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SafaricomCLOUD: Safaricom’s third act to dominate Kenya’s telecoms sector?

There is no denying that Safaricom is easily one of Kenya’s most innovative companies, even if its DNA is ultimately rooted in technology. It seems just like the other day when mobile telephony became widely available to the masses in Kenya at the cusp of the Millennium when Safaricom and Kencell launched their services. In fact, Kencell’s network was actually operational before Safaricom’s and everyone expected them to do well as  a result of the head start they had. However, the folly in Kencell’s launch is that they focused on the post-paid customer rather than the pre-paid customer. This proved to be their undoing as Safaricom hit the market with pre-paid services as the sharp-end of their strategy. Everyone could sign-up for Safaricom without needing to place financial deposits or showing their bank statements. All they needed was a mobile phone and pre-paid scratch cards to get started. In addition, Safaricom focussed on per second billing whilst Kencell focussed on per minute billing. The rest you could say is history and we all know what happened – Safaricom won that battle quite convincingly and it’s probably the platform that they needed to consolidate the market leadership they hold to this very day. However, that battle was largely about voice and SMS services. You could say that was Safaricom’s the first act in dominating Kenya’s telecoms sector.

The next phase of Safaricom’s market domination came with the arrival of M-Pesa and data services. More specifically, in launching M-Pesa, Safaricom reinvented Kenya’s financial services sector and almost all of its millions of subscribers are now more or less subscribed to it. This all happened around the time that Kencell had already changed its name to Celtel and thereafter to Zain. M-Pesa in many ways has locked in subscribers to Safaricom as its immensely useful as we know for moving money around. At more or less the same time, Safaricom paid a handsome fee to secure a 3G data license from the Communications Commission of Kenya and that led them to launching the first 3G data network in Kenya. The amount that Safaricom paid for this privilege was very high and we all saw the other networks balk at paying anything close to what Safaricom paid. Ultimately, two things happened in the process – one is that Safaricom had a monopoly on 3G data in Kenya which led to individuals and businesses opting to use their speedy network for data services. At the same time, the other mobile networks had to watch as Safaricom’s 3G revenues took off rapidly whilst voice and SMS revenues plunged. In fact, it was only just two months ago that the second 3G data network went live in Kenya in the form of Orange Kenya and we know Airtel Kenya has (partly) launched 3G services recently. So, you could say, Safaricom’s second market dominance act was the potent combination of launching M-Pesa and 3G data.

This past week, we saw what is essentially the arrival of Safaricom’s third act – the launch of their cloud services, also known as SafaricomCLOUD. According to Wikipedia, The Cloud or Cloud computing is the delivery of computing as a service rather than a product, whereby shared resources, software, and information are provided to computers and other devices as a utility (like the electricity grid) over a network (typically the Internet). SafaricomCLOUD offers the following 3 cloud service pillars:

  • Data Centre As A Service.
  • Storage As A Service.
  • Back-up As A Service.

I happened to attend the launch of SafaricomCLOUD and the total investment that they have put in shocked me – Safaricom has already invested Kes. 2 Billion and plans to invest another Kes. 1.5 Billion over the next year or so. Going by the recent exchange rates, this represents an investment of US$ 20 Million thus far for a service they have yet to start selling in the market. They are clearly taking the next wave of cloud services very seriously and are easily way ahead of other telcos in this space. So, what has happened is that the goal posts have shifted once again for Safaricom’s competitors – whilst they are trying to get subscribers onto 3G, Safaricom are already moving up the value chain to offer world-class cloud services right here in Kenya. As data becomes the next frontier for competition, Safaricom once again seem prescient and are moving forward relentlessly in their third act for market domination.

It seems hard to imagine that just last year I wrote a blog post here as to why we urgently needed to build out the local cloud after some outages on the high speed undersea data cables connecting East Africa to rest of the world reminded us as to how dependent we are on the International cloud already. At the time, getting to Gmail or Google Apps or any other form of cloud service was nearly impossible. Therefore, it seems that through Safaricom we now indeed have the local cloud that we have always needed that could make data services far better for organizations and people in the region. I am eagerly looking forward to the prospect of more companies setting up local cloud services by following Safaricom’s lead in this respect. This will ultimately lower the cost of accessing cloud services and reduce the latency of using cloud based services. It will also enable capacity building in terms of deploying and managing cloud services for local consumption, across the board, as well as  encourage innovation. In the final analysis, it’s a good thing and Safaricom once again is setting the tone in Kenya’s telecoms sector.

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3 Comments

  1. October 29, 2011 at 7:38 pm — Reply

    It will be very interesting to see what (user-oriented) applications they actually get onto the platform (and not just digital archives for the gov).

    Having cloud infrastructure is great – but you need something in it before it has any impact.
    Am sure the any farmer will agree that a cloud without rain is useless 😉

  2. Peter Mathare
    November 14, 2013 at 11:39 pm — Reply

    Thanks for the great insights. Any chance you can include hyperlinks (or list) some of the sources you used, especially in the first paragraph? I’m guessing a ton of researchers out there would appreciate that.

    Thanks!!

    • November 18, 2013 at 4:43 pm — Reply

      @peter I wrote this blog post ages ago. Truth be said most of what I cited is from memory based on what actually happened? There was no real source “per se”. Glad you enjoyed the read 🙂

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