Two weeks ago, Microsoft announced a new partnership with the Development Bank of South Africa (DBSA) to put 3 000 students, over three years, through its Students2Business (S2B) program designed to help tackle youth unemployment. With R145m of public money at stake, we wanted to know a little bit more about it, and why Microsoft couldn’t go it alone. So we sat down with Microsoft South Africa boss Mteto Nyati last week to chat about S2B, the wider CSR project 4Afrika, Office 365, Windows 8.1 and more.
It’s all good stuff, read on for more.
I think that as much as there’s a lot of talk about Kenya being the next big thing – to get to where South Africa is today it’s going to take a long time for any country to catch up.
So Mteto, before we begin, tell us a bit about yourself.
I’ve been with Microsoft now for five years, I joined in September 2008 after a 12 year stint with IBM. I’m not an IT guy at all though, I’m a mechanical guy by profession – I was doing a lot of consulting work in manufacturing industries. As I was doing that work, I started to learn more about IT and how it affected my work – there were a lot of factors we needed to leverage like ERM and supply chain management. It was at that time that IBM was also interested in bringing people in with deep expertise in industry verticals, and I was interested in IT and they were interested in my skills around manufacturing. That’s how I ended up in IT, and it was 1996, which is a long time ago.
Has all your experience been in South Africa?
I joined IBM in South Africa, and worked in manufacturing, then telecoms and media, and led a team looking at smaller and medium sized enterprises. That was very successful, so I was asked to go to Europe and spend some time sharing what we were doing here in South Africa across the Middle East and Africa. Which was great fun, working across lots of different countries and cultures. Linked to that, I was fortunate enough to get recognised by IBM and got picked up by their Fellowship program at Yale.
That was a real turning point for me. The whole point of the program is to identify leaders who are in mid-career and expose them to the global challenges of things like changing environments, political systems, energy crises we’re going to face: all those things that they should think about when they return to lead and need to come up with solutions that can tackle some of these big challenges.
It’s about issues like youth unemployment: that’s not a South African problem, it’s a global phenomenon. It’s a huge problem that youth are facing and we – as leaders in both the private and public sector – we have to find ways to address this thing.
We can’t have a lost generation. Not with the potential for education today. It’s strange. We can’t have it.
The fellowship exposed me to those things and I started to question myself – whether or not IBM was the right vehicle to do what I wanted to do. That’s to do good business while doing good.
I did overhear you at the Students2Business launch talking to one of your PR colleagues about not using notes for your keynote, because you were passionate about the subject.
These issues are in me. I had to make a tough choice – I love IBM dearly as a company, and they provided me so many opportunities. But I had to ask myself if it was the right vehicle, and how aligned they were with who I am and what the company wanted me to do. So I had to make a tough decision, and decided to separate.
I had to make a tough choice – I love IBM dearly as a company, and they provided me so many opportunities
Microsoft, when they interviewed me, said to me “We want you to make Microsoft relevant to Africa”. And that was such an important statement. Of course we want Microsoft to grow its business, but at the same time we want to make the company relevant to the people of Africa. It’s a completely different mission, a different mandate, and it allowed me to be myself. As I’m doing my job now, I can bring who I am to it as well.
Tackling the big issues with 4Afrika is a long term goal, how does that align with the more short term goals that businesses are usually guilty of?
At the core, I’m still a capitalist. I believe in the system and that if the system is applied in the right way it can have a positive impact in terms of development. So at that level, there’s no conflict at all. But there are challenges – the company is driven as a quarterly company, we need to deliver results on a quarterly basis and we have to have that rhythm. But to me, what I like most is that the same strong focus on execution that we have on a business level can be translated into the same kind of focus for strategic initiatives that we’re driving. We’re leveraging a lot of the stuff that makes us successful in the short term so that they’re helpful in delivering on the long term success. It’s part of our habit and the way we do things.
At the core, I’m still a capitalist. I believe in the system and that if the system is applied in the right way it can have a positive impact in terms of development.
If you look at some of the partnerships that we drive, we’re dragging a lot of partners along with us. Some of them are uncomfortable, they’re not used to the pace that we’re used to working at. They’re not used to the very clear outcomes that we expect. But when they look back, they’re amazed at how much they’ve achieved – and it’s largely because of the culture we have here. That’s a culture of being accountable in the short term.
