World economic crisis hit Kenya’s IT sector

October 16, 2008 • Top Stories

Kenyan Technology firms are bracing for a period of reduced spending on solutions as the global economic crisis continues to claim more casualties among financial firms, who are often the biggest spenders on IT.

In a report today Business Daily Africa said the sector which is often touted as the most efficient method to improve business processes and increase efficiency, companies around the world and in Kenya have been allocating increasing portions of their budgets to IT.

But results released by a number of companies in the sector reveal the downturn is having an impact on IT spend. “The market developments of the past several weeks have been dramatic and worrying to many businesses.

These concerns triggered a sudden and unexpected drop in business activity at the end of the quarter,” said Henning Kagermann, Co-CEO of SAP, the world’s largest business solutions provider.

Market watchers are seeing SAP’s announcement as indicative of the wider issues in the technology industry, as it is one of the world’s largest software companies.

Growth predictions

Several forecasts in the last few months have predicted Kenyan companies would spend more on technology in the coming year, but local players are reserved on growth predictions following the downturn. “It is still too early to tell. Certainly we had anticipated a good earning season for the coming months.

“I would say that this market will be affected by what is taking place but it’s still difficult to tell by how much,” said Serge Blockmans, CEO of Seal Consult, a pan-African SAP distributor based in Nairobi.

Locally SAP has been enjoying increased spending on its solutions by government, financial and educational institutions as well as small and medium enterprises.

SAP software is an Enterprise Resource Planning (ERP) solution that manages and streamlines data that gets captured and maintained during a company’s various business processes.

This can include capturing accounting, procurement, human capital management, production planning, project management and customer relationship management among other processes. The Kenyan ERP industry has been growing as more organisations in the public and private sector shift to the information age and need applications to streamline their processes.

Analysts say the slowdown in technology spending is expected to mostly affect providers of large enterprise solutions, although early indicators also reveal a decrease in online advertising and hardware manufacturers have indicated they may have to revise their initial earning forecasts.

SAP announced last week that after a preliminary review of its 2008 third quarter revenues, it expected third quarter software and software-related service revenues to rise. “The overall fundamentals of our business remain in place” said Mr Kagermann.

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