Isaac and I were about 12 when we discovered computers at Christian Brothers College in Kimberley. The attraction was instantaneous and the fascination intense. We were two kids from Ga-Rankuwa. Our mother had been in healthcare all her life and she was a matron at the local hospital; our father started out as a teacher and became an education specialist. They were both always very clear about education opening the door to success. And both of them were strong on discipline. That’s why they sent us to a Catholic boarding school. We finished high school and did well enough to get bursaries from South African Breweries (SAB) to study accounting. We were lucky. Although our generation was the last to be really exposed to apartheid, there were some of us in the township who knew that the only way up was through education; of course, we were aware of the realities around us, but we held onto the idea that school and university would provide an escape from the circumstances we lived in.
During the holidays, we worked in sales at SAB and towards the end of our studies we both got part-time sales jobs at what was then Software Connection. That really gave us the opportunity to develop our passion for technology. Remember that the IT revolution was only just beginning. Java programming language started to catch the attention of the technology world as a platform-independent language. Windows 95 was considered to be a cool thing, so cool that one million copies were purchased by users in four days. Microsoft’s Office 97 was published in December 1996 on CD ROM and also on a set of 45 3,5-inch floppy disks. The Internet did not exist in many countries; neither did email nor mobile phones. Google launched that year, but hardly anyone outside Stanford had heard about it. These were very exciting times for people who had an interest in tech stuff.
Also, by the time we were ready to start our own venture, we had been exposed to many different role models – our parents, our teachers at school, and the highly qualified and talented people we worked with at SAB and Software Connection. I cannot stress enough how important it was to work while we were studying – it laid the foundation for so much that was to happen later by giving us experience and exposing us to the world of business while we were still students. Few entrepreneurs get access to funding for their ideas, but it was different for Isaac and me. By 1996, we had worked part-time for Software Connection’s Pretoria branch for 18 months. We got to develop a great relationship with the owners of the chain, a company called the Connection Group and headed by then CEO, Philip Cowles.
They knew us well; we came to work every day, we were always on time, and we were good salesmen. The customers liked us, and we were always ready to put in the hours. So when we came up with an idea for our own business, they loved it. I think they were so drawn to it because they were entrepreneurs themselves; they knew where we were coming from. We asked them for R4 million to finance a start-up – a computer reseller targeting government departments and parastatals. Procurement policies were changing, and it could not have been a more opportune time for two young black men to stake our claim in what was about to become a booming industry.
Launching the business
When we completed our accounting degrees and got the loan, we were both absolutely determined to make it work. We knew that this was our chance, and I think we made the decision early on that we would build a company that would become a force to be reckoned with. Our vision was to create a business that was more than just a small IT shop – we wanted it to have longevity and to provide employment for people. We wanted to leave a legacy.
You have to take advantage of the opportunities that life presents. The fact that we got capital meant our aspiration could become a reality. There was risk involved on both sides, but we were almost arrogantly confident in our abilities and, at 23, far too young to be afraid of risk; second, we had built a great relationship with a company that was itself created by entrepreneurs, so they understood. The money was a loan and we had every intention of paying it back, which we did later on. That was how we launched Business Connection. But having the cash did not make it easy. One of the biggest headaches was leasing office space. Nobody believed we had the money to pay. Eventually, we managed to secure 165 m2 in Brooklyn, Pretoria. We hired a secretary and started trading in September 1996. The first clients were the National Parks Board and the Council for Scientific and Industrial Research (CSIR). Again, our part-time work paid off.
We had met a lot of our future customers when they popped into Software Connection. We had already built quite a large network and by tapping into that we secured our first customers. It sounds simple enough, but it was vital at that stage to prove that we could deliver. Had we failed to do that, the business would not be here today. The Connection Group provided accounting services for us, so we did not have to appoint a financial director in those early days. That level of administrative support from a company that had the know-how meant we really could do more with less. The help and the expertise we had access to made an enormous difference. We focused on gearing up the business for growth so that we could meet our contractual obligations.
