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Posted in the category: News

The real cost of connecting

A new book, “The Mobile Office”, reveals the true cost of connecting a small office or a mobile worker to the Internet – and sounds the death knell for dial-up access in South Africa.

“The Mobile Office”, the latest book by Arthur Goldstuck, technology writer and editor of The Big Change, has for the first time presented a detailed analysis of the cost of Internet access in South Africa. It shows that dial-up access is the most expensive form of Internet connectivity in South Africa.

The belief that dial-up is cheap because it tends to carry the lowest monthly subscription of all forms of Internet subscription is shown to be a myth. While the upfront subscription is usually far cheaper, once the access is actually used, it quickly becomes more expensive.

Arthur Goldstuck and FNB’s Len Pienaar at the media launch of “The Mobile Office” on 20 November

World Wide Worx’s research into mobile technologies in South Africa, under the Mobility project sponsored by First National Bank, provided the initial impulse for the book.



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Posted in the category: News, Technology, Trends

Beware the lure of the strategy metaphor

Sun TzuThe Art of War, written more than 2000 years ago, has become a standard textbook for any executive wanting to learn the basics of strategy.

The principles of waging war laid out by the military philosopher Sun Tzu seem fairly relevant, especially when he deals with issues like understanding the strengths and weaknesses of your own troops and those of the enemy. This can even be intoxicating for the strategy junkie, who thrills at the parallels to be found between the ancient Chinese battlefield and the corporate boardroom.

The problem is that most people don’t get the connection.

Not because they are too dense to deduce what AOL and Time-Warner or Microsoft and Facebook could have learned from the alliance between the soldiers of Wu and Yueh, but because they find that there are far more relevant lessons to be learned from modern thinkers and strategists. Not to mention from the business successes and failures of the 21st century. Keep reading →

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Posted in the category: Insight, Strategy

SMEs have what it takes to hold their own: Findings from SME Survey 2005

When it comes to being competitive in the South African economy, most small and medium enterprises (SMEs) feel they have what it takes to hold their own, according to the final results of SME Survey 2005 backed by Standard Bank, MWEB Business and Microsoft.

Although there was no surprise in the fact that Johannesburg leads the way with more than half its SMEs considering themselves to be extremely competitive, the city and area with the next highest confidences was Port Elizabeth (49%) and the Eastern Cape (48%), respectively.

“This was a real turn up for books, particularly considering that it was a region that, until recently, was considered to be in economic disarray,” says Arthur Goldstuck, principal researcher for the survey.

“It is obviously an indication of the amount of energy and attention that has been focused on the area recently, and of course the development of the Coega project has also been a major economic driver.”

Goldstuck points out that not only would there be a trickle down effect in terms of business opportunities for SMEs in the region, but that because the Eastern Cape is not really part of the economic heartland, a project the size of Coega would inevitably have much bigger impact than a similar sized development in Gauteng, for example.

“The other issue that will have impacted this region is the recent boom in vehicle sales, as this is an area that practically lives and dies on its motor car industry,” he says.

“These findings indicate that there needs to be some kind of special treatment for economically disadvantaged areas from government’s side. Of course the SME sector as a whole needs this type of support, so government must not be doing this at the expense of another region, but perhaps pay a little more attention to these disadvantaged areas.”

In terms of the impact of services on the competitiveness of SMEs, business owners surprisingly consider banking services as having the highest impact. 75% of SMEs say that banking services have a positive impact on the competitiveness of their business. Online banking received a similar positive rating, with 73% of business owners claiming it has a positive impact on their competitiveness. “This indicates that we are starting to meet the needs of SMEs both offline and online,” says Roy Ross, Director Business Banking of Standard Bank. “The high level of online banking usage by SMEs has enabled us to better meet the need of SMEs”.

The survey results also suggest that SMEs view Internet connectivity and the form this takes – whether dial-up or ADSL – as impacting greatly on perceptions of competitiveness.

