All systems go

Having supposedly seen the market reach its nadir last year, PC vendors in the Middle East are feeling bullish about their prospects again as they set about implementing their 2010 channel strategies.
All systems go
Chadan Mehta, Fujitsu Technology Solutions. (ITP Images)
By Andrew Seymour
Sun 17 Jan 2010 04:00 AM

Having supposedly seen the market reach its nadir last year, PC vendors in the Middle East are feeling bullish about their prospects again as they set about implementing their 2010 channel strategies.

The PC industry encountered its toughest ever year in 2009, but manufacturers are now picking themselves up off the floor, dusting themselves down and devising game plans to ensure what they hope is a swift return to better times.

Worldwide PC sales recently showed a growth of 2.3% after three consecutive quarters of decline, according to IDC, and while the Middle East and Africa had generally been exceeding the global average anyway, signs of a global pick-up will no doubt be well-received.

How successful vendors will be at transferring this positive performance into something more significant will be heavily influenced by their ability to engage with their channels in the region.

Irrespective of economic factors, vendors need to continue investing in and developing their sales channels to ensure they have the right coverage to address the opportunities that present themselves in the market.

Many PC manufacturers already lay claim to established partner networks in the Middle East and Africa so their plans for 2010 tend to revolve around empowering these channels even further. For Fujitsu Technology Solutions, the priority is to invest in channel training and education, explains product manager Chandan Mehta.

"We have already kicked off workshops with partners across the region and feedback from this will be incorporated into our plans for 2010," explains Mehta. "We intend to fully equip and support our partners to win more customers in both lines of our business - enterprise infrastructure solutions and consumer products."

Toshiba, a pure notebook vendor, is pinning its hopes on formulating sales programmes that inspire its existing channel partners in the Middle East to reach new heights.

Regional manager Santosh Varghese says the company has presided over a "stronger and tighter" partner network during the past 12 months, and it is keen to fortify that situation this year.

"For FY2010, we will consolidate our channel programmes, which currently offer only target-based rebates," reveals Varghese. "We are launching a new programme which will include sales staff training and certification, in-store branding, POS support, co-promotions and demo discounts on Toshiba differentiated products in addition to target- based rebates. We will also be increasing the offer of service franchise and pick-up and drop-off points for consumers."

Taiwanese PC vendor Acer is not planning any major alterations to its main channel programme at the moment, although it has not ruled out making some slight adjustments if it proves necessary. Like Toshiba, it intends to place a firm emphasis on conceiving sales incentive schemes that drive sell-out behaviour in the Middle East channel.

Aman Khan, marketing and communications manager at Acer Middle East, explains: "We are going to implement certain incentive structures on a quarterly basis. These will be over and above the yearly programme that we have, and this is primarily to boost the sales throughout the period. On top of that we also have the seasonal programmes - initiatives that we run during the Dubai Shopping Festival (DSF), for example, to help sales and help the channel."

For other vendors, such as Lenovo, giving partners a platform for communication and support sits top of the agenda. Djillali Lahiani, regional channel partner manager for the Middle East, Egypt and Pakistan at Lenovo, says "productivity and profitability" is its mantra for channel growth this year. "We have a methodology which is named RAD - retention, acquisition and development," says Lahiani. "As we are in the emerging markets, we continue implementing these strategic tools for us to segment the right partners in the right places and the right areas."

He says this segmentation has become critical to the company's plans, particularly with the launch of new IdeaPads through the retail channel to come.

"To meet the specific needs and demands of different segments, our main strategy is to work through selected partners," adds Lahiani. "We will be developing the partners that know our products, are loyal to us and believe in our products - many of them understand the business from the IBM legacy."

While PC vendors face pressure to make their quarterly numbers and generate the volumes to push them higher up the rankings, few can afford to ignore the topic of partner profitability in the current environment. Some manufacturers say they are looking to lift price points this year to drive additional channel margin, while others believe partner profitability comes from careful partner-territory management.HP insists it has worked hard to keep on top of the profitability issue by attempting to simplify the programmes it operates and the number of product SKUs it offers, while also endeavouring to drive value specialisation.

In addition to those factors, Anil Kumar, head of HP Middle East's Personal Systems Group (PSG), says the vendor is putting a huge amount of focus on design right now.

"If you look at the products that are coming out and the range of products, design has become such a key element. It is not just on the consumer space but on the commercial space," he says, pointing to HP's latest range of ultra-thin Compaq Presario commercial notebooks to support his view.

Kumar believes that achieving value for money in a particular design reduces the temptation for partners to try and undercut one another - an important feat when you consider the bigger picture of reducing average unit prices in the industry.

Toshiba's Varghese argues that finding ways to enhance channel profitability is a continuous process, but suggests there are a number of fundamental steps that partners can take to shore up their bottom line.

"We feel that the channel can be profitable provided that it manages its cash conversion cycle. Over trading, over stocking, high DSO and DOI will create issues. Toshiba believes in the power of the channel, which is why all our strategies involve and give due importance to channel health," says Varghese.

It is too early to say whether the next 12 months will bring some of the radical channel surgery that PC vendors have carried out in previous years, although most are adamant that this will not be the case.

That said, several have ambitious plans to break into new markets and harness channels that they haven't necessarily engaged with in the past. HP considers the telecoms sector as an emerging channel for its Middle East operation - not just for netbooks, but for thin and light notebooks, explains Anil Kumar.

"Out here, telco is becoming a big part of the channel strategy," he admits. "We have got some wins across Egypt and we want to replicate those across the region."

Lenovo, meanwhile, is looking to raise its visibility in the consumer space and introduce more products adapted specifically for SMB and SOHO customers. "Our belief is that the training to acquire the new and needed knowledge to better market Lenovo's cutting-edge technology is, along with the right price and rebate programmes, a key component for channel profitability," says Lahiani.

In a market where competition is fierce and brands are abundant, it is clear that rebate programmes, product SKUs and marketing tools will all have an influential role to play in determining which channels flourish in 2010.

Acer is placing its faith in its multi-brand strategy - enhanced by the acquisitions of Gateway and Packard Bell - to take its business to the next level.

"2009 has been a testing time and I think Acer has demonstrated that we are the only brand which has shown continued growth, even though the market was growing negatively in certain quarters," says Khan. "We have overtaken Dell this year to be number two worldwide and we are aiming for the number one position, so whoever invests with us will directly invest in their own growth."

Fujitsu, meanwhile, claims to be one of the few large vendors to manufacture and deliver PCs, notebooks and servers from its own factories in Germany and Japan. It insists this remains an attractive proposition for partners.

"We ensure the highest technology and quality during production, which translates into an extremely low failure rate," says Mehta. "Our retailers, resellers and partners recognise this as one of our strengths, which enables them to achieve a high customer satisfaction and to continue benefitting from investing with us. In addition, our partner programme offers attractive incentives, marketing support and support at all levels of the sales process."

The shape of the Middle East PC market will no doubt change from one quarter to the next as vendors implement their different strategies in the region, but after the past 12 months most will be satisfied just to see some stability return to the business this year.

If members of the PC vendor community agree with Lenovo's Lahiani then 2010 should bring an improvement for everybody associated with the market. "Today brings us a lot of confidence to grow in this market where people need reliable products, secure products and faster-performing products," he says.

For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.