Talent wars: What effect is big tech having on the Kenyan tech ecosystem? [Part 1/2]
Some time back, the Financial Times published an article (paywalled) covering the effect the entry Big Tech has had on access to talent by startups in the Kenyan ecosystem. While it was a noble effort, I found the article didn’t represent the full story and instead focused solely on how it is negatively affecting the talent pipeline for startups. While this is true, I feel this is just one side of the story. As someone who has been part of the Kenyan tech ecosystem for the last ~10 years and writes frequently about the space, I felt compelled to share my opinion about this debate. In writing this article, I have relied on my experience in the tech ecosystem and conversations with different players in the space. However, before I continue I first need to disclose that I left my own firm, Made by People, to join Microsoft as a Senior Product Manager. I have documented this extensively (my top five and 6 lessons learned running the firm for 3 years) but will also talk about the effect it had on my own firm.
Important note: while I work for Microsoft, the opinions shared in this article are solely my opinions and those of the people interviewed while writing this. They are in no way the opinions of Microsoft as a company.
First, let us set the background
Talent upheavals are not new in tech and not in Kenya either. The current cycle we are going through is being repeated but on a larger scale this round. About 10 years ago, we had a few well-funded startups and most startups were still young resulting in low demand for developer and design talent in the ecosystem. Additionally, large corporates didn’t see the point of investing in internal tech teams. This changed in less than 5 years. We saw many startups in the ecosystem fundraise and consequently hire more people. Corporates also invested more in tech talent with a good number setting up innovation teams (think Safaricom Alpha, I&M, Equity, KCB, e.t.c.) This was the first talent squeeze we saw. Bootstrapped startups could not match what funded startups and corporates could offer. What we are seeing at the moment is a repeat of what happened a couple of years back. Corporates and startups can’t seem to match what Big Tech can offer. In addition, the local talent now has access to international opportunities without having to immigrate. This has been fueled by the increased number of startups placing developers and designers based in Africa with international gigs (Andela and Turing come to mind but there are more). The Covid 19 pandemic turbocharged this as tech companies realized that they don’t have to work with local talent only. . Tech companies are hiring beyond the countries they are domiciled as it is cheaper, faster, and less competitive with little to no hit on productivity.
Following the laws of demand and supply, is bound to drive up the cost of talent acquisition in the affected ecosystems. Kenya is one of the most affected ecosystems in Africa. Microsoft set up shop here about three years ago and we have seen a lot of developers and designers either immigrating or taking up remote work. The tech talent market is hot!
The employee perspective: why do people change jobs?
I talked to a couple of people who have transitioned from one company to another in a bid to establish why they changed jobs. I am starting with the employee perspective as we live in a free labor market and changing jobs is an individual decision. I established four key reasons why people leave one organization for another.
- Money talks — this goes without saying because as Africans we still need all the money we can get. How will we build generational wealth if we can’t find well-paying jobs? As an employed person, compensation is critical so it is not shocking that this was one of the top reasons.
- Toxic culture — we don’t talk a lot about this but culture is one of the biggest reasons people switch jobs. Unfortunately, our ecosystem is still young and most startups are run with a cult personality mostly based on the founder(s). This is particularly a challenge as startups scale as what worked when a startup was small doesn’t at scale. For most startups, the focus is either reaching product/market fit or growth and as a result, culture is the last thing they think about. The corporate scene in Kenya is no better either. This generally doesn’t work for senior talent as they are more exposed and know there are better options out there. When such opportunities arise, they don’t hesitate to leave. I know of cases where people have taken a slight pay cut to join another company because they would work in a company with a better culture
- Growth opportunities — career progression is important for most people. When you work in one place for a long period you might get to a point where you feel you have stagnated. Startups are exciting and always give opportunities for growth. However, there is still a limit to what you can do. If you would like to learn about how to design for millions of people, few startups can offer this. If you would like to learn how to build for large enterprises there are a few options out there. You will find that talent always moves from a small establishment to a larger one to learn more.
- Just for a change — at times it is that simple. Working on the same thing for an extended period of time breeds monotony. Working for one firm for a long time can become boring.
Now that I have covered some of the reasons employees leave, let me move on to the impact movement of talent has both on employees and employers.
Short and long term effects
There is a huge debate regarding the positive and negative effects big tech is having on the Kenyan tech ecosystem. To simplify and rationalize it I will look at it from a short and long-term effect on employees, employers, and the talent ecosystem.
To startups and SMEs
In the short term, startups and SMEs will struggle to recruit and retain tech talent. It is hard to compete against the salaries and allowances offered by big tech companies. The effect on the cost of talent is not limited to tech talent but instead drives up the cost across the entire organization. This was captured well by John Gillespie, CIO at MGas.
“The problem is not just startups. One of the subsidiary issues is the distortion inside companies. It is hard to explain to the CEO why a Dev with 5 years experience needs to be paid more than a Finance Controller with 20. I would want evidence from other companies, but I speculate that Kenyan companies on low margins may struggle to bring inexpensive techies just when they most need to innovate.”
This will force startups and SMEs to figure out ways to tap talent early and grow it but not lose the same too soon to Big Tech. This means setting aside more resources to do this and in a resource-constrained environment, this is not easy. Startups and SMEs will also have to figure out how to retain talent longer. Conrad Akunga, CEO of Innova, captured the challenge of developing talent very well in a series of tweets.