Some 53% of players using ADSL regarded themselves as being highly competitive, while only 43% of those using dial-up held the same views.

“ADSL is particularly useful for the SME that has a large phone bill, as it can help to cut the bill extensively. Between this and the fact that Telkom has substantially reduced the cost of ADSL recently, using this becomes a no-brainer,” states Goldstuck.

The commonly held perception that e-mail is the killer application of the Internet has been confirmed. In fact, as many as 69% of small or medium sized businesses regard the impact of e-mail on competitiveness as positive, while only 18% say it has a negative effect and 13% are neutral.

According to Goldstuck, such perceptions are very much sector-dependent.

“Certain sectors of the market view e-mail as very important and these were way above the average, while others were well-below. It is obviously a sector-based issue – after all, if the SME is in the agriculture sector, e-mail would be almost irrelevant, while in the IT arena, for example, it would be critical.”

Gender once again made a significant difference in the perception of being highly competitive, with a far higher percentage of female respondents (51%) against just 44% of male respondents regarding their companies as highly competitive.

The survey results also show a direct correlation between the size of company and the perception by decision-makers in those companies as to levels of competitiveness, with the rating increasing steadily from a very low 33% for one-person businesses and 39% for other micro-enterprises (up to five staff members), and going as high as 58% for companies with 40-50 staff.

However, once the companies get beyond a staff complement of about 50, the perception of being highly competitive declines slightly.

“It is basically an efficiency issue, as once a company reaches a certain size, but without attaining the level of a corporate that will have a strong human resources department; it can become a bit unwieldy.”

“Nonetheless, it is still only a small decline overall, whereas the perception of competitiveness from the one-man operation up to the larger (50+) organisations showed a massive increase,” says Goldstuck. “Size does count in feeling competitive.”

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Posted in the category: Trends

South Africa's mobile habits uncovered

It’s official: South African men are bigger talkers than women when it comes to cell phones in their cars. 57% of men interviewed in a major new study admitted to talking on their cellphones while driving, compared to 37% of women.

The study forms part of the year-long Mobility 2005 research project undertaken by independent research organisation World Wide Worx, with the backing of First National Bank, Cell C, Sentech and the Mobile Institute. In the sixth phase of the study, entitled The Impact of Mobile Technologies on the South African Consumer, released today, a nationally representative sample of 2400 South Africans took part in telephonic interviews over a three-month period during the first half of 2005.

“The interviews were conducted with landline users who also own cellular phones, resulting in a sample that represents the upper two-thirds income brackets of cellphone users,” says Peter Searll, director of Plus 94 Harris, which conducted the field work for this phase on behalf of World Wide Worx.

The research unveils fascinating patterns in cellphone usage, and a detailed picture of a very satisfied market.

“One of the most significant findings of the consumer research was that South Africans love their cellphones,” says Arthur Goldstuck, MD of World Wide Worx. “Across half a dozen dimensions we rated, people were extremely satisfied with the impact of their cellphones on their lives.”

The highest satisfaction rating was with the impact of cellular phones on family security: 94.8% of respondents gave a positive rating. Impact on the user’s own sense of security and satisfaction with cell phone’s performance were tied at a 94.3% positive rating, followed by impact on personal life at 93.6%, satisfaction with network service at 93.2% and Impact on working life bringing up the rear, but not by far, at 92.1% positive.

This is clearly the market segment that keeps the cellular manufacturers in business: just over half of respondents said they had obtained a new handset in the past year. Of those who obtained new phones, half again said they would again obtain new handsets in the coming year.

What happened to their old phones? The biggest proportion – 44% of respondents – passed it on to family members.18% kept it as a spare, 14% sold it, 10% gave it to a friend, and 5% simply threw it away. No less than 6% said their previous phone was stolen.

