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Tue 29 Aug 2006 04:00 AM

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Jordanian Growth

Public sector IT investment has become a driving force in Jordan as in-country channel players make the most of growing market demand.

Fast growth|~|seb200.jpg|~|Ayman Arafeh, general manager at CEB|~|The IT sector in Jordan is developing fast. National IT organisation INTAJ now boasts more than 150 member companies and the country is fast tracking ICT development plans to stimulate the growth of the knowledge economy. For channel players in Jordan, the prospects look bright.

The rapid growth of the Jordanian IT market has not gone unnoticed by major vendors working in the Middle East. In parallel with the market development these vendors are appointing in-country distributors and working hard to build a network of second tier partners capable of taking their products and solutions to market.

“In terms of channel structure, we’re getting there now in Jordan,” said Nisar Khan, channel account manager at Trend Micro. “We have started taking channel business on the ground very seriously and we already have an in-country distributor in place. We also have resellers that are now becoming certified to sell Trend Micro products and services in Jordan.”

“We are currently using Logicom as our distribution partner and they have approximately 35 staff on the ground inside Jordan. Logicom really understands our product portfolio and that fact that they also represent Cisco is a real advantage for us in terms of cross-selling potential — especially in the SMB-focused channel,” he added.

The channel landscape in Jordan is finally starting to segment — a development that several industry insiders claim is long overdue. The role of INTAJ and the government authorities in driving this process has been critical.

“INTAJ is playing a prominent role in regulating the market,” explained Ayman Arafeh, general manager at CEB, a major integrator and solutions provider in Jordan. “We still have some companies claiming that they operate in all areas of the ICT market and that is something that needs to be clarified and resolved as soon as possible. When it comes to specific tenders the customers need to know if they are dealing with a partner that is skilled in ERP implementations or network consulting if that is what they require.”

While enterprise and public sector IT spending continues to underpin the growth of Jordan’s IT market, consumer channels are also developing fast as internet penetration levels increase and government initiatives target increased IT education and greater PC penetration. ||**||Selling solutions|~|jordshops200.jpg|~|Jordan has a vibrant reseller community|~|Ramzi Zeine, chairman at Jordanian IT powerhouse STS Group, explained: “The main drivers of the economy are the government, education and banking and also the telecommunications sector. There are many new developments happening in the market such as the growth of wireless technologies.”

STS boasts expertise across a number of IT sectors from consulting and systems integration through to hardware distribution. The company has expanded its product portfolio in recent weeks adding vendors such as Belkin and Twinmos to its existing line-up. The company also boasts significant software skills.

“We are an authorised Microsoft reseller,” added Zeine. “This means that we offer the licensing programmes that Microsoft has for corporate users. We provide Microsoft solutions on two tracks: one track focused on internet and portal automation and the second set of solutions based on application integration and enterprise application.”

By talking to some of the major IT companies in Jordan you soon get an understanding for how the channel landscape differs from markets such as the UAE where trading business tends to top the agenda. In Jordan it is very much a case of supplying solutions to end-users involving the delivery of hardware, software and services. The majority of the IT kit that finds its way into the Jordanian channel is destined for local consumption.

“The re-export of IT kit is small to a level where you can ignore it with the exception of Iraq,” said Motaz Abu Ruman, general manager at reseller Oasis. “There is a sizeable product flow from Jordan to Iraq.”||**||Local structure|~|jordoasis200.jpg|~|Motaz Abu Ruman, general manager at reseller Oasis|~|Channel segmentation has now started to occur with the emergence of power retailers such as Fun Directory and reputable local assembly operations such as Samsync — a joint venture involving both Oasis and Samsung. “Samsync probably represents the first and only factory for PC assembly in Jordan that offers high quality product at excellent price points,” continued Abu Ruman. “Local assembly is not that strong but it does exist and Samsync is committed to helping this sector of the IT channel develop further.”

While the channel has started to mature there is still some distance to be travelled before Jordan can really be referred to as a mature market. Fawzi Darwazeh, director at distributor Jocom, explained: “The IT channel has not matured enough in Jordan. We can see many IT vendors setting up distribution channels in the market but these channels are not well protected by the vendors themselves. Some vendors assign multiple distributors in Jordan, which creates confusion and excessive competition. Other vendors assign regional distributors as well as local distributors and this has the same effect.”

The clash between authorised and unauthorised channels remains an unresolved issue in Jordan, creating problems for some of the in-country distributors and resellers. “The channel structure is not clear,” said Mohammed Amireh, general manager at Jordan Micro-Tech. “Unfair competition is negatively affecting the market as it is very common for companies to fly to Dubai and import product. You can reach a situation where you can purchase HP products from a non-authorised dealer at a lower price that the authorised distributor can offer in the market.”

“Many companies import directly from Dubai and this gives them an advantage that allows them to grow their business faster than the local average growth rate,” he continued. “Total imports of these companies exceed total sales of the largest regional distributor operating in Jordan. Some shipments reach Jordan through unofficial routes and evade tax payments allowing these companies to create higher profit margins.”

Despite the presence of this unofficial product flow, local resellers and distributors in Jordan are starting to capitalise on the ability to now participate fully in vendor-led channel partner programmes.

“Most of the IT companies are now members of different channel programmes,” added Abu Ruman. “They work under the rules and systems set out by the vendors and derive the benefits associated with membership. This can also involve attending various conferences, training events and exhibitions to make sure that they are fully up to date with the vendor’s roadmap.” ||**||Vendor policies|~|jordsts200.jpg|~|Ramzi Zeine, chairman at Jordanian IT powerhouse STS Group|~|While the Jordanian channel has enjoyed a period of sustained growth, there is still an element of fear, uncertainty and doubt regarding the future prospects of the market. Most players are adamant that vendor policies will have a significant impact on determining how quickly the market matures and the channel’s ability to reach its full growth potential in the years ahead.

Darwazeh explained: “The biggest threat comes from the IT vendors themselves by not adhering to the set of rules that protect their partners and distributors. I think most vendors are looking to expand their market share even if it hurts their assigned partners. Creating multiple channels for the same product does not always mean more market share. On the contrary, it may backfire and actually result in less market share.”

Amireh at Jordan Micro-Tech commented: “We are always optimistic about growth rates but on the ground we see sales grow while margin shrinks. Some of the companies reached a dead end with their business and actually decided to leave the market completely because they actually could not handle their expenses anymore.”

“Such problems could be solved if there was an organisation that looked after the market and regulated the relations and trends in the channel. The current computer association is only concerned with making money and does not serve either the local market or the customers,” he continued.

The Jordanian IT channel has entered a critical development stage and vendors need to make sure that they are addressing the needs of in-country distributors and resellers. This is a market with huge potential and a solid base of committed resellers.

However, Jordan’s resellers need to feel that they are appreciated and valued by the vendors that they represent — rather than treated as a secondary concern behind partners in the UAE and Saudi Arabia. ||**||

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