Kathy Gibson reports – The Fourth Industrial Revolution is being positioned as the driving force behind South Africa’s economy, so there’s a pressing need for government and business to properly understand what it means.
This is the word from Arthur Goldstuck, MD of World Wide Worx, presenting the findings of the company’s latest research, “The Mobile Corporation in South Africa 2019”, conducted with Syspro South Africa.
Encouragingly, budgeting for ICT spend in South African companies has increased, with 68% of corporates having grown their investment in technology.
The single biggest expenditure was in enterprise resource planning (ERP) at 34%, followed by hardware/machinery at 26%, other (representing niche investments and indicating a lack of focus, says Goldstuck) at 25%, other applications or software at 10% and customer relationship management (CRM) at 5%.
Manufacturing companies tended to spend less on ERP, at 32% of respondents. This sector was also behind in hardware/machinery spend at 22%, others are 30%, other applications and software at 13% and CRM at 4%.
Going forward, just 27% of respondents plan to upgrade hardware. Instead, they are planning to spend on virtualisation (89%), software as a service (88%), virtual private networking (87%), cloud computing (86%), fixed-mobile convergence (82%), outsourced security services (81%) and mobile solutions (61%).
Goldstuck thinks this indicates that mobile solutions are fairly well entrenched in companies, and should be seen as a sign of maturity rather than lack of importance.
Companies now rate price as the most important factor in selecting a technology, at 78%. This is followed by stock availability at 76% and quality of the product or service at 71%.
Relationship (67%) is also important, then maintenance (57%), reputation of brand (53%), lack of downtime (51%), high technical capability (50%), functionality (49%), convenience (48%), procurement policy (47%) and future-proofing of a solution (45%).
“At this stage, future-proofing and being prepared for the 4IR is not on the minds of the corporate ICT decision-makers. They are still trying to keep the lights on, at the best possible price,” Goldstuck points out.
In the manufacturing sector, price is still the most important factor, followed by availability, but quality of the product and services falls well behind, followed by relationship.
“This shows that they are still trying to keep the lights on rather than take advantage of technology,” Goldstuck says.
Only 43% of manufacturing companies rate high-tech capabilities as important, again emphasising the extent to which the manufacturing sector has fallen behind the technology curve, Goldstuck says. “This is still an industry stuck in what it knows rather than what is coming next.
“And this is the flaw in government’s 4IR vision – manufacturing is at the heart of it, but is not there.”
All companies are planning an upgrade in their ICT infrastructure, followed by ERP (87%), financial or accounting software (87%), manufacturing systems (85%) and supply chain management (83%).
Software that is seen as essential to companies are accounting software (71%) and ERP (66%). “In other words the running of the business is where the focus is,” says Goldstuck.
CRM (38%) and business intelligence (36%) are well behind, while human resource (HR) management and procurement of supplier management software are the least important.
Manufacturing companies are ahead on seeing ERP and CRM as important to the company. Manufacturers are marginally behind in accounting and BI.
Key drivers for automation are considered to be improving business efficiency (99%), reduction of production time (97%), improving product quality (95%) and reducing downtime (96%).
In terms of connectivity, basic cell phones and fixed landlines are still seen as most important, both at 81%, followed by fibre optic connections (69%), desktop computers (66%), laptop computers (66%) and office WiFi (47%).
Fibre is seen as unanimously important for accounting, consulting and management services, communication and broadcasting, construction and engineering, health services and education, legal services and printing and publishing.
Just 63% of manufacturing companies see fibre as important, just ahead of the retail trade.
Laptop computers are also seen as vital to general business services, legal services and printing and publishing, followed by construction and engineers. Manufacturing is again lagging at 63%.
“The picture you start seeing of manufacturing is a sector that needs to catch up,” says Goldstuck. “It needs to move forward to meet expectations of the 4IR.”
When asked how often employees are away from their desks, manufacturing lags in mobility.
Overall, 87% of companies expect to user Internet of Things (IoT) to stay competitive in the nest 24 months. “This is the gold standard in South Africa, and one of the few areas where South Africa is ahead in the global market,” Goldstuck says.
Other technologies are virtual reality/augmented reality (VR/AR) at 36%, artificial intelligence and machine learning (AI/ML) at 31%, robotics at 24% and blockchain at 10%.
In manufacturing, companies are a little behind in IoT (82%), but ahead in other areas: 40% for AR/VR, 41% for AI/ML, 32% for robotics and blockchain at 14%.
Previous WWW research shows that the use of AI/ML in South African companies has not shifted at all between 2018 and 2019 – and much fewer organisations than before now plan to use it in future.
“The single biggest obstacle to AI/ML is cost – not of the technology, but the skills,” Goldstuck says. “The cost of skills is in fact the biggest barrier.”
When it comes to IoT, usage has grown, with similar numbers of organisations planning to use it in future. Goldstuck believes future growth will be driven by manufacturing.
The use of robotics has shot up from just 6% to 37%, with more than half of companies planning to use it in future.
“We’ll see an explosion in the future of robotic process automation (RPA),” says Goldstuck. “Even for small companies, robotics will become important.”
Driving their adoption is the low cost for entry-level RPA, Goldstuck says.
In terms of ERP in the manufacturing sector, 74% of South African companies have a system installed. Every player in a number of industries use ERP, although manufacturing is behind at 75% penetration.
In Kenya, by comparison, only 63% of companies have ERP installed. “So we are not behind the curve when it comes to ERP on the continent,” Goldstuck says.
Automation is becoming more important in the manufacturing sector, allowing for the imposition of very strict standards.
South African manufacturers see automation as a driver for better price-competitiveness, lower risk by allowing repeatable processes, higher inputs and improved quality. Automation also protects works from repetitive or dangerous tasks, and saves on utilities.
“There are tremendous perceived benefits to the implementation of automation – and we can see it in the success stories,” Goldstuck says.
The single biggest barrier, however, is cost. The difficulty in updating technology is also a big factor, as is the fragmented nature of the manufacturing sector. A relatively low level of awareness is another barrier, as is the lack of technical skills.
Manufacturers see that the best ways to minimise these barriers is to reduce the cost of acquisition and of maintaining technology. Improving availability of technologies and the availability of skilled workers will also help. More education about technology and improved ease of use were also seen as critical.
When it comes to mobile software, companies are looking for the full functionality of traditional systems (75%) and quick decision-making (63%).
Manufacturers are behind in both these areas, solidifying the picture of a sector that is not as competitive as others. “They need to become more competitive by embracing technology,” Goldstuck says.
“Manufacturers lag behind the technology curve because they see it as a threat. But they must come to realise that technology is better.”
South Africa is still caught between the third and fourth industrial revolutions, says Mark Wilson, MD of Syspro South Africa.
“We need manufacturing to move up the curve. We need to move existing companies and workers up the value chain, and also bring new skills out of the education system.
“It is a very dynamic world that we are finding ourselves in at the moment.”
Organisations around the world are facing a difficult journey with the Fourth Industrial Revolution (4IR) and digital transformation, Wilson.
There is a need for manufacturing to be relevant in both developed and developing markets. “This is the question: how do we bring cloud and new technologies into the heart of our environments,” Wilson says.