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Slashing the costs of digital business in Kenya

InnoVent’s Head of Business (Africa), Michael Lamwe.
InnoVent’s Head of Business (Africa), Michael Lamwe.

As one of the fastest growing economies in sub-Saharan Africa, with a flourishing digital economy, Kenya has been dubbed the Silicon Savannah, a hub of financial, communication and ICT services with a US$1-billion tech ecosystem. This innovative environment is inspiring a proliferation of digital businesses, including hundreds of FinTech and Consumer Digital companies.

The country’s Information, Communications and Technology (ICT) sector has also experienced substantial growth. According to the Business Monitor International (BMI), Kenya’s Information Technology (IT) market was valued at US$635-million at the end of 2020, with computer hardware sales totalling US$360-million, while IT software sales were valued at US$174-million and the balance on other services.

Telecommunications and broadcast equipment also grew by 6% at the end of the year. The Government of Kenya (GOK) has invested heavily in the ICT sector and has recognised the sector as a key contributor to the country’s GDP.

Sectors such as finance, health, education, agriculture, and the Government are quickly embracing technology for dissemination of information, enhancement of service delivery and to reach their customers more effectively and efficiently.

To meet the critical ICT needs and the changing nature of work for the Kenyan workforce due to technological advancements, there is an opportunity for telecom operators, hardware, and software vendors to ensure that IT assets including end-user devices, software solutions, faster and more reliable internet connections, are available.

However, where IT is concerned and is key to growing a business, a lack of capital and the high cost of new equipment can be a barrier to innovation and expansion, says InnoVent’s Head of Business (Africa), Michael Lamwe.

“CIOs of leading organisations are now turning to leasing to cover the cost of IT equipment and take on predictable operational expenses rather than capital costs. A leased IT model puts the latest technology into the hands of digital ventures without the huge capital outlay required upfront, allowing them to focus on innovating and growing their businesses without having to worry about the high equipment costs.”

Lamwe says Kenya is the perfect market for a leased IT model: “Why would businesses still adhere to traditional methods of procuring IT when everything else is procured as a service today (consider Uber, Airbnb, Dropbox, and the like)? You can get pretty much anything as a service – and people understand the concept.

So why would businesses hold onto the ownership concept of IT when everything else is shifting to the as-a-service model? If cost or capital is a factor, businesses can move to a solution that supports productivity and frees up their capital.”

Businesses are now starting to see the merits of this. We’ve seen the concept of leasing grow rapidly in Kenya as businesses start to see the advantages of a technology leasing model. Says Lamwe: “Not only are businesses enjoying lower, predictable IT expenditure and the latest technology, they also get a range of services when they lease technology. When they lease, they get scheduled upgrades and advanced asset management services.

We know that after a certain number of years, equipment depreciates in value, so why would a business want to own a depreciating asset with little resale value? There’s also the matter of what to do with all that old technology when it’s no longer useful. When a business leases its IT, those hassles are taken away: there’s no need to store or dispose of obsolete technology.”

With InnoVent, an agnostic service provider, businesses needing to update their technology can select the supplier of their choice and spread the cost over three years. “With the petrol price and other costs going up, this helps alleviate pressure on the business by spreading out the cost of equipment,” Lamwe says.

In addition, and equally importantly, leasing IT supports the circular economy. “Instead of a buy-use-dispose cycle, organisations that lease technology from InnoVent support a circular model in which devices are refurbished and reused to significantly extend their lifespan. At the end of life, materials are reclaimed and devices are disposed of responsibly, making the entire ecosystem far more sustainable,” says Lamwe.

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