Do you find that changes depending on which country you’re operating in? We hear a lot about how there’s an enthusiasm for some of these ideas in places like Kenya or Uganda: is it that South Africa specifically can feel like a bit of an anchor dragging slowly along behind?
I think that what you see is a generational thing, rather than a country thing. Here, we’re still largely led and managed by a generation which isn’t used to moving at speed. If you go to the Kenyas of this world or Rwanda, say, you find it’s a younger generation that’s leading them now. It’s not so much about the country, but the generation. Even here – if you’re connecting with some of the younger ministers, the pace is different to working with those who are comfortable declaring off big visions and not having any execution behind them.
I guess you must be quite popular at Redmond these days, because one of the big challenges for Microsoft is that it has real competition in emerging markets for the first time – specifically from Android devices used by people coming online for the first time. Seen through that prism, 4Afrika is also about the future of the company as much as it is about doing good.
It is. All of the things we do are very much about the strategy of the company. If you look at the things we’re focussing on with 4Afrika – skills, innovation and access – they talk to the core of the company which is about devices and cloud services. That’s who we are and where we want to be. Look at that space, and the people we’re competing with, we have a clear and a very different point of view that is informed by our past.
If you go to the Kenyas of this world or Rwanda, say, you find it’s a younger generation that’s leading them now. It’s not so much about the country, but the generation.
We feel that people will want to reduce the number of devices they carry. They don’t want a device for fun, a device for work and a device for this and a device for that – that’s our point of view and it’s how we differentiate ourselves with that. It’s still in the early stages, though, and people may not understand it yet, but what we’re talking about is that you can’t be travelling with a laptop, a tablet and a smartphone: you need one device that lets you be a professional and a parent, for example, that can capture all of your lives and help you connect with the people that you’re most passionate about.
You’ll see more and more of that coming out. Look at where we come from as a company: Microsoft is the company that stood up and said we want technology to be available and accessible to as many people as possible. That’s who we are. That’s what defined us: when Bill Gates said we want to have a computer in every home and at every desk. At the time, people thought he was crazy, but it happened – by driving down price points and making things more competitive.
If that was Bill Gates’ goal in the 1980s, would you say that your goal now is to put a computer in every African household?
That is our mission. Our mission is not ending. We can’t say that today, we reach one and a half billion people who wake up and open up some of our devices. We’re looking at the other five and a half billion, and making sure they have access. That’s why we’re looking at things like the white space project – we’re saying that for those people ito realise their full potential they need to have access to this stuff. And to make it accessible we need to make it affordable.
When we’re talking about network connectivity for $2 a month with white spaces, that changes the game completely from where prices are today. If they’re paying $15 a day now, for example, we want to free them up to spend the other $13 on something else. That’s the game that we’re in.
In terms of devices, do you think that Microsoft is there yet in terms of competitive prices? It seems to me that if you have certain companies out there selling Atom powered machines – essentially $300 netbooks – for over R10 000 here. Even as a relatively wealthy consumer by national standards, I walk into somewhere like Incredible Connection and look at the Android tablets and iPads that are R3 500 and… well… it’s difficult.
A number of people have told us that we’re late to the tablet space, and they’re right. But we needed to have an entry point, and for that we had to look at where we were strong as a company and where is the biggest pain. And what we observed was that the biggest pain right now is in the enterprise, and people coming onto corporate networks with their own, insecure devices and IT desks are being asked to manage these devices, that is where the biggest pain is right now.
That speaks directly to who we are as a company, and the things we know how to do. So the devices that you started to see initially are devices that target that space. With Windows 8.1, we’re starting to come up with different form factors, like 8-inch screens, that will move to the areas you’re talking about. We’ll have many form factors that will allow us to hit the price points we’re talking about.
With Windows 8.1, we’re starting to come up with different form factors, like 8-inch screens. We’ll have many form factors that will allow us to hit the price points we’re talking about.
Why did you never bring the low cost Windows phone you developed with Huawei under 4Afrika to South Africa?
In each of the countries we operate in, the OEMs have discussions with operators and have to have products tested and so on. Huawei are still going through that process at this time. But for us, when we see devices like the Nokia 520 – we’re not bringing one hardware provider. We’re dealing with all the vendors and saying “we have a mission to bring low cost devices to all of Africa”, and you will see more and more devices like that appearing.
