The engine to power the next generation of African miners which is flexible, scalable and affordable!

by Johan Theron, Director at Deloitte Consulting

The new mining environment in South Africa and Africa is all about entrepreneurial flair and fast reaction to volatile commodity markets. These miners want flexible, scalable and affordable back-office support.

This article was written by Johan Theron at Deloitte Consulting. If you have any questions or would like to arrange a more detailed discussion, contact Johan at jtheron@deloitte.co.za or +27 12 482 0514

It seems like there is a new scramble for Africa under way at the moment. Africa’s rapidly urbanising and increasingly affluent populations are certainly an attractive potential consumer market, but the real driver is global hunger for Africa’s mineral wealth. There’s also no doubt that Africa’s attractiveness as a market for goods and services also ultimately depends on the profits from mining Africa’s minerals.

The markets may be hungry for African minerals but they are also highly volatile—and look set to remain so. Long-term planning is thus much more difficult, but mining still requires significant long-term investment. Strong demand has also bred strong competition: it is now feasible to exploit smaller, less concentrated ore bodies. As a result, there are many more mining operations across the continent, and ownership is not nearly as concentrated as it once was. In part, at least, this trend is driven by Africa’s determination to participate much more actively in the mining value chain in order to ensure that more benefits remain on the continent.

In South Africa, in particular, the need for black economic empowerment has seen the birth of many junior miners, some of which have been hived off from larger entities. However they were formed, these ventures are primarily aimed at spreading South Africa’s economic wealth more broadly.

This changing mining landscape is driving the emergence of a new breed of entrepreneurial miners.

A new breed of miner

These new-generation miners are a far cry from the traditional mining houses with their impressive head offices and centralised, highly skilled finance, HR and IT teams. The new miners are building up their businesses—thus they are concentrated on exploration, followed by the creation of the infrastructure to support a mining operation and get the product to market.

All of this activity is, one should not forget, taking place at a time of severe fiscal constraint. Overheads thus need to be kept low, and fixed costs are much preferred because they make planning much easier. At the same time, as I noted earlier, demand has bred fierce competition: these companies definitely need to be run efficiently and to meet their delivery commitments.

These conditions place executives in a tight spot. Their main focus has to be entrepreneurial as they help to clinch new deals and partnerships, and generally create the strategy needed to prosper. They don’t have time to worry about day-to-day back-office operations although, at the same time, of course, they are dependent on them for cash flow.

A long established solution to challenges of this nature is, of course, to outsource some of the vital but non-core processes like payroll, HR or IT. Talking to these executives, it becomes apparent that payroll and IT are the processes most outsourced, but that other processes are rapidly catching up. The benefits include reduced risk and increased efficiencies—not to mention cost savings that, in our experience at Deloitte, can reach 30%. Benefits also include the flexibility to scale operations up or down according to business strategy, better regulatory compliance, a stronger control environment and access to global skills as needed.

Next-generation mining outsourcing for next-generation miners

Mining is one of the engines of our country’s and Africa’s future prosperity. I believe that this new breed of miner cries out for a new outsourcing model in which the key non-core back office processes are outsourced to a single vendor. The reason behind this thinking is, I think, compelling.

The first element of this thinking is that mining companies need to standardise on best practices appropriate to their sector. The days of extensive (and expensive) customisation are over. Both the systems and the back-office processes they enable should become background utilities comparable to water and electricity.

This is a welcome development because at one stroke it prevents companies from remaining hostage to the status quo—especially as the status quo might not have been optimal in the first place. It also means that software upgrades are easy and quick as there is no need to undergo the expensive customisation process each time.

Another key driver for today’s miners is the need to be able to predict costs accurately. This ability helps protect the bottom line and gives companies the flexibility to invest in their core activities.