The Microsoft differentiator
In that first year, Business Connection earned revenues of R100 000. But we had no intention of remaining small, which is why we realised we would have to move away from being a reseller and become a software integrator. To do that, we had to partner with a big player in the industry. By 1997 we had started to change direction to focus on becoming a specialist Microsoft Certified Solution Provider and one of a small number of local Microsoft Large Account Resellers. Microsoft then was what Apple is today.
Bill Gates was not yet a household name, but his company was young and it was changing the world. We too were young and we wanted to be part of that revolution. Microsoft in South Africa turned out to be an excellent ally and provided us with a lot of support, training and market research expertise, which in turn meant that we became specialists in the technology as the demand for it was escalating.
A big turning point came when Business Connection secured a three-year R100 million contract with Telkom towards the end of 1997. We had worked ourselves to the bone preparing pitches for business and compiling proposals. We worked 18-hour days and had no weekends. Winning this deal gave us our big break. We had to supply the entire Telkom user base with Microsoft licences. That deal literally changed the business overnight. Suddenly we were in another league. We had to employ additional experienced staff, which we did quickly. The deal was a success and we did the job well, because we knew we had to get it right. It was then that we realised how absolutely critical customer service is in the growth of a business. We got the chance to prove that in addition to making the sale, we could deliver on our promise to the client.
The first merger
In 1999, the Connection Group was having troubles and its stock collapsed to around 20 cents. Thankfully though, our local Microsoft proficiency paved the way for a global tie-up with Dutch-based multinational firm Getronix. The company acquired a 50% stake in Business Connection, enabling us to pay back the Connection Group loan and grow our staff to 50. We were now part of an international group which gave us access to new skills, new business and huge exposure to global best practices.
A year later, we were at a Microsoft conference in Seattle where we bumped into Matthew Blewett and Bruce Krebs, founders of Seattle Solutions, a Microsoft business like ours. We hit it off immediately. Meeting them proved to us how important it is to expose your business to the outside world and to attend conferences and expos. That networking element is key. Our presence effectively enabled the next phase of growth. Where Business Connection was largely Gauteng-based, Seattle Solutions had a strong footprint in the Western Cape and KwaZulu Natal. The value that a merger could bring to both businesses was a no-brainer. In 2001 we joined forces to form Business Connexion, an integrator of business solutions focused on Microsoft products. I was appointed MD. We rebranded the company with an ‘x’, but kept the name because it was already well known and respected.
By 2003, seven years after we had launched our start-up, our revenue soared to R300 million, we were employing 350 people, and we had offices in Rivonia, Pretoria, Cape Town and Port Elizabeth. We also became the only company in South Africa with triple Microsoft Gold Partner status for enterprise systems, e-commerce and support. In addition to that, we were named Microsoft’s channel partner of the year for the Africa region for two years in a row.
The business lived and breathed Microsoft technology. It was this dedicated focus on one area of specialisation that really paved the way for our early successes. Do one thing and do it right, that’s my advice to young entrepreneurs. That way, you build a reputation for your business in the market that few can compete with. Reputation is extremely important because it makes finding and securing business so much easier. Anyone can start a venture, but it’s how you conduct business that makes an impact on your customers, and on the industry you work in.
Nonetheless, our systematic pursuit of growth soon meant that although our base of Microsoft clients was huge, we needed to develop a new set of skills and services to offer the market, preferably with a strong focus on outsourcing. We dominated the Microsoft market at that stage, and when you dominate you have to be aware that your position is not sustainable indefinitely, which is why it was time for us to diversify. We knew that we had to take a leap to move the business up to the next level. The move was enabled by our merger with a big systems integration company, Comparex Africa, in 2004. I became deputy CEO and Isaac was appointed group executive for public sector client engagement, a position he still holds today. Isaac also heads up the innovation arm of the group. The deal, valued at more than R220 million, created a black-empowered ICT giant with annual revenues in excess of R3 billion. Business Connexion listed in May that year.
Listing came with its own challenges. It was not a decision we took lightly. Entrepreneurship and the corporate world can make uncomfortable bedfellows. It’s widely known that one of the key challenges when a company decides to list is how to transform the independent, entrepreneurial management style of a private business to that of a listed entity responsible to external shareholders.
