Bring it on
Altron and the new market
SOUTH AFRICA’S technology sector is in a different dimension than it was five years ago. The way the market views, uses and thinks about technology has shifted. We’ve seen what happened to companies – such as Faritec – that didn’t fit into the new status quo, while others, such as Datatec, were geared for the road ahead and have come out of the recession on top of their game. As Rob Abrahams, CEO of Altron’s Bytes Technology Group subsidiary puts it: “The mystique of IT is gone.”
Because Alton is a large group of companies, analysing how it fits into the new paradigm depends on which part of the whole you’re inspecting. Its Altech subsidiary – in itself a listed group of 25 companies with a market cap of R6,13bn – has fared well. Altron holds 62% of Altech. But Bytes, which used to be listed itself but is now wholly owned and absorbed into Altron, has had its work cut out.
Altron reported encouraging results for the year to end-February 2011, with revenues up 2% to R22,8bn and an EBITDA increase of 6% to R2,1bn against its previous year. Earnings per share jumped by 15%.
With the payoff line “Fit for the future”, Bytes is proving it has what it takes to maintain relevance in the market despite experiencing tough conditions in 2009 and much of last year. Abrahams says the group is now looking for growth and finding potential in new technology trends. Building on his statement of technology losing its mystique, Abrahams says it’s become “just another cog in the wheel”.
But that doesn’t mean it’s boring, with innovation still where technology companies will differentiate. Among the myriad of products and services Bytes offers via its subsidiaries, Abrahams says cloud solutions is one area worth noting. “For us… the focus is on delivering selfservice applications from the cloud. For example, take the latest strategic alliance between Cisco and Xerox – cloud printing services. For me it’s increasingly about the private cloud more than everybody – but certainly cloud computing is gaining momentum and for us is an opportunity.”
Abrahams says in the world of technology there’s a trend towards commoditisation, which means companies such as Bytes have to be very good at maintaining margins and controlling costs. “Our cost to income ratios are way below 20%,” says Abrahams. “It’s all about doing it at the right price. To us it’s about reducing costs and improving operational efficiency. The market is tough but we’re growing.”
He says another differentiator is that Bytes represents leading brands, such as Microsoft and Xerox, and delivers those to the markets where it operates with a level of service it believes to be unmatched by competitors.
Bytes has more Microsoft certified professionals (MCPs) working for it than any Microsoft reseller in Britain. It has also been recognised as Microsoft’s “most operationally efficient LAR across Europe, Middle East and Africa” and last year was recognised as Microsoft’s “Partner of the year”.
“So we say bring it on,” says Abrahams. “We can deliver a service to a large SA company from Port Nolloth to Beitbridge.” And Bytes has followed its clients beyond SA and into Africa. Standard Bank and Shoprite are two examples of large customers Altron has strategically followed north of our borders.
Altron group CEO Robbie Venter says he’s happy with the way 2010 turned out for the company. Retail and banking, as hinted at above, are where many of the group’s most significant clients sit. Those were sectors hit hard by the recession, but Altron managed to stay on the radar.
“You have to keep spending for the future,” says Venter. “As do your competitors. We’ve seen that in banking with ATMs, for example. First National Bank was the first one to move on the new intelligent deposit machines in their network and other banks had to follow,” he says. Bytes’ Managed Solutions subsidiary provides NCR ATM products.
Selling hardware is about providing services beyond the delivery of products, says Venter, which carry single-digit margins for distributors. So Bytes has developed ways to play a role beyond that distribution element.
But the company has also developed its own IP in areas. Says Venter: “We’ve got pockets where our IP is 100% owned. We have a big software business in Cape Town. And Bytes Healthcare Services, for example, effectively has its own practice management software for medical doctors with 80% market share… about 10 000 doctors use our software.
“But we take it further. With the electronics that switches that transaction from the provider to the medical aid, we’ve got 60% to 70% market share in that and that whole layer of IP is owned by us.”
Abrahams says that system alone switches around 80m transactions/year and Altron is able to operate with a 30% margin on those transactions because of its investment in IP.