Pulling all of this thinking together, I would propose the creation of an integrated solution based on an enterprise system that is preconfigured with best-practice mining processes. I would argue that it makes sense to outsource the financial processes that are enabled by this preconfigured system to the same vendor—along with the necessary IT infrastructure. It’s a winning approach because it enables process efficiencies across what is essentially a tightly integrated ecosystem. Along with these process efficiencies come significant cost reductions, as well as an easy-to-manage relationship with a single vendor.

The benefits for the next-generation mining house are manifold. As I have made clear, these operators are entrepreneurial in nature and are heavily into the investment phase of their life cycles. This type of approach gives them the freedom to focus on their core business strategy, secure in the knowledge that their non-core business back office operations are taken care of—and are optimised for the mining environment. The fixed, “pay as you go” cost structure means that CFOs can plan better, and can focus their efforts on growth activities.

A solution constructed along these lines has the advantage of being quick to implement (anything from four to six months would be standard, in our experience)—and it gives the small or mid-sized mining house a Rolls-Royce engine that it does not need to own or manage, but that that will give it the power it needs to do great things. Deloitte makes pioneering on the world’s final investment frontier easy.

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Filed under: Executive Leadership, Mining, Energy & Resources, access to global skills, Africa, back-office support, best practice mining processes, business strategy, CFO, cio, control environment, core business, cost savings, Deloitte Consulting, energy, financial processes, flexibility, IT, IT infrastructure, mineral wealth, minerals, mining, mining outsourcing, outsourcing, outsourcing model, payroll, preconfigured system, predict costs, processes, regulatory compliance, resources, single vendor, South Africa

Kamal Ramsingh of Deloitte Consulting on the state of information technology in South Africa

Kamal Ramsingh (Technology Head at Deloitte Consulting, South Africa) was asked to comment on the state of information technology in South Africa. If you would like to contact Kamal, his email address is kramsingh@deloitte.co.za.

A Comment on the State of IT in South Africa

by Kamal Ramsingh, Head of Technology, Deloitte Consulting, South Africa

When I was asked to comment on this subject my first reaction was a desire to obliterate the historic perception of South Africa being the poor cousin of the west that patiently waits for the Christmas “hand-me-downs” from Europe and the US. On reflection I came to two key realisations. Firstly, proof of us no longer being the “poor cousin” can be found via a quick trip to Dubai Duty Free – iPads there cost the same as back home – with a guarantee restricted to the UAE only! More importantly though, my second realisation was that there is significant activity around IT – in all sectors of our economy – but with very little tangible progress in areas that matter. So, like any good consultant – my thoughts have been framed in terms of key indicators and relative scores.

Government as a key buyer of IT services

The past year (or so) has been adequate proof of the spending turmoil in the public sector. SITA has a new CEO and we await its transformation with bated breath. Apart from the GCIO post still being vacant, the DPSA now has a new minister which will have its own implications on timing of next steps on IT. The good news, of course, is that Minister Padayachie drove the recently published “Vision for 2020 – Setting the ICT Agenda” document. Hopefully this will mean more traction for a focused ICT strategy. With the DPSA also having oversight of SITA – we would like to think that we could also expect a more meaningful deployment of IT within the public sector to improve service delivery and enhance government effectiveness.

Scoring for the Future: Government has not adequately supported the IT agenda to date. They have been lacking as a strategic spender that shapes and drives demand as well as a key enabler through legislation and standards. This is a fundamental risk as other African countries are rapidly presenting more attractive options for IT. The future does look brighter and we can but live in hope. Score of 4/10.

Private sector access to innovation

If the rate of market entry of Indian SI firms in anything to go by, then we must represent one of most lucrative markets on the planet! We have representation from all major global SI’s, Indian SI’s product vendors and consulting firms. There is definitely no apparent shortage of access to global IP or innovation. We also finally have PayPal and even Amazon delivers to SA now!