“There are also losers in this new dispensation, which tends to get swept under the carpet. If Twiga and Sokowatch are struggling to hold on to talent, what do you think the reality is for smaller, less capitalized firms? So here is what is going to happen. These smaller firms will get tired of developing talent at their expense (time and money. not to mention opportunity costs) for the big boys to poach without having invested anything, routinely crippling their execution. So one of two things will happen — they will stagnate as one/two man shows or they will contract their work to Bulgaria / Czech Republic / India etc. For many firms It will no longer make strategic or financial sense to invest in local talent development.”
These are critical points and I will speak to them further on the follow-up post that will focus on what we can do. It is worth pointing out that startups and SMEs didn’t lose talent at the same rate. There is a good share of startups and SMEs that lost relatively few employees to big tech. For those who didn’t bleed talent as much, what have they done right?
In the long-term, startups will have access to a wider and more experienced workforce as there will be attrition from large tech companies too. This is especially true for employees who like working in a fast-paced environment with limited supervision and a lot of freedom. At some point down the line, someone working at an organization would want to return to the startup space.
To employees and the talent ecosystem
For the employees, the story is different. They have more money in their pockets and this has several spiraling effects. Sitati Kituyi, former CTO at Pula and now a co-founder of hodi.co, captured this eloquently
“Anything that helps to expand the middle-class is a positive, and large-scale creation of well-paying jobs is exactly that.”
Let us first start with the entrepreneurship angle. There is a general assumption that the entry of Big Tech will reduce the number of entrepreneurs. However, when we talk about entrepreneurship, we rarely talk about the fact that your chances of success increase significantly if you can fund your idea in the beginning and/or you have a great network. A cursory glance at the Kenyan ecosystem shows that most successful founders started off in employment, are not-first time founders, or studied and worked outside the country. Big tech is creating the environment for the next generation of entrepreneurs by putting money in people’s pockets. Not everyone will stick around forever and there are high chances that we will see people leaving Big Tech to start their own ventures. If we play the long game this creates better opportunities for future generations. We have heard of stories such as Jeff Bezos getting $300k as seed funding from his parents to start Amazon. This is the beauty of generational wealth and it often starts with well-paying jobs. When we move away from our focus on entrepreneurship, they will just have a better life.
Another positive impact this will have is the upskilling of talent across product management, design, research, and engineering. It will take longer to see this happen but in a couple of years, the effect will be noticeable. Anyone working in Big Tech has to level up to the rest of the organization. As an ecosystem, in the long run, we will reap handsomely from this. I had the opportunity to chat with Dr. Shikoh Gitau, CEO at Qhala, who previously worked at Microsoft and Facebook.
“Microsoft taught me to be a problem solver, to be inquisitive and find alternatives for every thought you have… if you have worked with me, you will know, you must come with an opinion…
Google taught me to be an entrepreneur, I had to sell my ideas and opinions to people’s idea of Africa was the National Geography. I learned how to build teams, run teams, take risks….
Solving important problems well, is what i learnt from both of them…”
For the talent ecosystem, it looks quite positive both in the short and long term. First, we now have a better funnel for growth as an employee. Phares Kariuki, CEO at Pure Infrastructure Ltd, captured this well in a series of tweets.
“I think that this is good for the ecosystem as a whole. The lens through which many people are looking at this is the last decade, however, this happened in Kenya before, in the late aughts. Ericsson, Huawei, and Siemens made a foray into Kenya. They hoovered up all the network engineers they could find, with salaries at times going up by a factor of almost 10. It was painful in the short run, but Kenya, by far, has some of the most advanced ISPs and competent networking professionals. It’s good for the market as it also signals to the incoming generation to study technology because it pays. Hence the supply side is sorted out. The net result is more technology talent and the ecosystem being the better for it. The largest ecosystems for developers also happen to be the most expensive (Bay Area, Seattle, etc). We cannot grow as an ecosystem when talent is being underpaid. In the aughts, when the job market wasn’t receptive to Engineering / Technology, many people ended up in banking / consulting, etc. We need to pay competitive salaries for the market as a whole to grow, to attract more talent to the market, and consequently, more capital. This short-term pain will lead to a more competent and robust ecosystem.”
When I was doing my undergraduate (2008 to 2011), most of us dreamed about working for big tech. At that time, Google had just started working closely with universities to introduce their initiatives to universities. However, to join a firm such as Google you had to go through their insane recruiting process and relocate. That was impossible for most of us. Fast forward ten years later and these opportunities are here on the continent! Undoubtedly, most fresh graduates will not start at Big tech but there are bigger players in the ecosystem now. This has a net positive impact in the long run on the wider ecosystem. Big tech companies will fuel a higher interest in careers in the space broadening the pipeline of talent! This is a vicious cycle as we will also see more people in tech starting their own companies or funding existing ones. It is hard to see it now but it has happened in other ecosystems. I would put my neck on the line and hazard that other players such as Google and Amazon setting up locally will play out well for the tech industry in the long run.
So where do we go from here?
I will again quote Conrad Akunga, Innova’s CEO.
“OBVIOUSLY the solution to this problem is not ‘These big companies should stop paying these crazy salaries’ which is why I started off by saying it is a complex problem.
It’s a pithy thought piece to tell these small firms ‘This is good in the long term’ but they have very real and very present problems TODAY. Can’t eat and pay rent with thought pieces!”
In my follow-up article, I will talk at length about what we can do both in the short term and the long term. In the meantime, don’t hesitate to share your thoughts by leaving a comment below or reaching out to me on Twitter — kiruik.