Virtually unknown in the Kenyan market a decade ago, outsourcing has become a common practice as companies seek to reduce costs and focus on core business.
Mr Priyesh Shah, CEO of Express Automation has ridden the outsourcing wave to build a company specialising in leasing information technology office equipment that has just crossed the Sh1 billion annual turnover mark.
It all started in 2000 when Mr Shah, 36, a Bachelor of Science Economics graduate of the University of Nottingham, with backing from his brother — the late Anoop Shah of Kensta Group — decided to buy Stationery Express, a company dealing in office equipment.
Until then, he had been working for the Kensta Group, which has interests in the printing and packaging industry, expanding its operations into Uganda and Tanzania.
“We realised that print as a form of communication was going digital so we thought of diversifying into IT office equipment communication. We chose Stationery Express because they had some decent brands like Motorola and Samsung which would be a good platform to build on,” says Mr Shah.
They changed the company’s name to Express Automation with Mr Shah as the CEO. “Our goal was to be a company in the IT office equipment arena, but with a slight difference- there is no need to own equipment because most people use it as a means to an end, and can lease it as long as they get the right back up support and maintenance. Our business is leasing IT office equipment with managed service,” he says. The company focuses on printing/copiers, multifunction equipment, PCs, servers, and laptops.
Initially, its main clients were multinationals, but lately small and medium enterprises are adopting the leasing model. “If you look at the banking industry, outsourcing in Kenya was first embraced by multinational banks which were chasing cost savings from economies of scale and adopting a global trend. Now we are seeing second tier banks adopting it as well,” says Mr Shah. The pattern is the same in the manufacturing sector where the company’s first clients were EABL and Unilever, but now smaller companies like KAPA and Dawa Pharmaceuticals, a Top 100 company have come on board. This indicates the growth potential in the industry.
Banks were early adopters because of the huge cost savings they could get from leasing as opposed to outright purchase. A bank with hundreds of branches would need an entire floor of managers and technicians to manage its information technology system. By leasing, it could save staff costs and use its capital to focus on lending for profit, its core business. Many Express Automation clients prefer to have a team of technicians permanently stationed at their offices to facilitate quick response to problems.
“We supervise and pay them, not the client. They however fit in to the client’s schedule in terms of working hours. They ensure that we deliver on the service agreement we sign with the client,” says Archith Rao, head of business development.
“The other advantage of having resident technicians on site is that 70-80 per cent of troubleshooting can be done online since the team at the client’s office is connected to our team of engineers at headquarters.”
Leasing of printing/copiers brings in 30 per cent of the company’s revenues. The company has 200 employees and offices in Nairobi, Mombasa and Kisumu with an active customer base of 3,000 customers. Regionally, it operates in Uganda, Tanzania and Rwanda.
The company closed the just ended financial year with turnover of Sh1.5 billion compared to Sh800 million the year before. This makes it the latest graduate of the Top 100 Club whose members have turnover of between Sh70 million and Sh1 billion.
Despite this success, the company faces challenges top among them being the high cost of doing business in Kenya. “We are totally uncompetitive compared to Egypt, South Africa and globally compared to India, Malaysia, Singapore and Thailand. In our business of managed service, people are looking at global outsourcing so we’re already at a disadvantage,” says Mr Shah.
The company is, however, banking on its young talented team to achieve its plans which include rolling out the leasing model Africa wide.
“We believe in using home grown talent in each of the countries we operate in because they understand the market in a way that expatriates cannot,” says Mr Rao.
“We spend a lot of time researching what services clients need and we deal with branded, tested, world class products. This helps to reduce our overall costs by preventing a lot of down time.”