Age was found to be a major differentiator of the way South Africans use their cellular phones, particularly in the choice of contract versus pre-paid accounts. While 33% of all users in this market segment are on contract and 64% on pre-paid, only 8% of those in the 16-19 age group are on contracts, with 90% on pre-paid. This doubles to 17% on contract in the 20-24 age group, with 78% on pre-paid. Contract use rises steadily through the age groups until it peaks in the 46-49 age group, at 40%, and then begins to decline again.

More than half the respondents cited free or cheap phones as the reason for choosing their form of contract, pointing to a dramatic market shift if current regulatory proposals to scrap contract incentives become law. Average expenditure among contract users was R384 per month, and among pre-paid users R134, again indicating the impact that would be made on the market should there be a further shift to pre-paid. Not surprisingly, expenditure is lowest in the 16-19 age group, rising steadily to a peak in the 35-44 age group, and then dropping steadily as age increases – confirming the old stereotype that yuppies are the most enthusiastic cellphone users.

“While an ‘age gap’ exists between revenue and usage, we found that adoption and planned adoption of non-voice applications, like picture messaging, cellphone banking and 3G, are strongest among younger people,” says Searll. “The answer is probably to increase education of cellphone usage and technology among older users.”

But there is one area where older users need no education: leaving cellphones on during meetings. The most guilty group here is the 20-24 age group, with 19% leaving their phones on during meetings, and the percentage declining steadily through the age groups to 10% for those aged 55-64.

Nokia is far and away the first choice of cellphone brand for South African phone users, with Motorola and Samsung in distant second and third place.

87% of respondents have a bank account and, of these, 13% have tried cell phone banking. Almost two thirds of those who have tried it, however, have only done so to request a balance. Despite this, almost half of those with bank accounts believe cellphone banking is safe, and almost two thirds regard it as convenient, suggesting powerful growth in this area in the coming years.

“FNB is very pleased with the take up of our cellphone banking offering, which was launched in March this year. It highlights the positive response and interest in cellphone banking as shown in the research results” says Len Pienaar, CEO of Mobile & Transact Solutions, FNB. “This sets the tone for cellphone banking going forward.”

Finally, about those men on their cellphones in their cars: it’s not entirely positive for women. While men are more likely to keep their mouths moving with their cars, they are slightly more responsible than women in doing so. 72% of men who use their cellphones while driving do so with hands-free kits, while only 66% of the women who talk while driving do so hands-free.

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Posted in the category: Technology

The next big boom in the online world

A fascinating picture is beginning to emerge of the trends in Internet growth, electronic banking and e-commerce.  Today I pull together the threads of various research projects.

The first decade of democracy in South Africa has, by pure coincidence, gone hand in hand with the first decade of public Internet access in this country.

What was first a hobby for this writer, counting the number of people going online each year, has inevitably turned into a serious research business, as the 25 000 people with dial-up Internet access in 1994 turned into an overall market of more than 3 million users by 2004.

Today, the Internet pervades our lives, and in the business world has become more or less seamlessly integrated into the background of general business communications and activity. Among the public, however, it remains an expensive option that has to be justified on a budgetary basis – where it can be afforded in the first place – and looms large in the individual consciousness.

Today, the Internet pervades our lives, and in the business world has become more or less seamlessly integrated into the background of general business communications and activity. Among the public, however, it remains an expensive option that has to be justified on a budgetary basis – where it can be afforded in the first place – and looms large in the individual consciousness.Any additional costs associated with Internet use therefore becomes a decision based on experience, trust, and perceptions of improved convenience, efficiency and cost-effectivness. That is no less than five broad factors that will influence the uptake of the likes of online banking, online retail, and using the Internet as a commercial channel for individuals.

A core mistake made by many online retailers and other operators is to assume that all users arrive on the Internet ready to engage in all forms of activity. They then peg their market size at, say, 3.3-million, and then express shock at just how low the uptake of their particular offering might be.

