we’ve come up with a really nice solution called HDS Anywhere that provides all the enterprise level type security on that, all the access requirements...So, now you’ve got control over the whole environment. In addition you’ve got the ability to search that corporate information which has really created a lot of interest among our clients.