 | Issue: | Africa and the Middle East I 2003 |
| Article no.: | 7 | |
| Topic: | GSM as The Catalyst for Broadband Access – a New Initiative for Small and Medium Businesses (SMEs) in the Developing World | |
| Author: | Niezaam Davids and Maruis Conradie | |
| Title: | Executive Head, Mergers & Acquisitions and Executive Head, Strategy & Scenario Planning | |
| Organisation: | Vodacom Corporate Strategy, Vodacom Group Pty (Ltd), RSA | |
| PDF size: | 72KB |
About author
Niezaam Davids is the Executive Head of Mergers & Acquisitions in the Vodacom Corporate Strategy sector of the Vodacom Group Pty (Ltd), RSA. He is a qualified Chartered Accountant and holds a Bachelor of Commerce degree and an Honours degree in Accounting Science from the University of Cape Town and University of South Africa respectively. He has over five years corporate finance experience and provides strategic merger and acquisition advisory services to the Vodacom Group. Maruis Conradie is the Executive Head of Strategy & Scenario Planning in the Vodacom Corporate Strategy sector of the Vodacom Group Pty (Ltd), RSA. Mr. Conradie holds a Bachelors and Masters degree in Electronic Engineering from the University of Stellenbosch, as well as a Masters in Business Administration (cum laude) from the University of Cape Town, where he has specialised in Strategy, Scenario Planning and e-Commerce. He has more than 12 years telecommunications experience, especially in the research, design, development and evaluation of antennas, RF propagation, GSM and communication systems.
Article abstract
The ICT needs of SMEs in developed and developing nations are quite different. In developing nations, basic ICT services are often not available. An application service provider hub-model that combines basic GSM and broadband access to software and services can support multiple SMEs. This approach removes many of the barriers to effectively supporting SMEs with ICTs. By using a building block approach, the hubs can introduce SMEs to complete ICT solutions, building productivity and their contribution to the economy.
Full Article
The SME sector has often been cited as the engine of economic growth both within the developed as well as the developing nations of the world. The importance of the sector in this context, has forced governments to work towards creating ‘an enabling environment’ to foster greater economic growth within the sector and for it to play a greater role in the overall economy. Attempts to create such an enabling environment have often been fraught with difficulties none of which has been more challenging than creating the necessary ICT (Information and Communication Technology) support structures. In many developing countries the ICT support service needs of SMEs are thwarted by the general lack of basic ICT services. The need for ICT services to enhance the productivity of the SME sector in developing countries is part of the broader need to bridge the digital divide within these countries. The innovative use of all available technologies, applied appropriately with the adequate education and support, allows developing nations to leapfrog certain technological eras thereby contributing significantly to crossing the digital divide. This is particularly relevant in the Sub-Saharan African Continent. Defining the SME Sector SMEs are described as such not only because of their sise, measured by annual turnover or number of employees, but also because of their degree of formalisation. The SME sector tends to be formalised in developed nations whilst in developing countries they are often informal, often to the extent that they do not have fixed premises. “Whereas broadband access for a banker in Bond Street, London, may need Internet speeds high enough to move around large amounts of information within seconds to a street vendor on the corner of the street in an African township, it may simply mean having access to his banking statement and being able to facilitate payment to his suppliers.” The key challenge for many governments in developing countries is the formalisation and regulation of the SME sector. This is important to determine the infrastructure requirements of the sector and to measure its contribution to overall economic growth. Defining Broadband Access The definition of Broadband access could be extended beyond the traditional technical definition of throughput rate of data in kBits/s to include any ‘Non-voice’ access to the required data, delivered with whatever technology. For example, access to multimedia is generally thought of as broadband access with 1000 kBit/s transfer rates. However, in order to display a multimedia image on a small screen handheld device using compression techniques, the required throughput is only in the vicinity of 40 – 60 kBits/s. Whereas broadband access for a banker in Bond Street, London, may need Internet speeds high enough to move around large amounts of information within seconds to a street vendor on the corner of the street in an African township, it may simply mean having access to his banking statement and being able to facilitate payment to his suppliers. For the purpose of enabling SMEs in developing countries, we would therefore steer away from using a strict definition of broadband access