A core mistake made by many online retailers and other operators is to assume that all users arrive on the Internet ready to engage in all forms of activity. They then peg their market size at, say, 3.3-million, and then express shock at just how low the uptake of their particular offering might be.The truth is, those 3.3-million people do not represent a current target market.

In putting together the findings from three of our surveys, namely Internet Access in SA, Online Banking in SA, and Online Retail in SA, we’ve come up with a few surprising conclusions about one of the market dynamics for e-commerce among the public. That dynamic is the level of experience of the Internet user.

In putting together the findings from three of our surveys, namely Internet Access in SA, Online Banking in SA, and Online Retail in SA, we’ve come up with a few surprising conclusions about one of the market dynamics for e-commerce among the public. That dynamic is the level of experience of the Internet user.Bear in mind that the Internet user statistics we compile are based on an industry-wide survey, examining the number of people with access, rather than on the more common media studies, which are concerned with the use of the Internet as a media tool, and thus examine usage over, say, the past week or month.

In industry terms, the level of Internet experience is based on length of time with access, rather than the intensity of access. And here is where a fascinating picture emerges. Rather than look at how many people have access to the Internet today, we looked at how many people had access five years ago. That figure would then equate to the number of people with five years experience at the end of 2003. The figure for 1998 was 1.2-million people with Internet access, meaning that at the end of last year 1.2-million people in South Africa had five years experience on the Internet. It is therefore not a great coincidence that the number of online bank accounts in South Africa came close to that amount, namely 1.06-million. However, that number represents probably around 800 000 individual users of online banking. Given that it is unlikely 100% of a target market will take up any service or product, it is a remarkable achievement of South African banks that they have achieved an uptake that is equivalent to about 80% of the experienced user base.

In industry terms, the level of Internet experience is based on length of time with access, rather than the intensity of access. And here is where a fascinating picture emerges. Rather than look at how many people have access to the Internet today, we looked at how many people had access five years ago. That figure would then equate to the number of people with five years experience at the end of 2003. The figure for 1998 was 1.2-million people with Internet access, meaning that at the end of last year 1.2-million people in South Africa had five years experience on the Internet. It is therefore not a great coincidence that the number of online bank accounts in South Africa came close to that amount, namely 1.06-million. However, that number represents probably around 800 000 individual users of online banking. Given that it is unlikely 100% of a target market will take up any service or product, it is a remarkable achievement of South African banks that they have achieved an uptake that is equivalent to about 80% of the experienced user base.Given these numbers, we can begin to see a close correlation between online access and online banking – as long as we focus on experienced users rather than all users. The banks’ projections for 32% growth in online banking in 2004 suddenly does not sound like dot.com-era hype: the growth in number of Internet users with 5-years experience this year will be no less than 44%.

The next question is what this means for spending online. Firstly, only about half of online banking users also transact within the online banking environment (i.e. not only accessing account information). Using a similar proportional basis, of these 400 000 or so individuals who have gained enough trust in online banking to transact on a banking site, it must be assumed that around half would have gained enough trust in the Internet in general to transact outside a secure banking environment.

The next question is what this means for spending online. Firstly, only about half of online banking users also transact within the online banking environment (i.e. not only accessing account information). Using a similar proportional basis, of these 400 000 or so individuals who have gained enough trust in online banking to transact on a banking site, it must be assumed that around half would have gained enough trust in the Internet in general to transact outside a secure banking environment.Suddenly, we see the real ceiling for online retail: no more than 200 000 online shoppers at the end of 2003. And suddenly, we can understand why even the most successful online stores cannot claim more than around 50 000 individuals actively and regularly shopping on their sites. And we can understand why we do not have Amazons and eBays setting our markets on fire.

But by that very same token, we can also see huge potential in the future. In 2009, on the eve of the World Cup Finals in South Africa (doesn’t it feel good to say that?), we will have three and a half million South Africans with more than five years experience on the Internet. We will have more than two and a half million banking online. And the number of online shoppers will be approaching the million mark.