Scoring for the Future : We believe that we have successfully dispensed with the “poor cousin” stigma. Our businesses have viable access to global IP and our country is continuing to attract product and service organisations from around the globe. We definitely have work to do in broadening citizen access to the internet in historically underserviced areas. Score of 8/10.

Skills pool and Development

Minister Padayachie recently noted in the “Vision 2020 document” that it is financially more lucrative to hire and re-train a foreign graduate than it is one from our own country. Our dependency on foreign. low-cost locations such as India has – over the years – created a significant skills deficit in the IT domain. This has had a multiplier impact in acting as a deterrent to new entrants into the sector. As a consequence our pipeline of talent is notably weak with a vast majority of experienced practitioners reaching the latter part of their careers. As a consequence, there is limited succession planning in technology organisations and massive challenges in staffing key leadership positions in the same organisations. Our lack of planning and creating and integrated education process has significantly impacted our current ability to make a meaningful impact into most IT areas – without strategic partnering and sourcing with other countries.

Scoring for the Future: We have a lot of ground to cover – starting at the grass roots level and reaching far into the private and national government levels. The recent job creation commitments from the DoC created a stir – but thus far remain as the only real commitments made. We have to also mention that SITA’s use of the Integrated Financial Management Systems (IFMS) programme to attempt to stimulate both the SMME sector and the creation of local technology skills is commendable– but is still academic.  Score of 2/10.

Made in the RSA – Home-Grown innovation

We are often very critical of the constant flight of entrepreneurs and technology ideas to US shores. We are equally in awe at the mass of technology start-ups originating from India. This must beg the question … why not “Made in the RSA”?  It is my opinion that the total lack of a venture capital market for technology innovation must be blamed for both the flight and resulting absence of home-grown innovation. We have the CSIR that makes a business of R+D but lacks in the ability to commercialise. The Technology Innovation Agency (TIA) has been created with this primary objective in mind – but it remains a state agency and subject to the boundaries that come with this status. Let’s not forget the Centre for Public Service Innovation (CPSI) that is mandated to seek and fund innovations that enhance service delivery. We definitely have several viable channels and mechanisms that can be used to enhance local innovation – but yet we lack them. We need more Shuttleworths to really put us on the map!

Scoring for the Future: There is definite merit in the structures that are in place. Even the IDC has a VC fund that can be used for local content based technology start-ups. However, we should look to borrow from the Americans and Indians and promote the creation of a real VC “fund” for technology specific innovation. This will have the immediate effect of stimulating new SMME development in the sector – which is the engine room of any economy – and we are lacking this. Score of 5/10.

Telecommunications as a key enabler

No discussion on IT can be complete without a meaningful swipe at the telecommunication operators. The fact is that our telecommunications cost, availability and quality are significant inhibitors to the adoption of key technologies such as Cloud Computing, “Everything” as a Service and Enterprise Mobility solutions. The strategic intent to grow our Business Process Outsourcing sector remains under pressure as a consequence. The rapidly emerging market for mobile application development will see a significant step-up in the number of new entrants. These will come in the form of students and young entrepreneurs, all of whom will be dependent on the high availability of low cost broadband services.

Scoring for the Future: Whilst some strides have been made in this regard, the cost of telecommunications remains a significant and self-imposed barrier to meaningful entry into the new practices of IT. This is a material challenge as the majority of the next (and the next) evolution of applications and technologies will assume these fundamentals are in place. Score of 5/10.

Based on these indicators several key points of conclusion are appropriate. Firstly, we believe that both public and private sectors have meaningful access to thoughtware, innovation and services that are in-line with anywhere else in the world. In this sense, we are fully connected into the global economy and should comfortably shake-off the “poor cousin” mentality. We also believe that there are important and relevant channels for innovation and research.

However, we have to accept that we (as a country) are significantly behind the curve when it comes to the development of key skills. Whilst we are convinced that Government has a key role to play in releasing significant spend on IT towards improved service delivery – we are also key proponents of the philosophy of partnership between the Public and Private sectors in order to create the appropriate environment for cultivating growth for IT in SA. This environment must include establishing a VC market for technology innovation and alleviating the historic challenge of the cost of telecommunications.

