Boutique advisory BCX unit created

Telkom’s information technology subsidiary, BCX, is wading into consulting, an industry that is dominated by global firms such as Accenture, in an effort to be a one-stop shop for digital-related services. This is part of the group’s plan to diversify its revenues and offer more of its own products at higher margins.

Telkom’s information technology subsidiary, BCX, is wading into consulting, an industry that is dominated by global firms such as Accenture, in an effort to be a one-stop shop for digitalrelated services.

This is part of the group’s plan to diversify its revenues and offer more of its own products at higher margins.

BCX said last week it had a selected team of software engineers and other digital experts to be part of its new Exa unit and focus on capabilities including digital advisory and consulting, software engineering and integration, data insights and intelligence.

BCX, which provides information and technology hardware and software products and services, contributed half of Telkom’s R43bn revenue for the year to March.

Vish Rajpal, BCX chief of information technology solutions, describes the new unit as a “boutique advisory practice”.

BCX CEO Jonas Bogoshi said: “We had the option to simply call it ‘digital transformation’ and say we have a R3.5bn business, but the team instead chose to start everything from scratch.”

He explained that BCX was already doing some of this work through its various business units but decided to create a separate unit that deals exclusively with addressing, designing, creating and implementing client-specific solutions.

Work on the new unit actually started in April 2019, Rajpal said. The aim is to make it a R500m a year business, he said, adding “there’s been a lot of demand already” from clients wanting tailor-made programs. Revenues for the unit have doubled, having started at R100m in 2019.

BCX chief of sales Shaheen Vawda said Exa will allow the company to create custom software programs and solutions, which is a higher-margin business.

Traditionally, information technology companies became vendors and support units for large technology companies such as Microsoft, Oracle or SAP, which entailed paying licensing fees or a share of profits to the inventor of a solution.

Vawda says BCX is growing its own portfolio of software, adding that the company will “build once and reuse”.

Once a software program or solution has been built, it can be repurposed or used many times in different contexts. An example is Microsoft Office which is used by millions of people across sectors in homes, schools, the government and enterprises.

BCX is not the only information technology firm preparing for a future in which being a software provider will not cut it.

Having lost a lucrative Microsoft licence as a result of governance concerns and an investigation, EOH CEO Stephen van Coller recently said in the future information technology customers, both at consumer and enterprise level, are likely to be able to access products and services directly from firms such as Salesforce or IBM, without the need for middlemen. This is the future he is preparing EOH for, one in which companies evolve from being vendors or resellers and relying on revenue from licensing to offering their own products.

Describing BCX’s business, Bogoshi said the company has three distinct types of revenue.

The first he calls “good but declining”. This includes the legacy fixed-voice business which produces good margins but with the shifts and changes in technology, experiences declining demand.

In the last financial year, BCX’s revenue declined 4.3% to R18.7bn, driven by 15.8% shrinkage in the fixed-voice business. This was partially offset by 2.3% growth in its information technology business to R9.1bn, due to specialised solutions and growth in its own intellectual property.

The second type of revenue has high income but “restrained growth or margins”, Bogoshi said. This segment is mainly driven by its managed services through which, according to Bogoshi, BCX is simply “exchanging time for money”.

The third type of revenue, which BCX is directly trying to tackle with Exa, is that of advisory and consultancy. It offers small returns now but has potential for growth, Bogoshi said. His aim is for 5%-10% of BCX’s revenues to come from these new areas of business.