Whisper it quietly, but there’s a little bit of concern in the Middle East channel that the fourth quarter is turning into a damp squib. For a region that has become accustomed to stellar year-on-year growth rates, the prospect of a soft quarter is a worrying thought.
The next two weeks will prove critical as vendors and distributors pin their hopes on a sharp sales spike to help them hit their annual targets.
I’ve had a couple of phone calls from distributors this week and chatted to some software and hardware vendors operating in the region, and they freely admit that sales have been sluggish in the fourth quarter. Some reckon that the fabled fourth quarter hockey stick effect is getting ready to kick in as end-users — particularly at the enterprise level — look to spend whatever is left in their annual IT budget before the year-end.
The other theory doing the rounds is that the current malaise is symptomatic of a wider global apathy towards IT investment that has hit the fourth quarter. One security software vendor in the Middle East pointed out that a similar situation was unfolding in Europe.
Undoubtedly, we are witnessing a subtle change in the IT spending patterns that exist in the Middle East. The effects of seasonality have been on the wane for a couple of years now with the IT channel claiming that the traditional summer slowdown has become less pronounced and the impact of other events such as Ramadan no longer have such a noticeable impact in terms of pulling sales down.
Whatever the reasons, the fourth quarter looks slow and vendors need to look long and hard at the reasons behind this and adjust their targets and planning strategies for 2006 accordingly.
In-country comes of age
For distributors looking to sell across the entire Middle East from the UAE, 2005 will undoubtedly go down as the year when they started to witness a real challenge from in-country distributors. There are a few developments underpinning this trend that need to be explored.
Firstly, vendors have started to appoint and support in-country distributors outside the UAE and provide them with the financing, stocks, support and services required to accelerate the development of an in-country channel.
One of the best examples of this trend has to be Al-Jammaz in Saudi Arabia, which has delivered on its promise to turn itself into a genuine multivendor distributor working with a number of major vendors. Starting off as an in-country Cisco distributor, Al-Jammaz has added APC, Dell and Sun in recent months, marking itself out as one of the rising channel stars in the Kingdom.
As distributors such as Al-Jammaz develop their business potential in markets such as Saudi Arabia, the pressure immediately begins to build on the ‘stayaways’ as I like to call them — the distributors that claim to work in a certain market but only serve it remotely.
In the past, when there was a dearth of high-quality alternative in-country distributors to work with, resellers may well have purchased from a distributor in another country, or even procured kit from a sub-distributor dealing with the remote distributor.
That situation is now being consigned to channel history as vendors start to understand the importance of in-country distributors, national markets reach critical mass and resellers start to realise the business benefits of buying from a local distributor that can provide credit, a local stocking point, pre-sales support, quick delivery and excellent post-sales service.
Distributors sitting down at Jebel Ali or in Dubai that have not yet realised this trend is occurring need to start paying attention now. If they don’t, they may well find their channel role becoming increasingly marginalised in the years to come.
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