Finally, and probably most importantly – we as a country lack a singular vision for our role in the global IT economy and with that, we lack a single point of ownership to make this vision real. We are clearly expending a fair amount of effort at multiple points but actions in the absence of a clear vision can amount to wasted energy.

There has never been a better time than the present to capitalise on new waves of technology and in so doing, leapfrog past leaders through innovation and collaboration.

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Filed under: Information Technology, Centre for Public Service Innovation, cio, cloud computing, CPSI, CSIR, Deloitte, development, DoC, DPSA, enterprise mobility, GCIO, government, ICT Agenda, IDC, IFMS, information technology, Integrated Financial Management Systems, IT, Kamal Ramsingh, SITA, skills, talent, Technology Innovation Agency, telecommunications, Vision for 2020

Cloud is not a silver bullet

Evolution or revolution? Or maybe both? In an interview with SAP Spectrum, Mark White, CTO Deloitte Consulting, and his deputy William Briggs discuss why cloud computing is the next giant step in IT – and how it will revolutionize business models.

Experts say that the cloud represents a new chapter in how enterprises can better use IT. Why do they believe that?

— Mark White —

There are three broad answers to the question what companies want to achieve by using the cloud. Number one: they want economic advantage. In fact, you might say they have a preference for operating expense over capital expense or they have a preference against a large upfront payment. So cloud, particularly public cloud, offers the opportunity for preferring operating over capital expense and for having a monthly subscription over a large upfront capital cost.

The second answer is speed to solution or scale of solution. The head of HR might say I need the resumé screening site up next week, not three months from now. Doing that with the internal IT team can take weeks or months. But in the cloud, it only takes hours or maybe days to go from identifying the need to identifying a service provider. As for scale of solution, there are actually two parts. In one I can pilot, test, or try out my new HR resumé sourcing system in a limited fashion with the external cloud provider. If it goes well, I can scale it up to the full scale and scope of my business demand. The second part is the global perspective. For example, it could be that I have quite a sophisticated IT capability in Germany but need a working group to do business in the Czech Republic, where my company’s IT capability just doesn’t manifest well. So what you are finding in some companies is that they’re going to a cloud to provide services for the remote, less developed, or emerging markets of their organization.

The third answer is efficiency of resource. Let’s use an SME example. SMEs are the most aggressive and complete adopters of public cloud services today because in the cloud they have access to solutions at a level of sophistication or capability that they can’t afford to implement internally.

Read more . . . . Cloud is not a silver bullet

Have any questions? Visit the Deloitte South Africa cloud computing website and speak to our specialists

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Filed under: Information Technology, cio, cloud, cloud computing, Deloitte, IT, technology

Cyber Crime – A Clear and Present Danger

This paper presents the key finding of Deloitte’s review of the results of the 2010 Cyber Security Watch Survey, sponsored by Deloitte. The paper reports several key results of this survey and Deloitte’s interpretation of key survey results. By its nature, interpretation goes beyond simple reporting of results (which is not our goal here) and may prompt disagreement or even controversy.

Deloitte believes however, that some of the findings point to significant incongruities between the views of many survey respondents and the current reality of cyber crime. Given that the survey respondents include mainly executives and professionals responsible for the security of their organisations’ IT environments, such incongruities are worth examining.

Download the full report . . . . Cyber Crime – A Clear and Present Danger

Contact one of our specialists at Deloitte Risk Advisory for a more detailed discussion:

Kris Budnik       kbudnik@deloitte.co.za  

Tommy Prins     tprins@deloitte.co.za  

Dave Kennedy  dkennedy@deloitte.co.za

Marius Alberts   maalberts@deloitte.co.za

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Filed under: Risk Management, cyber crime, Deloitte, IT, security