The same thing will happen on tablets and laptops. There’ll be a lot more of that.
Does the pace of that change – regarding hardware pricing for Africa – ever frustrate you? Would you move faster on price changes if it was up to you?
When we say we’re a devices and services company, these are things that we haven’t been involved with in the past. Historically, we’re a software company. So as we move into this space, we have be careful. It has its own logistics and supply chains and after-sales support – we’re learning, and we’re making mistakes and refining what we do. I prefer that sort of pace to failing big. I like looking, testing, changing and going back again – this is the right way to enter a new market. Making a big mistake could cost us billions of dollars, so I prefer this way.
Look at what happened with virtualisation. It was a space that was traditionally controlled by VMware, and we identified it as something we thought was important for the company to play in [Microsoft launched Hyper-V nearly five years ago]. Now, if you look at marketshare in South Africa, we’re up to nearly 50% already. We were nowhere, but we’ve listened to the customer and iterated and been successful. And it’s in line with what we do as a company, because we’re doing the same thing as the competitors but at a fraction of the price.
Just going back to Students2Business – can we clarify the numbers? To date, 6 000 students have been through the program…
That’s right, since 2007.
The extra 3 000 students that will come from the new JobsFund money – that’s in addition to the ongoing program?
That’s right, this is 3 000 extra. The current program is continuing and we’re adding more students every year. But when we heard the minister of finance giving corporate South Africa a challenge in 2011, we decided to participate and liberate those resources. We’ve made a commitment to government that in the next three years we’ll have trained and placed an extra 3 000 net new students.
We can’t have a lost generation. Not with the potential for education today. It’s strange. We can’t have it.
So the question is, if S2B is an ongoing program that has been successful in the past, why did you need government money to expand it? Why not just divert more 4Afrika funds and invest the full R300m yourselves?
This is a partnership. Government announced, two years ago, that they had a big challenge with job creation, and that they wanted to create partnerships with the private sector to meet the challenge. To do that, they opened a R90bn fund to which we could apply. The thing is, as the private sector, we are doing these things, but we’re not doing them at the pace which will meet the demand. We can’t be fast enough. There’s so much need for skills, and this vehicle from the government helps us to rise to the challenge.
But for me, this was another thing that we wondered about. And we decided that we wanted to demonstrate this partnership. To solve South Africa’s problems isn’t going to come from one side or the other of public or private sector. It’s important to demonstrate that these partnerships can work. When I sat the team down and said “We are going to do this thing”, I said that I didn’t expect many South African firms to apply for the fund, and that in a few years time we’ll still be sat around complaining. So I wanted us to be part of the solution.
When you talk about a partnership, other than the money what are the differences between running S2B yourself and working with government?
There’s no difference, because even in the current model we’re in partnership with government departments. This is just another one – the Development Bank (DBSA). It’s important for me to be involved because if you think about DBSA and what it’s doing, it’s driving development across the country and has been asked to look specifically at municipalities. Local governments. The point where citizen is most likely to interact with government. And most of us know that those institutions aren’t working. There’s a bigger agenda, in that maybe we can work together to look at some of the challenges municipalities are facing, and help them too.
I didn’t expect many South African firms to apply for the fund, and that in a few years time we’ll still be sat around complaining.
Two years ago, we signed a program called Student2Government with DBSA and the intent was to train 100 people and place them with municipalities in the Western Cape and the Eastern Cape. All of them have been absorbed. And what we saw was that a year ago, those guys were unemployed, and now they are a source of light within their departments. They’re the people everyone goes to if they want to find out about stuff. That’s the power of technology and knowledge. I want to continue to nurture the relationship with DBSA, because we can do so much more with them.
One thing that surprises me a little, with my European eyes, is that you focus so much on students in particular. An IT graduate in many countries will never be out of work. Is there an issue with higher learning here?
Yes. And Student2Business is solving the problem after the fact. Where are the problems, they’re in the higher institutions of learning where they aren’t training these guys in the things that will get them ready for work. So when we say we want to touch 1.5m young people over three years with 4Afrika, the majority of those will be in universities and colleges. We are donating free software, training lecturers and students in the technologies that will make them employable when they leave the system. That’s the problem, really, and if you do that you reduce the number of unemployed people, because when they graduate they start their own business or get absorbed by people like us.
