Node Africa’s Phares Kariuki is chasing customers who want to make the transition from their own data centre to a cloud-based service

25 August 2017

Top Story

The existence of neutral data centres in Africa offering services and much improved internet connectivity in a number of countries has made the transition to the cloud much easier. Kenyan start-up Node Africa is offering companies managed services in the cloud. Russell Southwood spoke to its founder and CEO Phares Kariuki about why people are using its services and how this type of market will grow.

After the boardroom fight at his previous start-up Angani, Phares Kariuki said: “We can dwell on what happened, or we can move on with our lives.” And that is precisely what he did when he launched Node Africa in January 2016. He is now offering cloud services to anyone from SMEs to large multinationals.

Q: Where did the idea come from for Node Africa?

A: I’ve been in the space for the last ten years and it’s a path I’ve been on for a fairly long time.

Q: What does Node Africa do?

A: It is helping companies move to the cloud. The cloud is the future. Currently there is no clear path from them having their own data centre to using an external data centre.

Q: Give me some examples of companies making that transition?

A: It might be a company that has invested in running its own primary data centre but needs an external data centre for disaster recovery. We will back it up to our platform and back it up with the possibility of running it entirely from our site (if the need arises).

Over time, people find our website more reliable and they move more stuff to us. We’re currently hosting at (Liquid Telecom’s) East Africa Data Centre but we’re also setting up in icolo (a new data centre) and will run two facilities with a single rack at each.

Q: How many customers are currently using the service?

A: 63 companies are using the service.

Q: What have been the barriers to cloud adoption in Kenya?

A: It’s directly coupled with internet connectivity. The more stable the connectivity, the quicker they move and we now have stable connectivity in Nairobi and Mombasa.

There’s also a reticence about using a third party provider. But all OTT services operate from the cloud.

Q: Why don’t your customers simply go directly to a data centre?

A: We lease according to the space you need and manage that space for you. If you lease directly from a data centre, you still have to manage your server. So you have to look at the total cost of ownership.

Q: What’s the customer paying?

A: It’s based on consumption and can be as little as US$10 per month but we have a larger customer who is paying US$5,000 a month. An there are some other customers who even breach that.

Q: What type of companies typically use your service?

A: It’s remarkably varied. We have some companies from Asia. There’s a bank, an insurance company and a supermarket. There’s an industry wide need. For certain sectors like banking, we have expertise that no-one else has and we run a consultancy business based on this.

Q: So what do you think the total size of the market is that you’re addressing?

A: System Integration in Kenya is a $600m market and cloud significantly cuts down this number. The actual figure has not been studied closely by anyone, but given current rates of adoption and assuming similar trends with the US, we work it out in the following way.

Global system integration as of 2015, according to Transparency Market Research was around $235.35 billion. Cloud Computing is viewed as a separate market though it technically feeds off this market. It’s at roughly $65B ($16B being IaaS, $49B being SaaS). If we assume equivalent rates of adoption with the USA (obviously Cloud Computing has a higher uptake in the US, but we can come up with a figure for a realistic near-term upper limit to the addressable market) it would work out to a total addressable market of $165M, which when you factor in Google Apps sales, Office 365 Sales, Sales Force etc works out to a more realistic

The growth rate of IaaS and SaaS is estimated to be a Compound Annual Growth Rate of 23.5%, which will have the IaaS market in Kenya at an estimated $114.9 m. SaaS will therefore translate to $360M in Kenya. The rate of growth of System Integration will obviously slow with a lot of the market share being cannibalized by the cloud, but this clearly shows that there’s a larger market to own, that we are uniquely positioned to capture.

Q: Where will you be in two years time?

A: To be honest, I’m not sure. I think we’d be approaching 500 customers and be in two other countries?

Q: What expansion will there be in the next 18 months?

A: We’ll have a presence in Uganda and Rwanda.

Q: How have you funded the company?

A: It’s largely been self-funded by friends and family and debt. But we’re looking for under US$1 million. To an extent, we’re like a software company. We’ve got some third party software and a bunch of automation tools that we’ve built ourselves.

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