Sure, listing comes with benefits – such as access to capital for expansion – but it also raises the profile of the business and places reporting, compliance and corporate governance responsibilities on the executive team, all aimed at protecting new shareholder interests. It’s vital, therefore, to ensure that a company is at the correct stage in its business lifecycle to benefit from being public. In our case, we saw the Business Connexion listing as a definitive milestone in that lifecycle. It was the logical expression of the vision we had back in 1996. A number of acquisitions followed. Between 2004 and 2009 we bought four companies. Today we employ 4 600 people and we have offices in Namibia, Tanzania, Zambia, Mozambique and Nigeria. When we started the business, we knew that we wanted to develop it into something considerable. To grow, you have to learn to let go. Our growth has been achieved largely through mergers and acquisitions, all of which were hugely emotional decisions. I always had to be realistic about how my role would change.
The M&A challenge
Mergers and acquisitions put a huge amount of pressure on any organisation. Again, the Microsoft factor played a role. The technology was in great demand throughout, which meant that there were no cutbacks. When you don’t have to layoff staff, it’s a lot easier. The toughest decisions we always had to make were about who would lead the teams. You have to make peace with the fact that not everyone can continue to do the same job, but we always focused on choosing the best person and doing it swiftly.
Months and months of deliberation make everyone uncertain. The quicker you integrate two businesses, the easier the process is on everyone. Many companies that merge try to maintain the status quo; I don’t think it’s possible. It’s better to realise that change has happened and to move on.
Business Connexion’s depth and breadth of skills has played a core role in its service delivery levels. Through all the mergers and acquisitions, the value of our client relationships came to the fore as we never lost any customers along the way. Gut feel plays a hugely important role when you are making a decision about whether to buy a company. Once you know you have common ground, you have to make sure that the deal is in the best interests of your staff, your management team and your shareholders. Those factors are what determine the overall health and sustainability of any company. When you have alignment there, go for it. In the fast-paced world of IT, one of the few sustainable competitive advantages any business has is skilled staff. We have always recognised this. Ongoing investment in our people positively impacted our bottom line and growth. By focusing on the accelerated growth of our employees through intensive and ongoing training, we were able to deliver the best professional services to our customers. The successful transfer of knowledge has empowered our employees.
Surviving the Telkom bid
My biggest challenge so far was 2007. That was a hard year. I succeeded Peter Watt as CEO of Business Connexion, having worked alongside him since the 2004 merger. I had learnt a lot from him. But that was also the year that Telkom’s bid for the company was finally called off.
Telkom had made a play for Business Connexion in 2005, which it raised to R2,4 billion in 2006 to woo board members. The bid was eventually blocked by the competition authorities when regulators and rival operators argued that the former monopoly would be reinforcing its dominant position in the market. We were pursued for two years. Had the deal gone through, it would have been excellent for our shareholders, but not for our staff and customers. It’s one instance in which staying true to who we are was critical. But the bid had a bad impact on the business. Operating profit plummeted by 25% and headline earnings came down by 13%, indicating the damage caused by the uncertainty around the offer. When it was all over, my team and I decided to take corrective action. It was a business imperative. I had just taken over as the head of the company and it was clear that because of the distraction of being targeted by a large organisation, we were worse off than our peers. Quite simply, management had taken its eye off the ball and the business had suffered as a result.
We initiated a revitalisation programme which lasted for two years. A wide range of projects and cost-cutting measures were rolled out, all focused on boosting margins, attracting more of the right people, ensuring accountability and clarifying responsibilities, eliminating duplication and consolidating support functions. Our financial results show that we did the right thing. The company has since succeeded in restoring its fortunes. Our operating profit margin went up by 6,1% for the six months ending February 2010, against 3,2% for the six months leading up to November 2008. This was a direct result of savings on operating expenses. In addition, investor confidence has been restored and we expect strong growth in profits in the months ahead.
There’s no doubt that having a twin brother who shares your vision is a huge advantage. Isaac and I have worked long and hard hours to build the business. But we’ve always had the comfort that comes with knowing you are working towards one common goal. We have also constantly had the confidence of believing that we can trust each other and rely on each other when times are hard.
