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Interview with Microsoft South Africa MD Mteto Nyati

By , Editor, ITWeb Africa
08 Aug 2013

Interview with Microsoft South Africa MD Mteto Nyati

Global technology giant Microsoft has been busy in Africa this year.

Early in 2013 the firm unveiled its 4Afrika initiative, which looks to boost the role that technology plays in spurring on the continent’s economy.

The 4Afrika initiative, of course, also included the launch of low-cost Windows Phone 8 powered Huawei smartphones in Africa, and even television white spaces broadband projects in places such as Limpopo, a province situated in northern South Africa.

Furthermore, the company has launched the first Microsoft Technology Centre for Africa in Johannesburg this year.

So, ITWeb Africa editor Gareth van Zyl has sat down with Microsoft South Africa managing director (MD) Mteto Nyati to discuss more about the initiatives the company has undertaken this year.

GARETH VAN ZYL: Microsoft has launched a technology centre for in Johannesburg, South Africa. This is the first centre of its kind in Africa, is that right?

MTETO NYATI: That is correct, yes. It’s the first centre that we have of its kind in Africa. And where we have put these kind of centres in the world, it has helped a lot the local economies. Because the purpose of the Microsoft Technology Centre is really to try to create an environment from which our customers or our partners can go and, you know, think about the problems that they are facing ... and ask themselves how they can work and leverage the infrastructure that is there to come up with solutions that address those problems. So, basically what you’re finding is that the time to solution is shrunk by having a centre like this, because you create a platform for people to come and see. And it’s typically a cross-functional group from that customer looking to the problem, and designing the solution to that problem, (to) testing that solution, and when they get out, let’s say after two or three days of spending their time here, they come out with a working solution, with a solution that has been tested and...people can just go and deploy it. So it is something that is just such a valuable thing. So, we are excited.

What we think is going to happen is that sub-saharan Africa: we are able to serve it well from here.

GARETH VAN ZYL: What was Microsoft’s rationale behind opening this first centre for Africa in Johannesburg, because there’s other markets such as Kenya and Nigeria that are becoming burgeoning technology nodes? Why South Africa?

MTETO NYATI: If you look at it, we need to be looking at some of these things in a sober way. And if you look at it at a practical level what is happening: South Africa is being seen and is being used by many multinationals as a hub for them to move into the rest of the continent, largely because of the well-established infrastructure. So, even in this case, when you look at where South Africa is technologically, look at what our customers are experiencing and the challenges they are experiencing versus the same customers of other parts of Africa, you’ll find that we are very much ahead. Our problems are much more complex here in South Africa compared to the much more basic things that are happening elsewhere. If you look at the types of investment that is being made by our customers, you’ll find that at certain levels some of the countries in Africa are at a basic level. By that, what do I mean: it may mean implementing things like you know email, communication and collaboration, whereas the customers here in South Africa, they’ve long implemented those technologies, they are are looking at things like big data, so there is that element. You’ll find that the usage of this facility -- given the fact that it is something that is leading edge -- it will be used even more by customers here than elsewhere.

GARETH VAN ZYL: Microsoft has also been quite busy in South Africa with white spaces broadband technology in places such as Limpopo, where you can sell uncapped broadband packages for R20-R50 per month. Could we see more of those types of white spaces projects behind rolled in South Africa by Microsoft?

MTETO NYATI: Right now we are working on a pilot together with the department of technology, Council for Scientific and Industrial Research (CSIR), Multisource, doing this pilot in Limpopo. We chose Limpopo because of its rural setting. We have chosen it and we are going to be proving that we can deliver high speed broadband at very, very affordable rates -- between R20 and R50 a month. However, at the end of this thing, we are not in the network business as Microsoft: we are in a completely different business. So, we will be handing this thing over to a network provider or somebody like a network carrier, who will have the muscle and the financial strength to roll it out, you know, throughout South Africa. Very, very important: the minister said once we have proven this thing, we need to roll it out as quickly as possible. Because there is a direct correlation between the penetration of broadband and GDP growth and even the challenges that we are facing in our country. The sooner we enjoy the benefits of enabling small businesses, the better.

GARETH VAN ZYL: What is the scale of this project then: can this affordable broadband be rolled out across South Africa?

MTETO NYATI: Sometimes we kind of get caught up in this affordable thing. For example, the pricing is going to be tiered, you know. So, it’s not like everybody is going to be paying R20. People who are unemployed, rural communities, schools, and those are the people who are going to be paying the lowest. But companies that are sitting in those areas who could afford to pay higher rates...they will be paying the normal going rate. For example, in Limpopo, you have agriculture, farms there that are willing to pay the normal price but they do just not have the connectivity. They will be paying the normal price. But there clinics, schools...they will be paying the lowest rate.

