HP In Africa Highlights
- Managed by Stefanos Giourelis
- South Africa is by far the largest market, followed by Nigeria and Morocco
- Has sub-regional management in East, South, West and French-speaking West Africa
- Works on social development with CHAI and other charities
- The Nigerian government is a significant reference customer
- It expects African IT growth to be 6-7% in 2012
- Management needs to be more flexible, although offerings are the same
- Training graduates, turning them into professionals through training and retaining them is key to the future
We recently talked to HP’s Santino Canegrati, Country Enablement Manager for Growth Market, and Stefanos Giourelis, Managing Director of Africa as part of our investigation into the continent. We believe 2012 is an important year for the region and are profiling a number of suppliers as a result. This paper follows HP’s answers to a number of questions we posed. We’ve also added some of our own research findings for Africa from the ITCandor market model.
Which Are The Biggest Country Markets For HP In Africa?
South Africa is the largest market, followed by Nigeria and Morocco. There are a number of growing countries, including Algeria and Kenya.
HP doesn’t provide guidance for the proportion of its revenues it generates from Africa. Our own estimate is that it was around $1.9 billion in the year to the end of Q3 2011 – 1% of worldwide and 4% of EMEA.
In a wider context HP classifies countries in Africa as ‘growth markets’ alongside others (but not all) in South East Asia, the Middle East, South America and ex-Russian ones.
How Does The African Business Split By Division? What Are The Differences?
All of HP’s business groups are active in the region and it claims market leadership in PC, peripheral and others, including industry standard and Business Critical servers: it also claims that its ESSN group has a market share of around 50%. It is in the process of penetrating new country markets and believes it is in a good position to take advantage of the potential growth.
Again it doesn’t give a revenue breakout by division for Africa – we have provided our estimate of its evolving market share by quarter for its leading products in Figure 1.
How Is Africa Managed Within HP EMEA?
Africa, as a region under Stefanos, reports to HP MEA, which in turn is part of its EMEA business. Within Africa country managers run the business locally. Some directly to the Africa region, while others report to one of the four sub-regions: these are East, South, West and French-speaking West Africa (including the Ivory Coast, Senegal and Mali). On our call HP also mentioned the connections with its French-language Service Centers in Tunisia and Morocco.
What Investments Are You Making In 2012?
2012 is the second of a multi-year investment project for HP in Africa. In 2011 it opened 10 new offices (Ghana, Senegal, Democratic Republic of the Congo, Ethiopia, Tanzania, Uganda, Mauritius, Botswana, Angola, Mozambique).
In total HP now has a direct presence in 17 African countries, adding the new countries to those it already had in Algeria, Egypt, Kenya, Morocco, Nigeria, South Africa and Tunisia.
Its strategy is to hire a director and a small team in each new country. It invests in partnerships and in developing its staff – hiring graduates and transforming them into professionals. HP is building business in telco, education and infrastructure sectors in those countries it already has a presence in. It also set up an Education Experience Center in Casablanca in September 2011.
HP’s internal infrastructure building includes setting up its supply chain, industry sector approach and project management capabilities. It also has to provide such things as local currency price lists and special pricing. It recently ran an intensive 4-week training course for graduate entrants in Nairobi and is now running another in Casablanca.
How Do You Look At Social Development Issues?
HP has established a number of relationships in new countries as part of its social innovation initiative. In particular:
- Botswana – it’s working with Positive Innovation for the Next Generation and Clinton Health Access Initiative (CHAI), expanding the malaria pilot disease surveillance program to cover other infectious diseases as designated by the Ministry of Health; the program uses a mobile/cloud disease surveillance solution to cut down the outbreak of disease
- Ghana – it has set up a mobile phone app with mPedigree for patients to authenticate prescription drugs and avoid purchasing counterfeits
- Mozambique – it is working with Mozambique Development in Motion to establish a computer lab in a rural secondary school
- Senegal – it is deploying a technology with the charity Tostan to help bring education to adults and adolescents without access to formal schooling
- Tanzania – is working with the SafePoint Trust to implement and monitor a safe injections programme
- Uganda – is working with CHAI to expand the HIV Early Infant Diagnosis Program – first launched in Kenya in November 2010.
Beyond these specific charitable activities HP addresses security and education, which it considers the two most important social issues over all.
What Recent Major Customer References Do You Have?
HP signs multiple large customers each quarter and referenced its N4.3 billion ($29 million) contract with the Nigerian government to establish the Government Integrated Financial and Management Information System (GIFMIS) and including data centre and networking and 1.5k workstations.
What Are Your Expectations For African IT Spending Growth?
HP expects IT spending in Africa to grow by between 6 and 7% in 2012.
We are less optimistic with a current forecast of –1% for all ITC products: nevertheless we expect Africa to have stronger growth (less decline) than Europe (-5%) or the Middle East (-2%).
What’s The Same And What’s Different About Doing Business In Africa?
HP’s strategy in Africa is ‘more or less the same’ as in other regions: it targets large companies, public organisations, telcos and consumers. It has no special products for Africa, offering the same portfolio it has elsewhere. However it needs to be more flexible than in other regions its plans to open 2 offices were frustrated by the Arab Spring for instance.
Which Partners Do You Use?
It has a similar model to other regions and has around 30 ‘Tier 1’ distributors, which in term service 700 ‘Tier 2’ resellers in Africa. It also partners with suppliers such as Alcatel Lucent, Microsoft, SAP and VMware.
Our estimates of major supplier revenues by quarter in Africa are shown in Figure 2.
Is There An IT Skills Gap? If So, How Do You Help With Education And Training?
HP sees no real problem in hiring graduates, but keeping them is more difficult as by gaining experience they become attractive to their competitors – competition for talented staff is tough. The key is to invest in local staff on a long-term basis. HP sees a lot of activity from Chinese companies in Africa at the moment – especially in government accounts – but notes that they tend not to hire staff locally for their projects.
We believe that Cloud Computing will eventually be in strong demand in Africa, to make up for the relative lack of technical knowledge in the region. HP noted that most countries outside South Africa lack the backbone requirements from a Service Provider point of view.
HP indicates that its Education Experience Center in Casablanca is being used by many African governments to learn about possible solutions for education.
Some Conclusions – A Sustainable Local Presence With Flexible Deployment
Africa is currently under-represented as a consumer of IT and suppliers need to do more to establish a presence. HP has had a long-term presence (Stefanos and Santino are both 20-year veterans for instance), but started a multi-year expansion last year. It is focusing on building a presence in new countries, hiring graduates and turning them into professionals, as well as setting up its business infrastructure. We expect to see an increasing number of reference sales, especially in government and Telco accounts.
Its challenge is to create a sustainable business, retaining its new local staff as they become more valuable to the competition and being flexible enough to overcome any of the major problems that occur in the region, including opening offices in 2012 it had planned to do in 2011. It is well positioned to enjoy the growth in African IT spending we expect over the next 5 years.