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By Chloe Castle, channel partner lead at Backspace Technologies
While connectivity has become the lifeblood of businesses and households, with a growing addressable market offering attractive opportunities for SMEs and innovative businesses to scale in the sector, there is a tension between South Africa’s need for job creation and economic expansion and the exclusionary, gatekept realities for businesses trying to enter the local telecommunications landscape, says Chloe Castle, channel partner lead at Backspace, a South African B2B telecommunications company and technology enablement partner.
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Castle explains that while the opportunities are clear, business owners trying to find their way often face prohibitive Capex requirements, arduous ICASA/industry compliance, billing and CRM software expenses, technical and support headaches, excessively long on-boarding processes and prohibitive minimum spend requirements holding potential channel partners back.
Cost of competing with Tier-1 network operators is gruelling
For a boutique IT business or independent internet service provider (ISP) trying to scale, the cost of competing with Tier-1 network operators is gruelling, she says. She adds that trying to navigate compliance while securing commercial agreements across more than a dozen fibre network operators, not to mention being held to high minimum monthly spend commitments, has many businesses on a road to collapse.
The solution, Castle argues, lies in shifting away from fragmented dealer models toward an integrated, collective “economic ecosystem”.
She says:
Chloe Castle
“This way, you consolidate aggregated buying power so that independent businesses can bypass brutal minimum spends typically demanded by upstream providers. We’ve seen first-hand that this approach allows smaller players to maintain healthier margins while remaining competitive on price”.
Margins and price competitiveness are important
Castle says that margins and price competitiveness are incredibly important because the industry is highly competitive and can be unforgiving despite the immense opportunity.
“We’ve seen many instances of businesses being acquired, folding, and liquidating. The prohibitive environment means that this happens widely, not just to small startups, but also to well-known businesses. Being forced into steep commitments and then layering the typical requirements, you’re in for a million rand before you’ve opened your eyes and started trading. That’s a bridge too far for many”.
Agility is a word that’s often used in the corporate world, says Castle, but when one considers typical corporate onboarding, with vetting, KYC and procurement pipelines regularly taking three months to operationalise a new partner or enterprise client.
“Instead of agility “we see slow, creaking wheels and not the responsiveness needed by modern African businesses. No one can afford to wait a whole quarter to start trading, and this is exactly why we have built an offering around a gap of just ten days between an application to be a reseller or dealer partner and the first sales”.
Building own business infrastructure from scratch
Castle adds that another obstacle keeping businesses out of the sector or preventing them from scaling is the sheer weight of trying to build their own business infrastructure from scratch. “Businesses wanting to scale need a business-in-a-box solution. This de-risks their expansion by enabling them to piggyback off a pre-built technical, regulatory and billing aggregator platform. It frees them to go out and actually grow their businesses,” she explains.
Being able to onboard quickly as a partner and have the peace of mind of ongoing support and robust billing infrastructure, enables SMEs to prevent revenue leakage and take advantage of growth opportunities eluding them currently.
“Think of an organisation already working in a business or business park as a specialist security or IT partner. Once they are onboarded as a reseller or white dealer partner, they are creating multi-stack value by combining internet, telephony, security, servers and more, meaning the end client has no reason to look elsewhere. This stickiness creates a competitive advantage,” she says.
Castle says that businesses wanting to grow in telecommunications need a real partnership. “Of course, businesses need to execute but with ongoing support they can be hitting steady targets within six months and by a year they generally start hitting the real momentum of the growth curve. Beyond that, with discipline and effort, we have seen businesses develop impressive core, sticky customer bases, enabling the financial freedom to grow and expand their teams”.