But by that very same token, we can also see huge potential in the future. In 2009, on the eve of the World Cup Finals in South Africa (doesn’t it feel good to say that?), we will have three and a half million South Africans with more than five years experience on the Internet. We will have more than two and a half million banking online. And the number of online shoppers will be approaching the million mark. Which begs one final question: five-year plans, anybody?

  • Arthur Goldstuck is editor of The Big Change and Managing Director of World Wide Worx, South Africa’s leading independent technology research organisation. He leads World Wide Worx’s research into Internet access, online banking and online retail.

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Posted in the category: Insight, Trends

South Africa's SMEs buoyant

Small and medium enterprises in South Africa are alive, well and regard themselves as highly competitive.

This is one of the key findings of SME Survey 2004, a project that researched the role played by government, information technology and financial services in small and medium business in South Africa. Conducted with the backing of Hewlett-Packard and Standard Bank, the research involved interviews with 2919 SME business decision makers.

A startling 86% of the SMEs surveyed regarded themselves as somewhat competitive or very competitive. A further 12% believed themselves to be neither competitive nor uncompetitive. This left a mere 2% of SMEs who believed they were not competitive.

“This bears out all the assumptions that have been made in recent years about SMEs being the new driving force in the South African economy,” says Thierry Boulanger, Hewlett-Packard South Africa’s Solutions Partner Organisation manager heading up the SMB, Corporate and Enterprise Managed Partners division.

However, few of the businesses give the Government’s SME initiatives credit for their competitiveness. Less than 1 in 10 of the respondents rated government efforts to promote small business as effective.

Given the enormous resources Government is putting into SME development, this reflects poor communication rather than poor strategy. This is borne out by the findings, which show that no less than 70% of respondents gave government a poor rating for the way in which it communicates these efforts.

At the heart of the survey, SMEs were asked to rate the impact of various Government initiatives, from SME and business support programmes to legislation and regulation, on the ability of companies to survive or grow. SMEs were reasonably positive on legislation, with 41% of respondents positive on the impact of legislation in general, and only 21% negative.

“SMEs understand that a strong legislative foundation is needed to provide a healthy business environment,” says Spiro Georgopoulos, Director of Business Banking at Standard Bank.

The same proportion, 41% of respondents, was positive on the impact of import/export legislation, but with 33% negative. Impact of skills development programmes (30% positive) and impact of BEE (28% positive) also scored reasonably, but had more negative respondents than positive.

“The extent of neutral respondents, around a quarter to a third on most issues, indicates the opportunity for government to use communications to change perceptions,” says Georgopoulos.

The lowest ratings were given for the impact of general Government incentives for SMEs, with a mere 12% positive, while impact of SME support structures received an 18% positive rating, impact of preferential procurement 23% positive, and impact of export incentives 25% positive.

A high proportion of respondents, 41% of the total, reported a BEE component to their business.

About SME Survey 2004

SME Survey 2004, an annual research project on the factors influencing small, medium and micro enterprises in South Africa, this year focused on the role of government, information technology and financial services on SMEs. The project was backed by Hewlett-Packard and Standard Bank, and included interviews with 2919 SME decision-makers during March and April 2004. The research was led by Arthur Goldstuck, MD of World Wide Worx, call centre research services were provided by Netsurit, and strategic marketing and project management services provided by Debbie Whittaker of Coolcumba Communications and Celeste Whitaker of Fizz Marketing. The survey is a project of SME Survey (Pty) Ltd.

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Posted in the category: Insight

Lynn Brewer the Enron Whistleblower's Warning

Confessions of an Enron Executive:   A Whistleblower's StoryWhen Lynn Brewer decided to blow the whistle on dark dealings at Enron, she was treated as a traitor instead of as someone who wanted to save the company. I interviewed her on the role of the whistleblower.

