The ICT industry in South Africa is fragmented, with small players competing alongside large multinationals. It is also fast evolving from offering services such as outsourcing, which improve productivity and efficiency, to providing value-added services, such as analytics consulting and cloud-based computing. These new high margin sectors attract the attention of large international players and increase rivalry. With their strong buying power, global companies like Accenture, EOH and Amazon Web Services are driving the market consolidation locally. While this trend establishes economies of scale and drives down cost for client organisations, it can also disrupt the growth of South African ICT businesses and hinder local skills development.

The opportunity, given AYO’s differentiation:

Growth in the cloud computing industry is expected to reach a compound annual growth rate of 35.8% between 2020 and 2023, thus fuelling overall growth in the ICT sector. As a holding business for dynamic ICT subsidiaries with substantial cash reserves, AYO is in a strong position to acquire equity in upcoming cloud-based computing local businesses giving them the resources to scale their operations and access to the 500+ organisational clients the Group services. Growth through acquisition will remain an important pillar in our strategy for 2020 – enabling us to further diversify our portfolio into a lucrative value-added services segment.

Key risks and mitigating actions:

The disproportionate buying power on behalf of international tech titans vying for the same market access poses a risk of contested bidding and ultimately over-paying for investment-worthy subsidiaries. This is exacerbated by the fact that valuation of ICT companies is largely subjective and based on future prospects rather than tangible assets. To successfully compete in this arena, it is imperative that we engage in strict due diligence processes.

Our ability to offer added value beyond cash investment to targeted acquisitions, including access to new markets and speed of scalability, will enable us to present compelling offers to attract such auspicious subsidiaries.

Our business strategy and the integrity of the business and its leaders have been intensely scrutinised in the public domain since listing. While the excessive media attention can be seen as a positive sign, indicating that we are significant enough of a player in the South African economy to warrant high-volumes of coverage, it has had a resultant impact on our share price and discussions with targeted acquisition companies, and potential business partners. The reality is that many of the widely circulated media reports have been unconstructive and often based on unfounded allegations against our business. This matter is of material importance, as brand recognition and trust are deciding factors in the selection of service providers.

The opportunity, given AYO’s differentiation:

During 2019 AYO refrained from countering the blows we received in the media and chose to focus, instead, on strengthening our business and establishing a solid base from which to execute our strategy and deliver on the goals we communicated to the market at our listing on the Johannesburg Stock Exchange. We have made massive strides in the right direction during the reporting period and plan to assertively communicate these successes in 2020 to restore trust in our brand. We plan to use our communication channels effectively to deliver timeous and objective updates to our stakeholders.

Key risks and mitigating actions:

Brand reputation is an essential non-tangible measure for any business, particularly so in the services segment. The negative media exposure of the AYO brand, which is baseless and unwarranted, can have detrimental consequences on our ability to deliver value to our stakeholders.

AYO has developed a strong communication strategy to mitigate the negative publicity we have been subjected to in 2019, and convey the successes along the journey.

We recognise that collaboration amongst the subsidiaries companies that make up the AYO Group, as well as within the ICT sector as a whole, is a key enabler for business and overall economic growth. Transfer of knowledge and technological innovation across the businesses within the Group allows us to modernise and optimise our clients’ industries. Collaboration with large international players, on the other hand, enables us to introduce the latest global developments locally, grow our market share and revenues and exponentially increases the value to our clients. Furthermore, partnerships with respected global brands such as Microsoft and Amazon Web Services could actively enhance AYO’s business reputation and market positioning.

The opportunity, given AYO’s differentiation:

The dynamic nature of the ICT industry makes collaboration in the market a prerequisite, rather than a “nice-to-have” for local technology firms. This creates opportunities for new partnerships with global sector leaders. AYO has recognised that currently there is no official platform to foster such symbiotic collaborations and enable leaders of the industry to share learnings, technologies and practices. We envision creating a programme in 2020 to facilitate cooperation and shared learning amongst progressive local and international ICT companies, which will additionally enhance our business’ positioning as a leading innovator within the sector.

Key risks and mitigating actions:

Collaborative business relationships invariably involve a number of companies, which may be in different lifecycle stages, governed by diverse leadership styles and utilising distinct business processes. Thus, identifying a concerted partnership model poses a unique set of challenges. It is important to address such collaborations in a flexible manner and experimentation may be required, in some instances, to discover an optimal mutually beneficial model.

Further, proprietary IP is of paramount importance to the value of ICT businesses in general and collaboration would not be possible if such IP is not suitably protected. Through AYO’s experience in creating sharing platforms amongst our subsidiaries, we have developed solid practical models to foster joint developments and resource pooling while protecting and compensating for individual proprietary knowledge.

The ICT industry globally is influenced by rapid and continual technological advances, developing industry standards and changing customers’ needs and preferences. The success of a company in this environment is dependent on its ability to anticipate and adapt to changes. Effectively identifying global trends and innovations and translating these developments into locally applicable products and services will allow AYO to create new niche offerings as well as enhance the value proposition of our clients and reshape their industry verticals.

The opportunity, given AYO’s differentiation:

AYO’s key value-added reseller and supplier agreements with principals such as Dell, Plantronics, InterSystem Corporation, Cisco Systems, Microsoft Corporation, IBM and Riverbed Technology provide us with continuous access to the latest innovative global technologies. This enhances our business performance and enables us to deliver high-quality service to our clients.The incorporation of such cutting-edge products and services into our existing portfolio has the potential to unlock significant revenue growth for our business, while firmly entrenching our brand as the frontrunner of technological advancement in South Africa and driving economic and social development growth for the country as a whole.

Key risks and mitigating actions:

While being first-to-market with fresh technological solutions gives a company a competitive edge initially, the speed at which technological innovation is replicated in the 21st century globally renders any such advantage short-lived. Only through applying proprietary IP to enhance global innovations and customise them for the local market, we fortify the value of the lead.

AYO and its subsidiary businesses have established strong supplier partnerships with key international innovative technology firms to ensure we have immediate access to the latest global industry developments and invested heavily in talent to build much needed internal IP capacity. Key supplier partnerships and talent management will remain our core focus in 2020.

The agile environment that is the ICT industry prompts our business not just to understand but anticipate the key skills the segment will require in the future and proactively foster skills development in our staff and the broader community to continually generate a talent pool capable of driving the 4IR in South Africa. We recognise that to create disruptive solutions with multiple areas of integration requires diverse skill sets from individuals and that the speed of innovation necessitates continuous investment of time and resources in talent development. A people-centred commitment and empowering work environment, on the other hand, will enable us to attract and retain scarce skills.

The opportunity, given AYO’s differentiation:

At AYO, we are cognisant of the fact that proactive learning and growth to cater for skills in a changing world is paramount. We are also aware of the positive impact a meaningful learning and growth programme can achieve in transforming our communities and the ICT sector.

AYO Academy, our flagship skills development initiative, is designed to develop and nurture such meaningful, critical and scarce skills. The programme will ensure AYO’s talent pipeline is of the highest standard while supporting socio-economic transformation through upliftment and education of talented young leaders of tomorrow.

Key risks and mitigating actions:

Shortage of and competition for critical skills are rising globally in all industry segments. The situation is exacerbated in South Africa, where political and economic uncertainty has fuelled high emigration levels of talented professionals.

Having a strong employee value proposition is thus critical for our success in attracting and retaining a competent workforce. We focus on fostering an inclusive empowering environment, attractive remuneration and development opportunities, with the vision of becoming the employer of choice in the South African ICT industry.