Is there a danger that by becoming too involved with these institutions they’ll become too Microsoft focussed? Are you stopping people from getting a more rounded education?
Not at all. It’s not just Microsoft, there’s opportunities to learn IBM, Oracle and so on – but when people have made the choice that they want to develop in the .net environment then we provide them with the latest tools and technologies – otherwise they’re stuck on XP and no-one else is using it. And their teachers as well. So I don’t think we’re trying to make people use Microsoft, we’re giving them the option and – when they’ve made that choice – giving them the best education possible.
Will the falling Rand affect what you can do through 4Afrika?
Not at all. In fact, it gives us more resources, because the budgets we’re setting are all in dollars, so the more Rands you get for the dollar the more we can do. But it affects us, because it affects our clients who have less to spend. Our core business is affected, but not the 4Afrika initiative. That may affect things later on, of course.
So I don’t think we’re trying to make people use Microsoft, we’re giving them the option and – when they’ve made that choice – giving them the best education possible.
I want to touch on Xbox One a bit. Are you worried that some of these new devices are targetted to specifically at the US or Europe and don’t take in to account things like infrastructure here for online requirements [note – this interview took place before Microsoft signalled a massive change to its plans for Xbox One]? Do you wish that sometimes people would take into account the realities of life in emerging markets?
What I like is that they listen. They know that they’re operating in a global company. But they’re also not confused about the truth that if things aren’t adopted in certain markets, they won’t make it in emerging markets either. So some things have to be successful in the US, the UK, Japan, Australia and so on. So I would like a thing where the company announces something simultaneously in all markets [note – South Africa won’t get Xbox One at the same time as the US], I would like that. But the reality is that we don’t necessarily have the resources to do that and I have accepted that it is what it is.
You talked a bit about the cloud earlier. Is South Africa really ready for products like Office 365 and the move to always on, licensed software? I’ve spoken to some small businesses who are concerned about having to use overseas services and what that does for their business for example.
What I’m seeing is that Office 365 was announced about a year ago, and the current customer base in South Africa is 95% small business. We had no clue this would be the case – these are companies that weren’t in our databases, that were just emerging. Only 5% of sales are to our existing customers. Large customers are starting to move, but they are slower because they’re in three year agreements usually and they only adopt new technologies at the end of that cycle. What all this means is that the move to the cloud is going to be much faster than any of us realised. We are seeing strange things – even government customers are signing up, and moving from archaic tech to this just like that [clicks fingers].
We need to say that we want to be a hub, and these are the core competencies that we want to be known for.
I think part of that is because of the skills problem in South Africa – people are adopting these low maintenance systems faster than we expected. When we were looking at these sovereignty issues, we thought government would be the last to adopt the cloud.
That business is growing exponentially.
So to round up then, where do you see South Africa in 10 years time?
There’s so many things linked to that question. You have politics, technology… assuming that things improve on the policy front and that there’s more clarity around things and execution on the broadband strategy, I think that as much as there’s a lot of talk about Kenya being the next big thing – to get to where South Africa is today it’s going to take a long time for any country to catch up. But it should not make us complacent. We need to move and stay ahead. We don’t want news or perception that we are no longer relevant. We are a hub. We have a level of sophistication and infrastructure and understanding of how to manage data centres, for example, that’s a long way ahead. Look at our banks, we have been in this business of data centre management for a long time – we have knowledge and skills that won’t be easily replicated over night. If you look at the skills that are being built elsewhere, they aren’t the high level skills required for managing sophisticated data centres and keeping them running 24/7 and connected to the rest of the world. When you look at that level of knowledge – that’s here. We need to keep it. And our banks and our telcos are going to continue to innovate – they’ll be forced to as we continue to interact with the rest of Africa.
Is that a lesson that we need to learn?
We need to know that. We need to consciously build this thing and decide that we want to be that African leader. We need to make that part of our psyche. Right now, it’s just happening and it’s not a conscious thing. We need to say that we want to be a hub, and these are the core competencies that we want to be known for. We are the initiators of growth and we’re sitting in a position of advantage over everyone else, and we need to leverage that advantage. That, today, we’re not doing.
That requires leadership at all levels. Not just at a political level, but at a business level too. We need people working together to build business value.