AG. Do you believe what happened at Enron was more a product of the time and the kind of environment in which Enron was operating, or does it rather represent the kind of executive overreaching that could happen at any time in any organisation?

LB. Honestly, Enron’s story is a combination of both points you raise. On one hand, the recklessness of the corporate culture promoted the behaviour that caused the company to implode. However, having said that, today, nearly three years later, the Securities and Exchange Commission (the governing body for publicly traded companies) is receiving 20,000 whistleblowing reports per month, which clearly indicates that perhaps we have an epidemic.

The Sarbanes-Oxley Act of 2002 put in place a number of requirements that will make it more difficult for companies to sustain the sort of behaviour that we witnessed at Enron over a long period of time causing greater damage to the stakeholders; however, there will still be companies that seek to look for the loopholes.

Six years ago, the average amount of time that a mutual fund held stock in a company was three years. Today it’s 11 months, which places incredible pressure on leadership to take aggressive measures to make certain they meet their targets. If a company misses their projections, they are punished by a sell-off of the stock, causing them to create a cycle of yet further aggressive behaviour.

AG. What do you think is innate in otherwise intelligent business leaders that allows them to ignore whistleblowers when the stakes are so high and the consequences can clearly be so disastrous?

LB. I think, at least in the case of Enron, it was three attitudes: 1) Arrogance that caused leaders to discount anyone who might criticize their actions; 2) short term strategy vs. long term sustainability; and 3) denial as to the consequences of the first two attitudes.

Unfortunately, many leaders naively assume that having cohesiveness outweighs the benefits of conflict when actually a true leader doesn’t mould everyone to be a follower but learns to manage the polarities between his or her personality and strategy with those who need to hold them accountable. Certainly a “warning” that we are in the path of a runaway freight train is a good thing. But, in the end, I think most leaders are in denial about the fact that at any time, they could become the next Enron.

AG. Why do you think whistleblowers are treated as pariahs rather than as heroes in the early stages of the “whistleblowing process”?

LB. While most believe whistleblowers are simply disgruntled employees, truth be told, most of the once I have spoken to, myself included, were very loyal to the company but had simply hit their threshold of pain. Rather than sit back and watch the demise of the company, they manage to find the moral courage that allows them to confront their own fears to address the real issues. Quite frankly, any company that refuses to listen to those who have information, whether good or bad, is a disaster waiting to happen.

AG. Do you think rigid hierarchical structures in corporations works against whistleblowing?

LB. Yes. Whistleblowing isn’t necessary where there are open lines of communication. The healthiest organizations have no barriers to the lines of communication. Rigid hierarchical structures tend to disengage employees destroying the communication and thus the loyalty. When this happens, employees (at least in the United States) begin to develop a sense of entitlement. So, rather than “blow” the whistle, they simply begin to steal from the company by taking trade secrets or other liberties with the fringe benefits.

AG. Do you think laid-back corporate cultures such as those that were famous during the dot.com boom are more prone to executive fraud or mismanagement than are formal and hierarchical cultures?

United States) begin to develop a sense of entitlement. So, rather than “blow” the whistle, they simply begin to steal from the company by taking trade secrets or other liberties with the fringe benefits.

AG. Do you think laid-back corporate cultures such as those that were famous during the dot.com boom are more prone to executive fraud or mismanagement than are formal and hierarchical cultures?

LB. I don’t know that I would describe the corporate cultures of the “dot-com” era as “laid-back” as much as immature and lacking in capital stewardship. In my opinion, much of the “burning” through money was brought on by the investment community that promoted the mismanagement of investment funds. Interestingly enough, I think there was sort of an expectancy that a large number of the dot.com companies would fail simply because they had no proven business model, where the more formal cultures tend to have (at least on paper) the representation that they have solid business plans – which is why it is so shocking when these more “traditional” bricks and mortar companies fail.

AG. Do you think such laid-back corporate cultures make whistleblowers’ roles any easier?

