Cisco KSA has been singled out as a star performer by the networking giant in the past few years, reinforcing its status as one of the Kingdom's top channel-focused vendors in the process. But is the growth really coming so easy?
Channel Middle East caught up with managing director Dr. Badr Al-Badr at the company's CiscoExpo event in Riyadh to find out.
What factors are behind the rapid growth of the Saudi IT market at the moment?
If I start with the economic factors that are driving the Saudi IT market you can very easily begin with the trend in increasing oil prices. This is increasing the income of the government, which is focusing on building out infrastructure.
That is also coupled with the liberalisation of the telco market, which started about four years ago; both of those factors coincided and led to a boom in the ICT market.
In addition, this is matched with new lighthouse projects that have been announced in Saudi Arabia, such as the new economic cities that are leapfrogging existing technology and aspiring to be the first in class in deploying smart services.
What kind of growth expectations do you have for this year and how do they compare to what you achieved last year?
Saudi Arabia is one of the markets where Cisco has doubled its business in two years, and our focus is to continue to double our business in the next two years.
Two years ago Cisco announced a five-year investment plan in Saudi Arabia, which involves scaling the workforce up to 600 people. How is that particular target going?
We are two years into the plan and we have more than 250 employees now. And at the time of announcing the plan we were about 100, so we are well on track.
What do you regard as the biggest challenge facing the KSA networking channel, and what is Cisco doing to tackle it?
The number one challenge is the skills shortage - that is exactly what we are focusing on in our Networking Academy Programme, through which we are now increasing capacity to graduate 25,000 students by 2010.
The other one is the NetVersity Programme, that focuses on developing the business leaders of the future.
These programmes are open to our partners, and we have also announced the Cisco Partner Talent Portal that brings together our partners and their technical needs with the guidance of our educational programmes.
The skills shortage is creating intense competition for talent among channel partners. Is this having an adverse effect on their overall performance in the market place?
The skills shortage is a challenge. Some of the ways they have been addressing this include bringing in talent from outside, whether on a permanent or temporary basis. But the long-term solution is qualifying local skills, and that is what we are helping them to do with our education programmes.
The likes of Dimension Data and Wipro have been building up their local presence in Saudi Arabia. Do you foresee more international resellers and integrators entering the Saudi market in the near future?
We are inviting international players to come to the Saudi market. The reason is that the Saudi market is growing faster than the capability of the market to absorb.
Plus there are specific areas of expertise that have evolved in other places in the world that we want to bring into Saudi Arabia and encourage knowledge transfer.
If more internationals are coming to the market, what advice do you have for local Saudi resellers that are concerned how they should protect their market position?
First of all, I just want to underscore that the market is big enough for all the existing and new-coming players. At the same time I have seen many of them invest in training their staff, increasing their financial capabilities and building relationships with a client.
This is exactly what needs to be done. This is the basis of doing business, and if these things are applied consistently then these companies will definitely secure their share of business.
One of the advantages that these local companies have is a better understanding of the business landscape and relationships. They need to capitalise on these factors. Cisco's worldwide channels team has made a lot of the fact that partners need to specialise and demonstrate technology depth. How is this issue playing out in KSA?
With the newer technologies there is some catching up that needs to happen. However, with those that have been with us for a few years, like IP telephony, security and wireless, I am quite happy with the depth and breadth of the partner landscape.
We are now actively training our partners to specialise in newer technologies such as digital media systems, real estate solutions and TelePresence.
Given your growth expectations for the market, is there a need for you to widen your distribution network?
We are actually already enlarging our distribution network and we are looking into specialised and regionalised distributors. I cannot really announce the plans yet, but as the market is growing, we are growing our distribution with it.
So the Saudi market can expect to see changes in your distribution model.
Let's not call it a distribution model - let's call it additions. Expansions and additions. Distribution accounts for about 25% of our business so it is critical that the distribution network is strengthened with the right partners.
Cisco has a global partnership with the Westcon Group, but it is not there in Saudi. Are there discussions to extend that relationship to Saudi Arabia?
We are having discussions with multiple partners right now. We are undergoing a selection process and once that is completed we will announce those who will be working with us. A partner working with Cisco internationally does not automatically qualify to work in Saudi Arabia.
We require our partners who want to work with us in Saudi Arabia to address the right level of local investment - to be fair to the other partners and to provide a better level of service to our customers. It is all about the commitment to local investment that needs to be demonstrated on the ground.
Is Westcon one of the companies you are having discussions with?
I cannot confirm or deny that. As you'll appreciate, it is a confidential matter.
In most markets, partners continue to raise the issue of margin erosion. What is Cisco doing to address this?
Consistently we have heard that as an issue with partners worldwide, not only in the Gulf and Saudi Arabia.
We addressed that in our global partner summit that took place in Hawaii a few weeks ago. We have multiple programmes that enrich the margins - some of them focus on having partners actively seeking out opportunities before they become over-competitive.
Another one is on specialisation in certain technologies where the partner will be unique and can command margin. We really care about the profitability of our channel partners because we know that they cannot sustain their relationship with us in the long term if they are not profitable.
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