GARETH VAN ZYL: So, what the business model be to sustain something like this?

MTETO NYATI: Our base stations are completely different by a factor of even up to 20. So, they are cheap, they are solar powered base stations, so the investment that you put upfront, it’s much lower. So, from a return on investment (point of view) it doesn’t take much for you to recoup that investment.

The other side is, as you are generating power through solar, for these base stations, what we have seen elsewhere is that we are generating more than what is required to power the base station. So, you can even sell the electricity to the local communities, so you use that also again to subsidise.

I don’t know if we’re going to do that necessarily here in South Africa: we will see.

GARETH VAN ZYL: And looking at Microsoft’s Windows 8 operating system: it was launched last year. But the global PC market is depressed and the takeup of Windows 8 has been less than expected, according to the likes of research firms such as Gartner. Is Africa then potentially a growth area for Windows 8?

MTETO NYATI: Let’s just look at South Africa and globally what is happening. I would say there are two areas where our company is competing: there is traditional business, which is the on-premise business, and then there is the cloud business.

And in the traditional business where a client will go and buy some of the equipment, then they implement servers within their own data centre: that is the business that for Microsoft is growing quite fast.

It is growing fast largely because of our value-proposition. If you look at the virtualisation space, looking at the server space, looking at systems management -- all of those areas -- we bring a lot of value because we are affordable. At the same time, the quality of our tools and our systems is more or less the same as that of our competitors, so we’re seeing a significant shift, we are taking a significant market share from our competitors, as clients are moving onto our platform and standardising on our platform. That is the big trend that is happening right now: it’s happening across industries. For example, if you look at virtualisation. In South Africa now we are ahead of VMWare...but who created that space? That space was created by VMWare. So, only a few years ago, we were sitting at about 10% market share, now we’re currently sitting at about 48% market share in South Africa. And it’s growing quite fast.

Why is it happening. Because our value proposition is that we are saying we are in a volume game… .What we are saying is that we want to price for affordability, whilst not compromising the price, so that is who we are.

And as such at times like these, when the economy is really going in a wrong direction, companies, financial directors, CFOs and CEOs are asking themselves the question: why should we be paying ten times for something that is doing the same that is being offered by someone else.

So, we are growing significant share across the board. So, if you look at South Africa, we are number one database in SA, ahead of Oracle. You’ll be surprised: both in terms of the number of units sold and the value of those units sold - in the dollar amount and the number of units. Same thing: we are catching up with VMWare.

Number of server units are declining globally, but the Windows server is increasing because people are moving away from UNIX servers coming to the affordable Intel/Microsoft/Windows server.

We in Microsoft South Africa: we were number two in the world in terms of market share growth. The number two country within Microsoft in terms of how much share we’ve taken away from competitors. So, this is something that is happening that many people are not aware of.

Then you look now into the other two spaces where we say as Microsoft, our future is not in the traditional space where we’re gaining share. Our future where we see ourselves is a cloud services and devices company. In the past, when you used to talk about devices, we only limited it to PCs, right. But when we’re saying devices now, we’re including things like tablets, smartphones. In this new world, in this space we are excited to be getting there. We did not have a product in the past to compete in that space -- we did not have anything. So, Apple created this space ..and Android came in, but as Microsoft, we did not. That’s when as a company to make a decision that we have to come up with Windows 8: our way of getting into this new world of touch first. So, that is the design point of Windows 8.

We moved quicker than our OEMs because we are creating an operating system, not just for ourselves but for all of our hardware providers - Lenovo, HP, Samsung, Asus. We moved this way but our partners took a bit slower for them to come out with projects that leverage this new operating system. If you look in South Africa, six months ago if you go to Incredible Connection, you will not even find a touch device there linked to Windows 8.

As much as they were designing these new products, they were also committing volume on the old products. So, that change has been a slow change which has impacted all of us: them and us in terms of the unit volumes sold.

Now, almost 50% of the devices that they are selling in retail is touch-first device and that is very important for us, because that is an important value proposition, which other competitor has that -- none.

When you look in the last quarter being Q1, when you look at the tablets being sold, we were sitting at about 7.5% of the tablets sold globally being Windows 8 based tablets. Think about it, we are talking about a product that is less than six months, sitting at 7.5%. For me that is not something that should be discounted.

Then we look at the cloud services space...it’s one of the great success stories...almost all of our products that are coming out, they are cloud-first products.

Within one year, we’ve managed to get $1.35 billion (revenue) for Office 365. The fastest business to get to $1billion.

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