As far as startup pivots go, Okra's decision to enter the cloud services business is hardly conventional, but it certainly raised a few eyebrows.
The startup, which launched in 2019 and has raised more than $16 million from investors, is a pioneer in API infrastructure in Nigeria. However, rising infrastructure costs forced it to reconsider its priorities.
"One thing we realised as everybody was being impacted by forex, devaluation, and just the general economic climate was that, outside our people costs, we were spending the majority of our earnings on infrastructure costs," CEO, Fara Ashiru Jituboh tells Techpoint Africa. "So, we started to ask ourselves how we could reduce our infrastructure costs around the tools that we use."
A naira devaluation in 2023 sent technology costs spiralling for Nigerian startups like Okra. While they generated revenue in naira, critical infrastructure costs were denominated in dollars, which frequently fluctuated, making it difficult to predict expenses.
Consequently, many businesses switched to local technology providers, a trend Okra hopes will drive usage of Nebula, its cloud infrastructure service.
Market opportunity
Despite having spent the past six years building expertise in financial services, Jituboh says Okra sees enormous opportunities in helping African businesses transition to the cloud.
Data from Xalam Analytics reveals that Africa's cloud computing demand is growing between 25% and 30% annually, outpacing projections in Europe and North America. With African businesses only just beginning to transition to the cloud, Okra’s entry allows it to capture a portion of this growing market, according to Andrew Mori, CEO of Deimos.
"Any cloud provider offering infrastructure locally has an opportunity to capture a large portion of that growing total addressable market (TAM), and probably for the reason that it will be cheaper. It's a big market, and a cloud provider that does it properly in Africa can dominate it," Mori says.
Like other local cloud service providers, Nebula offers businesses significant cost advantages. While players such as Microsoft Azure and Google Cloud charge or benchmark cloud services in dollars, Okra charges users in local currencies, a major consideration for the millions of small businesses on the continent. Amazon Web Services (AWS) understands this and has recently begun allowing businesses to make their cloud payments in local currencies.
Written by Omoruyi Edoigiawerie, a seasoned startup attorney with over a decade of experience. Learn more.
Give it a try, you can unsubscribe anytime. Privacy Policy.
Beyond offering a cheaper alternative for these businesses, Jituboh is optimistic that Nebula can drive increased activity in industries where low latency is crucial, thus expanding the market size.
"If you look at the gaming industry right now, on a global scale, Africa does not compete very well. That's because we don't have the same pings and latencies as gamers across the world, who are closer to their hosting sites. So, I think this is an opportunity unlocked for the EAs of the world to acquire more customers," she says.
Policies geared towards data sovereignty could also drive the adoption of local cloud services.
In Nigeria, Okra's primary market, the National Information Technology Development Agency (NITDA) recently finalised a data classification framework that will mandate certain data to be stored in Nigeria. These include financial, healthcare, and government data. Once this policy is implemented, it could force foreign players to set up data centres locally or partner with existing cloud providers.
Can Okra compete in the cloud market?
Despite its optimism, a key question for Okra is whether it can compete in a market dominated by deep-pocketed incumbents like AWS, Microsoft Azure, and Google Cloud.
While its desired entry point — infrastructure-as-a-service (IaaS) — is not as expensive as building data centres, having to lease capacity from third-party data centres limits its ability to control costs and performance. However, Jituboh assures that its performance is comparable to that of most players.
"For our customers, we provide load balancers to distribute traffic evenly across servers, ensuring optimal performance even during peak usage periods," she says. "On the infrastructure side, we exclusively partner with Tier 3 and Tier 4 data centres, which guarantee an uptime of at least 99.982% (less than 2 hours of downtime per year)."
There's also the issue of competitiveness with players like AWS and Microsoft, who have years of experience building and managing cloud services globally. While Jituboh argues that the Okra team already has significant experience building financial infrastructure, they will be up against businesses with decades of domain expertise.
"I always say, 'Do you think you can build data centres better than Microsoft?' And the answer is generally no, you can't. Microsoft, Amazon, and Google Cloud are typically building the world’s best data centres with the world’s best architectures. So, it might not be true, but it’s quite likely that these other players are producing lower-quality data centres—probably cheaper. It might be high quality, but I would say there would be a difference in intellectual property," Mori says.
With large cloud providers offering advanced tools like AI, machine learning, and high-performance computing services, Mori notes that large businesses with more complex needs are likely to stick with these incumbents.
Looking to the future
It's only been five months since Okra began offering cloud services, but the startup is confident that this is the right move. It continues to offer some of its open banking services, but Jituboh shares that Nebula is the immediate priority.
Currently, it has two availability zones in Lagos and Johannesburg and hopes to capitalise on existing relationships with businesses from its open banking days. While Jituboh declined to share which businesses already use its services, she says early feedback has been encouraging. Okra also plans to leverage its proximity to these businesses to build custom features, which it says are missing from larger cloud businesses.