LB. Again, I think in a more “laid-back” culture, you tend to have more open lines of communication where more people feel engaged. I think it is important to differentiate between laid-back and unstructured. Enron was not laid-back but unstructured. The structure and controls the company represented they had simply were not there. No controls and no structure will ultimately cause a company to implode. A laid-back culture on the other hand, more along the lines of what we are seeing with Google, can be quite healthy and sustainable Of course, time will tell once Google goes public and the pressures to perform are placed upon them – they may lose their laid back style and if they have no structure or controls; they too will be just
another dot.com failure. However, having said that, the role of the whistleblower is never easy. Statistically speaking, 50% lose their job and 25% of those lose their families.

AG. Is there a different imperative for whistleblowers in emerging economies such as those of Africa in general and South Africa in particular and, if so, what is the difference?

LB. I believe along with an emerging economy comes a greater responsibility – both to act with integrity and to report those who fail to act with integrity. Unfortunately, in the United States, while we make up 6% of the world’s population, we consume 24% of the world’s resources. We have not learned the simple “economics of enough”. Unfortunately, as we move to a more global economy, many countries seek to emulate the United States, which can be a fairly dangerous thing to do.

I fear that Enron was simply a warning sign of where we are heading as a nation and that the same arrogance that brought Enron to its knees is likely to bring the United States to the realization that they may very likely be the next Roman Empire. My hope is that emerging economies all over the world would heed these warnings. Consider the United States your greatest whistleblower.

Lynn Brewer is author of “Confessions of an Enron Executive” and president of The Integrity Institute. She can be contacted on +1 253 843-0202 or by
e-mail at Lynn@TheIntegrityInstitute.org.

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Posted in the category: Insight

Swallowing Google whole

Just as in the wonderful Douglas Adams tale The Restaurant at the End of the Universe, where the ultimate restaurant is a symbol for all that is excessive on earth, the Internet can also be viewed in culinary terms in order to explain the excesses of both the hype that bedevilled it and the counter-hype that followed. This, in turn, can help us understand why the listing of Google on the Nasdaq stock exchange is causing such heated reaction from both its detractors and its cheerleaders.First, imagine that the Internet and all the old, new and convergent technologies revolving around it, powering it and being powered by it, make up a vast international restaurant.

There were those who refused to eat there, believing it to be too fashionable, or threatened by the apparent sophistication of the place, the menu and the waiters, and afraid they would not know how to conduct themselves there.

There were those who refused to eat anywhere else, believing this to be the only way dining could now occur, seduced as they were by the apparent glamour of it all.

There were those, whom we may call investors, who rushed to eat there as often as they could, simply because they heard that everyone else was being seen there. And, of course, there were those who saw it as a useful venue to add names to those already on their lists.

When everyone realised that some of the more high-calory items on the menu offered up to investors in the Internet were overpriced and offered only scraps on diners’ plates, the doomsayser feasted on what they imagined was the carcass of the new economy.

Analysts from both the old and new ecomomy sides of the fence all suddenly agreed that the old rules did apply after all, but in their haste to repair the damage they had caused when buying into the belief that the old rules had been thrown out, they dismissed the Internet as a passing fad.

And they got it wrong yet again.

What the doomsayers were doing was judging the restaurant by what they found in the garbage cans outside the back entrance. That’s where the leftovers from the old menu had been dumped along with the carcasses that had served their purpose.

But you don’t taste the leftovers to determine the value of a restaurant. You don’t stand outside the restaurant and look through the windows to count how many people may be suffering from indigestion inside. You have to go into the restaurant, you have to speak to the diners, and even take a walk through the kitchen.

At the tables you discover that those who have selected their dishes wisely are having a satisfying meal; those who dine at a range of restaurants, including this one, are quite happy with the service, the fare and the price; and even the kitchen, though it may have messy corners and workers who underperform and pots that have boiled over or just won’t come to the boil, serves its purpose as long as the demands made on it are not too great.