in terms of data throughput rates, and rather define it as sufficient non- voice access to manage required business solutions. This would include GSM access technologies such as SMS (short message service), WIG (Wireless Internet Gateway), and GPRS (General Packet Radio Services). Traditional Problems with Broadband Access and ICT to Assist SMEs Traditional stand-alone information technology solutions have often not yielded the appropriate solutions for the SME sector mainly as result of the following: The lack of relevance to the typical business needs of a less educated or skilled SME The significant costs associated thereto Its limited influence on enhancing productivity The lack of a critical mass of users sufficient to justify the investment The steep learning curve involved in getting to grips with the technology The need for constant upgrades and hence the return on investment debate. The inability of ICT solution providers to identify clearly and understand the dynamics of this sector and hence its inability to define its user requirements has served to compound this problem. Their traditional focus has been mainly big business and hence big spenders. Categorizing Types of SME Solutions and Supporting Technology / Systems Enhancing SME productivity in developing countries is often as simple as providing basic telecommunication services in remote locations. Such basic ICT services forms the building blocks of providing a holistic cost-effective and integrated ICT offering to SMEs. Technologies available to leapfrog other more traditional technologies include: Mobile Voice Communication The most basic need of any business is voice communication. Taking into account the scarcity of fixed-line access and the higher associated infrastructure costs, mobile communication technology (specifically GSM cellular) provides a useful alternative. Mobile services also offer the SME operators benefits not afforded to them by fixed-line such as the mobility that allows them to establish virtual offices. This is of particular relevance to many remote and rural-based SMEs. The phenomenal growth of cellular subscribers in Africa, and the rapid rate of fixed-line substitution, bear testament to user acceptance of this technology. “Although broadband access is now more affordable and accessible to SMEs on its own, it has still not been able to enhance the productivity of SMEs greatly, mainly due to the lack of basic ICT services as cited in the previous section.” Mobile technologies provide a cheap alternative to traditional broadband services: Providing relevant information at the point where it is required, in an easy to use, inexpensive way to enhance productivity of the SME sector. This could typically include Internet access, email notification, sales force automation or job dispatching and control of mobile work forces. Most of these applications do not require true broadband access and can be provided with existing GSM technologies such as SMS, WIG and GPRS. The key to gaining user acceptance of such technologies lies in building on the already accepted technology of mobile handsets and applications like SMS. Although still hampered by the availability of data compatible handsets, expensive pricing and lack of many business solutions and education for SMEs, GSM can provide the productivity stimulus to SMEs in many vertical markets. With the introduction of GPRS in SA, access points to the Internet and its associated wealth of information has potentially been increased from around 3 million to more than 13 million. The key challenge is for all stakeholders to enhance the uptake of these existing technologies and business solutions in a co-ordinated and structured approach. Regulators should not cripple telecommunication operators by overcharging them for resources and other obligations, allowing lower pricing and rapid handset availability; Mobile operators, application developers and industry consultants / integrators should work together to develop rapidly and deliver suitable solutions to SMEs. Governments should assist with resources, rebates, workshops and training to bring SMEs and the mobile operator value chain together. The Role for Traditional Broadband Services in the SME Sector The advent of more affordable high-speed broadband technologies, provided by DSL (Digital Subscriber Line) over copper lines in urban areas, MMDS (Multichannel Multipoint Distribution Service) or WiFi (Wireless Fidelity) on microwave links, and satellite links like VSAT (Very Small Aperture Terminal) has made true broadband access possible in many developing countries, especially remote and rural areas. Although broadband access is now more affordable and accessible to SMEs on its own, it has still not been able to enhance the productivity of SMEs greatly, mainly due to the lack of basic ICT services as cited in the previous section. However, using Application Service Providers (ASPs), Telecommunication Kiosks and other NGO (Non-Governmental Organisations) initiatives in a SME-hub model, many of the inhibitions to SMEs use of ICT can be overcome. The SME-hub model, especially in remote areas where true high-speed broadband access and ICT costs are still a limiting factor to most SMEs, aims to centralise most cost elements in the