Study on Nigeria IT Industry
In many aspects, the development of technology becomes the driving forces of a countrys economy. The role of technology in business is indispensable as technology becomes the catalyst of efficient business operations. Furthermore, technology has recently become an important commodity for multinational businesses. This condition underlies Nigeria to prepare a nation reliable telecommunication network through several new Acts including the efforts to increase the foreign direct investment into Nigeria.
One of efforts is to increase foreign direct investment in information technological sectors to increase the number of internet users, for instances, which would lead to awareness of doing business online. This also leads to the improvement of economy in the Nigeria. India for example, experiences significant FDI inflow due to its capabilities in technology-related industries. Off shoring of technological companies are common in India. Employment on the other hand, is considered as a determinant of economic stability. The lesson highlights that investors prefer to invest in nations with high employment rate because it reflects a stable social and economic condition for business investments.
Literature Review
Benefits of Information Technology
Technology has been the key to business success in this information era. Many literatures consider the advancement of technology in a country become a contributor to their business development. Many believe that technology would get into all aspects of business and significantly alter the face of modern economic activities although still many believe that the benefits of technology is limited toward technical influence, in which it increases corporate efficiency by allowing business to become faster and cheaper.
In addition, information system is a very important tool for management. Business professionals used them to make strategic planning as well as to perform daily tasks. The efficiently system provides them with relevant knowledge and helps them make the right decision. Information Technology (IT) has been applied in various sectors to manage both profit and non-profit organization.
There are several noticeable effects of technological advancement in business activities as following
Enhanced Efficiency
As occurred in the revolution industry where the invention of advanced technologies at that time such as steam machines, Spinning Jenny and Water Frame have increased the production output, in the information era, the use of technology also increases the exchange of information. This leads to the increase on efficiency of business processes.
A famous example of how information technology contributes to the increased efficiency is on the Amazon. Competitors of Amazon like Barnes and Noble also has traditional bookstore in addition to their virtual presence in the internet. Amazon on the other hand, relies merely on selling books and other products on their online stores. They depend fully on its virtual presence to gain revenue and profits.
Since the company only does business online, as a result, Amazon has a significantly lower cost structure compare to its competitors. It saves millions of dollars from having to build buildings for stores and promotions. The company however, allocates its funding to create a distribution system that enables the company to reach much wider markets (Cane, 2007).
Another example on how technology development increases efficiency is from IKEA Company. This Swedish furniture company is known for its innovative concept which was quite revolutionary in the beginning of its presence. However, by allowing customers to assemble their furniture themselves, the company saves millions of dollars in distribution and storage rooms (Innovation in Business, n.d).
Alters Business Relationship Behaviors
In addition to increased efficiency, technology also influences the work culture where it changes the way people perform business activities. Unlike business in 1980s that mostly carried out by phone and surface mails, in the developed information technology, the intercontinental communication can be done by using electronic mails (emails), instant messaging etc.
Communication via emails and messengers generate a new written culture in corporate managers and employees. Due to the absence of gesture and bodily signals in this type of communication, managers and employees have develop a more verbal way of expressing thoughts and feelings. Communication becomes simpler and more directive
E-Commerce
Electronic commerce (e-commerce) is the most prevalent example of how technology will have an increasingly integral role on business activities. It carries with it the flag of efficiency, globalization and enhanced quality of business operations. E-commerce allows people to make business arrangements with partners or clients thousands of miles away from their location. E-commerce obviously outperforms the traditional paper-based transactions, which generated significantly more cost and time. Using e-commerce, corporations can virtually exist in foreign markets with lower cost compared to those making physical presences in the markets (How Digital, 2007).
One example of e-commerce is eBay. Although the company does not physically exist in every country in the world, virtually the company can carry out transactions with customers worldwide. Another example of a company using technology as a tool of business development is Yahoo and Google. These companies provide services for worldwide customers without having much of physical presence in any of its markets. Through the World Wide Web, internationalization of business activities is easier to achieve.
Factors that influence the information technology developments in Nigeria
In the 1970s, the need for timely, accurate and reliable information helps the Information Technology to grow widely. But it was due to the small computers or refers to desktophome computers that are discovered in the 1980 that increase the impact of Information technology toward individuals and businesses. Today, the technology has developed into corporate weapons to face fierce competitions. The role of the IT business as a strategic advantage of is widely recognized (The Importance of, 2000).
In addition, it is also discovered that the use of internet in business is increasing rapidly, despite the fact that within that year -2002- international business are having a little downshift in its development. However, the share of online transactions in total B2B sales is growing quickly on both sides of the Atlantic, estimated to be 20 in 2006. International dialogues have been made to address the internet-induced changes in the global economy. The condition represents a major shift of global business to the on-line environment (E-Commerce and Development Report, 2005 Corbitt, 2003).
Figure 1 Growth of mobile phones subscribers in Africa
Source Open Net Intiative. 2007
One factor that contributes to the exponential growth of internet users is the increasing number of mobile phone users. It happens as the mobile phones mostly work in the 2G (second generation) system that enable customers to connect to the internet through their mobiles phones at least by using GPRS connection.