So it is with the Internet. It is a superb tool to include in general corporate strategy. It does not always perform as expected, and those who have too great expectations of it come away hungry or angry. Those who ignore it totally have enough other tools in their kit to keep their businesses going, although they may be missing out on a rewarding experience. Those who choose only the Internet as their arena of business more often than not come away with severe financial indigestion.

If you swallow the Google promise whole, of course you stand a high chance of suffering heartburn. If you reject its promise, of course you risk losing out on a great financial repast. Google may be a great business, and an even greater brand, but it is not the final word in business. The hyped-up but discredited Internet evangelists who see Google as the salvation of their burned reputations need to be put on sedatives before they start talking up the whole menu based on one dish.

But the same applies to the sour bankers who dismiss Google’s investor-friendly approach. The search engine company wants to spreading the potential rewards and bypass a number of mechanisms created by the financial institutions to boost their fees from IPOs. But there is no rule that says the banking business must come before the people business.

And if Google fails the taste test? Sure, it will damage Internet stocks, but it does not alter the significance of global connectivity by one byte.

The etiquette at this restaurant is not that you eat only here or not at all, but rather that you decide how it can fit into your diet, choose carefully and then eat sensibly. If it is not the right place for you, you make that decision based on your needs and what is happening in the restaurant. You certainly do not forage about in the garbage out back to have your prejudices proven.

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Posted in the category: Insight

Telkom Internet set to dominate dial-up

What it couldn’t do through the courts, Telkom is now attempting to do through good, old-fashioned competition: dominate dial-up Internet access in South Africa. This week’s annual results were highly revealing not only for the dazzling financial performance Telkom has turned in, but also for the trend lines that show its success at moving into fields some would regard as outside of its ambit.In 1996, Telkom attempted to use the courts to have all Internet Service Providers (ISPs) in South Africa declared illegal, or at least to have them meet regulatory requirements that could have shut down the industry. Telkom lost the battle, although it never conceded that the legal battle was over.

It was a mystery why Telkom should take such an antagonistic view towards what were some of its best customers, and those internal politics have remained an enigma.

In the meantime, however, they tried a far more effective strategy, but one that raised valid protests that they were competing against their own customers: they started an infrastructure provisioning ISP, SAIX, and a dial-up ISP, Intekom. The latter was always something of a maverick, with its own culture and a solid and loyal customer base, but one that was never a serious challenge to larger ISPs.

Then they launched Telkom Internet, and absorbed Intekom back into the fold and back into the corporate culture. Now they went the obvious route: using their massive billing run to market the ISP to the phone-using masses. A year ago, they had 98 000 customers on their books, making them the fourth largest dial-up ISP in South Africa. It was obvious, then, that they were going to challenge number two and three, Tiscali World Online and Absa Internet, before long. And so they did.

Their latest annual results show a huge 44% growth for Telkom Internet, to 142 000 subscribers, making them the second largest ISP in the country. And, while MWEB still enjoys a substantial lead, they are anxiously looking over their shoulders. Two years from now, the unthinkable may become reality: MWEB may become number two in the dial-up market.

That does not, of course, make Telkom the best ISP, but their price advantage is enough to deflect attention from their lack of a content offering and the tremendous value-add that MWEB builds into their packages. At the same time, of course, Telkom is making hay while the SNO fails to shine. In the absence of a second network operator, Telkom happens to control many of the fixed costs faced by ISPs, which prevent them from competing effectively on price with their own telecommunications provider.

Obviously it’s not fair. But using unfair business advantages to destroy the competition is a step up from using the courts. The flip side of the coin is that, when Telkom no longer has the monopoly, it should expect no favours from the competition.

  • Arthur Goldstuck is editor of The Big Change and managing director of World Wide Worx. He can be contacted by e-mail on mailto:arthurg@internet.org.za

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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