SME-hub. The SME-hub could be a school or other NGO business support structure, a Telecommunications Kiosk (i.e. a commercial offering run by an SME), or an ASP (the more traditional larger ICT company). Key interventions that broadband access and an ASP / SME-hub model allows for are: “Open source coded software serves to drive down costs for the ASPs making the services more affordable to the SME sector.” An outsource component through the introduction of a SME-hub – limiting the SME’s need for getting to grips with the technology and avoiding the ongoing requirements for upgrades. Also as an ASP allows several users to access the same IT infrastructure and software solutions it creates the necessary critical mass to justify the ASP’s investment Hosting applications – limits the need for SMEs to create expensive IT architecture and infrastructure to host their applications as this could now be done remotely through ASPs. These applications could vary from normal financial systems supporting the administrative tasks of the SME to complicated search engines, connected to many data sources over the Internet, that can provide intelligent, summarised business information or online problem solving Simple – easy to understand and to operate terminals could now be housed at the SME with all the backend technology being hosted at the ASP Cost-effective solutions are now a distinct possibility, as the SME can obtain business support, multimedia training, etc. by either physically visiting the ASP, or by using thin clients, GSM and other WLL (wireless local loop) technologies as the (lower bandwidth) link to the ASP Scaleable infrastructure allows the ASP to accommodate the SME sector’s growing needs. By applying the principle of ‘Learn once – apply many times’ SMEs can be supplied with blueprint solutions and be assisted much more effectively In the above context, broadband access, existing GSM technologies and ASP / SME-hub models combine to serve as the enabler to SMEs in developing countries. Key Challenges to Creating a Viable ASP / SME-hub Model Creating adequate macro-economic stimulus for the provisioning of broadband services. This requires governments to demonstrate their willingness to open up the telecommunications markets by liberalising and creating an adequate and transparent regulatory environment. That will also enable large multinational companies to invest in these countries in the form of ASPs or in supporting initiatives like NEPAD (New Plan for Africa Development) and other NGO initiatives. Provisioning of Basic ICT Services As referred to in earlier sections, the provisioning of basic ICT services serves to stimulate the use of technology by the SME sector and allows for the building block approach to providing a holistic ICT offering to SMEs that will ultimately be adopted by the sector for enhancing its productivity. Cheap Broadband Access The fundamental requirement for creating a viable ICT offering to SMEs is the need for cheap, easily accessible broadband. It is in this respect that governments should play a leading role by making such broadband access available or liberalising the telecommunications market for private operators to provide such a service. This may require a level of subsidisation by governments to create the necessary stimulus. Such broadband provisioning needs to be priced accordingly, with the appropriate quality of service and levels of support. Education The education of entrepreneurs as to the benefits of broadband technology and the possibilities for creating IT solutions for their business is a critical component to ensure the uptake of the service. Support Service Providers / NGO’s Service providers serve to stimulate the market demand for ASP services. They play a key role in not only educating the SME sector but also tailoring solutions and supporting such services. Open Source Coded Software Open source coded software serves to drive down costs for the ASPs making the services more affordable to the SME sector. It is critical to ensure that the software is sufficiently robust to support SME user requirements. Conclusion Providing an effective ICT service offering to SMEs requires a careful evaluation and understanding of the broader environment in which they operate. Such environments differ significantly between developed and developing nations. The challenges faced in many developing nations are the provisioning of basic ICT services. Governments play a key role in this regard by creating the correct macro-economic stimulus (often by liberalising telecommunications markets and establishing a strong regulatory framework that is transparent). Combining appropriate technologies in an innovative manner (not being fixated by particular technologies) allows developing countries to leap-frog certain technologies. An ASP / hub-model is proposed to combine basic GSM services, broadband access to a centralised hub and leading edge software and ICT technologies in the hub to support multiple SMEs. This approach would remove many of the traditional barriers to the effective use of ICT in enabling SMEs. This allows for a building block approach for the establishment of a holistic ICT offering for SMEs to enhance their productivity and increase contribution to the overall economy.