We have played to our individual strengths. Isaac is a people’s person who has great sales ability, which is what he has focused on.
My strengths lie in strategy development. I believe my leadership style is balanced and engaging. I welcome participation and interaction from my team. But I always ask one question and demand a careful, considered response: is this in the best interests of the business? It’s this clear definition of roles and responsibilities – taking into account our different yet complementary abilities – which has made it possible for us to work together so successfully. It’s been difficult to establish balance in our lives. I’m a true Blue Bulls fan and I made sure I was at the Super 14 final in Soweto to witness my team’s triumph over the Stormers. Sport is a great interest of mine, and it’s one of the ways I maintain balance between work and my personal life.
I believe that even today we have kept the entrepreneurial spirit of the company alive by empowering all the people who head up our business units and making them accountable and responsible. It’s inevitable that the bigger you become, the more corporate you become, but it is possible to keep that excitement about the business alive. Investec is a great example of a business that’s done just that.
The company has also weathered the global economic recession, emerging fairly unscathed. That’s because a large portion of the business is based on annuity revenue. Annuities have pulled us through the worst, but I must admit that we have seen far fewer technology refreshes in the last couple of years, so we have indeed felt the impact of the downturn even if we have not been damaged by it. Thankfully, we started rolling out the revitalisation programme before the recession really kicked in. Another thing to bear in mind is that we have never really had a problem with profitability. The business has always been successful from that point of view. But there’s a key factor that has worked in our favour – we have never had to cut back on staff so we have never had to deal with the emotional impact of layoffs, even when times were hard.
Looking ahead, we aim to consolidate our business in South Africa and to take advantage of the escalating demand for data centres and cloud computing. One of the main challenges for us now is to grow our African business. We have clients across the continent in financial services, telecommunications and other industries, but we always have to be realistic about doing business in Africa. There is a lack of skills in these countries, and getting the right people in place is not easy. Skilled South African employees are not really that keen to live in regions where there is little infrastructure. All of these factors add up to a huge cost of doing business. We have to be very cautious. I’m really excited about the future. Our industry is going through changes. Cellphones are becoming more important and widespread than PCs. As the telco sector is liberalised and the price of bandwidth comes down we are going to see more and more innovation, particularly in mobile. We’re ready for the next wave.
Our work ethic was established early on in our lives; coupled with the determination to succeed, our faith in each other, and a hard-earned reputation built over many successful projects, it has enabled us to grow the business and turn the dream we first envisioned all those years ago into an organisation that will continue to create value for all its people for many years to come. In the beginning, we capitalised on being in the right place at the right time. We were savvy enough to take advantage of the opportunities that came to us as a result of political change in the country, and to leverage the innovative new technology that was coming to the fore. It was a perfect combination of circumstances. But we were also smart enough to deliver. Now, as a multi-billion rand global enterprise, we are poised once again to make the most of the changes that are happening in the ICT industry and to build on the legacy we have created.
10 Fast Facts About Business Connexion
- More than 30% of South Africa’s employee pay slips are generated by Business Connexion’s payroll solutions
- Business Connexion runs the networks and IT infrastructure of the largest producers of paper and packing solutions in SA
- Business Connexion’s ERP solution is used to produce more than 4,5 million statements to South African ratepayers
- Business Connexion designed, developed, implemented and maintain Government’s payroll system, PERSAL
- Business Connexion’s Venus financial solution processes more than 4,5 million municipal consumer accounts
- Business Connexion provides the ICT solutions that underpin the operational excellence of some of South Africa’s largest retailers
- Business Connexion designed, implemented and maintains the network system that handles the bulk of South Africa’s airline reservations
- More than 30% of South Africa’s short-term insurance policies are created, under-written and processed using Business Connexion’s solutions
- Business Connexion provides the IT backbone for the delivery of over 40% of South Africa’s liquid fuel requirements
- Business Connexion manages and co-ordinates the ICT service delivery of four of the big six mining resource companies in South Africa. It also oversees and integrates various service and product suppliers for them