Figure 2 Nigeria the Africans largest mobile markets
Source Traffic Online Media Solutions, 2009
As the figure 1 display, Nigeria growth rate in mobile penetration has surpassed those at Egypt and Morocco. The future of mobile phone market is also lucrative in Nigeria as analysts estimate the current outstanding growth is only a quarter of Nigerias estimated market potential (Traffic Online Media Solutions, 2009).
Figure 3 Growth of internet users in Africa
Source Open Net Intiative. 2007
To be precise, among African countries, Nigeria leads the industry in terms of number of cellular phone customers (see figure 2). As explained previously, this exponential growth is also in line with the increasing number of internet subscribers. This data shows that increasing the number of internet users are related to the provision of mobile phone networks throughout the country.
The study on Nigeria IT industry compared to Malaysia
As computer technology and internet become two major factors that speed up the IT development of a country, it drives authorities in Nigeria to present the infrastructure that would favor the increasing traffic of internet. As the result, within the 21st century, the country experiences the tremendous growth on internet traffic.
Figure 4 Africa Top 10 internet countries
Source www.internetworldstats.com
Figure 4 shows the comparison of internet users in Africa where Nigeria is considered to have over 10.9 millions of subscribers, representing the country as the top leading country in Africa in terms of number of subscribers. In another literature, the growth is detailed where Nigeria records a remarkable growth on the internet users from 200,000 users in 2000 into magnificent 11 millions users in 2009 as shown in the figure 5.
Figure 5 Internet Usages and Population Growth in Nigeria
Source Internet World Stats, 2010b
The telecommunication infrastructure that enables the exponential growth of internet users in Nigeria is the existence of international cable networks that land in Nigeria. This situation benefits Nigeria as bandwidth price is getting lower.
Figure 6 International cable networks landing on Africa (Heacock, 2009)
One cable network that lands on Nigeria is GLO-1 submarine cable in Lagos. This is one of advanced cable network that connect Nigeria and 13 other West African countries to global telecommunication network through Europe (Heacock, 2009).
This development is comparable to Malaysia that also experiences significant internet users growth during the 21st century (see Figure 7). The difference is Malaysia already has better internets penetration rate about 15 in 2000 as the geographical condition in Malaysia support the mass deployment of IT infrastructure. This is much different from Nigeria that requires multiple modes in order to increase the number of internet users in the country due to the challenging geographical conditions.
Figure 7 Internet Usages and Population Growth in Malaysia
Source Internet World Stats, 2010b
Factors that support the development of internet users both in Nigeria and Malaysia are contributed by changing policy. In Nigeria, for example, previously the country face hurdles as they have unreliable and underdeveloped fixed-line infrastructure. However, the country then changes the regulations to intensify the competition and let the advances wireless broadband access technology to serves customers. This changing immediately adds the number of internet service providers (ISPs) into 400 licensed ISPs in addition to the growing number of gateway operators, internet exchange, and data carriers (Internet World Stats, 2010b Berkey, 2002 Bo-Ling, 2001).
As the information technology does not merely depend on fixed-line access, the country also deploys the Next Generation Networks (NGN) that becomes the basis for triple-play services composing of voice, data and videoTV services (Internet World Stats, 2010b).
This regulation factors also become one driving factors that contribute to the increasing IT sector in Malaysia. The country also introduces the Multimedia Super Corridor (MSC) Project that highlights the governments commitment to the improvement of technological society. As the IT infrastructure in Malaysia is advancing, this would attract foreign companies to establish branches in Malaysia (Internet World Stats, 2010a).
Figure 8 Cable networks land on Malaysia
Source httpwww.telegeography.comwordpressindex.html3Fp45.html
Like Nigeria that connect to the global telecommunication network through several cable systems, Malaysia also get connected to the world via several cable system that help them to increase the number of internet users significantly (See Figure 8).
Nigeria efforts to increase inflow foreign direct investment
As a country that becomes one of the biggest and fastest growing telecom markets in Africa, Nigeria has lucrative markets for growth in all sectors. Learning from Malaysia that develop seriously the Multimedia Super Corridor (MSC) Project in order to attract foreign investors to invest in Malaysia, Nigeria also learns that the building of reliable and widespread IT infrastructure will be the keys to increasing number of foreign direct investment to the country. Figure 9 shows the historical trend of Nigerian inflow foreign direct investments during 2001-2006 periods.
One major move that Nigerian government take in information sector is the privatization of incumbent telecommunication operator, Nitel, which will enable them to compete aggressively and effectively in the future. The government also introduces the licensing regime in 2006.
Figure 9 Nigeria inflow foreign direct investments
Source Internet World Stats, 2010b
The changing regulation in telecommunication sectors will attract new operators to provide both fixed and mobile services in Nigeria in which some of them are backed up by foreign companies. Once these operators deploy network throughout the Nigeria by delivering both fixed and mobile service, Nigeria expect that it will significantly raises demand for Internet access and broadband capabilities.
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