By Stuart Wilson
IT vendors do not have a successful Middle East channel strategy unless they can truthfully declare that their Saudi operations are firing on all cylinders. In the wider Middle East IT market context, the Kingdom represents a massive part of the overall picture.
Vendor tactics|~|mizramain.gif|~|Mirza Asrar Baig, CEO at IT Matrix, believes there is a Catch 22 situation preventing some vendors from investing more resources in building their Saudi market presence and forging closer links with local partners|~|Building channels in Saudi Arabia and establishing a strong market presence can be an arduous process. But the potential rewards more than make up for the effort involved. For vendors that are prepared to invest and make a long-term commitment, Saudi Arabia represents a honey pot of IT spending just waiting to be discovered. Despite the rewards on offer, not all vendors are prepared to shell out the funds or invest in recruiting skilled local staff to take advantage of the opportunities that exist.
Local players frequently paint a strikingly similar picture of vendor indifference to the Saudi market. “The issue in Saudi Arabia is that international vendors do not always come here looking for actual channel partners,” says Mirza Asrar Baig, CEO at Saudi security software vendor and service provider IT Matrix. “What frequently happens is that the vendors come in and just do end-user focused roadshows for potential customers to attend. The customer may then decide it wants the product in question and goes away and contacts its usual system integrator or solution provider. This partner then has to contact the vendor to request authorisation to sell the product and join their channel programme.”
Many vendors wishing to sell goods in Saudi Arabia favour this model of pull marketing based on end-user presentations. Unfortunately, the model has a tendency to pull in partners for one-off engagements with their existing customer base as opposed to those looking to build committed long-term partnerships. It also requires a constant supply of end-user events run by the vendor to generate interest from customers because the channel is not capable of providing push-based marketing on its own in the market.
Adds Baig: “In this sort of situation, the transaction is reactive and based on the customer’s wishes. As a company, IT Matrix attempts to be more proactive and has been taking concepts like anti-virus software and actually going out and talking to corporate customers about this.”
Those vendors with an established presence in Saudi Arabia are eager to point out the benefits this can produce. Dominic Morris, country manager for Saudi Arabia at structured cabling vendor Systimax Solutions, says: “Systimax has been here for a long time as part of companies like AT&T and Avaya. We have had people on the ground developing the market and pushing the solutions and this gives us a strong competitive advantage.”
“Systimax currently has three dedicated staff members in Saudi Arabia including a senior technical consultant and a business development manager,” adds Morris. “We added the technical consultant this year to give us the ability to go out to customers alongside business partners and talk to customers about their technical requirements.”
For Systimax, its seven business partners remain the only method of fulfillment in the Saudi Arabian market with the channel taking on the installation and implementation of cabling solutions. It is beyond this role that the vendor gets involved, ensuring that customers feel comfortable dealing with them.
“In the Middle East, Systimax has been very strong at developing its ability to work with the customer in a consulting capacity,” adds Morris. “We will help out with technical design and development and take on the role of project consultants.”||**||Entry routes|~|mainDom-Morris.gif|~|Dominic Morris, country manager for Saudi Arabia at structured cabling vendor Systimax Solutions|~|New vendors are still trying to work out the best strategy to enter the Kingdom and build their market presence — often displaying varying degrees of success. Morris is adamant that commitment equals success: “We have always had the in-country headcount, value-add consulting expertise and the ability to work directly with end-users on certain elements of projects. Having a presence here is an absolute necessity. Despite this, many vendors still look to leverage in their presence outside Saudi Arabia through third parties. This model just does not work because the vendor is too remote for the customer's liking.”
With the Saudi channel-to-market taking steps to mature, the problems vendors have faced in the past identifying the right partners to work through could become less of an issue. Companies such as Ebttikar represent the union of three separate companies into one providing a potential partner with scale and customer reach.
Concludes Morris: "The Saudi market is set to continue its growth and remain one of the largest IT markets in the wider Middle East region. There are construction projects everywhere and the banking and telco markets are showing strong development potential. Existing enterprise level organizations are growing quickly and extending their base. The challenge for all vendors is to address these opportunities in the appropriate manner."
For Systimax, this also means roadshows and end-user events. It recently held an event in Riyadh attended by more than 250 interested customers and similar events are now planned in other Saudi provinces. The company has also set aside marketing funds for its business partners to use for brand development and lead generation activities.
While Systimax has the local staff and channel partners to follow up on leads generated at roadshows, vendors without these resources in place should be more wary. “Saudi Arabia has so many end-user roadshows and events for specific solutions that they are starting to lose their impact,” advises Baig at IT Matrix. “It is worth remembering that projects are often awarded on the basis of personal contact networks that exist in Saudi Arabia too.”
Building a channel in Saudi Arabia is no easy task for vendors, but there are partners ready to respond to those that are ready to make a commitment — even if they are still few and far between. “IT Matrix looked internationally for vendors selling e-mail firewalls that we could resell in Saudi Arabia,” continues Baig. “The problem we faced was that many vendors only viewed the Middle East as a small part of their global infrastructure and were reluctant to commit their own resources to the region. When it comes to selling a vendor’s offering in Saudi Arabia, it is vital that the customer does not see any lack of commitment from the vendor. It is often neither the partner's fault nor is it the fault of the limited local staff a vendor does actually have.”
Even when partners have signed reseller relationships with vendors, there are no guarantees they will pick up projects even if they carry out the bulk of the groundwork needed to develop the lead.
“We can go to a new customer and promote one of the products we carry,” explains Baig. “The customer agrees it is an excellent project, puts out a tender and receives five bidders including the solution provider it usually works with. This solution vendor — which may not actually carry the product in question — has to contact the vendor and become a partner in order to complete the project.”
“It is a Catch 22 situation for these issues to be resolved,” adds Baig. “It requires vendors to be more committed to their partners in Saudi Arabia and also for partners to be more committed to the vendors they work with. But who should show that increased commitment first? Often the real loser in this situation is the customer.”||**||Committing resources|~|mainsaudi.gif|~|Saudi Arabia represents the largest national IT market in the Middle East|~|Current industry estimates reckon that the Saudi IT market is worth some US$3bn a year, with the majority of this investment still in hardware. If accurate, this figure would confirm the Kingdom as a market constituting half of the total Middle East IT markets. It is a figure backed up by comments from major vendors.
“Both Jeraisy and Ebttikar are Vision Partners for 3Com in Saudi Arabia and the national market is currently over 50% of 3Com’s business in the region,” says Wael Fakharany, regional manager at 3Com Middle East. “It is a country with tremendous growth opportunities.”
Given the current emphasis on hardware sales, the indication is that this is a market with further untapped growth potential. If anything, Saudi Arabia is currently at the start of its growth curve. It is a market reaching a tipping point where in-country investment by major vendors will suddenly be triggered. As this happens, a cumulative cycle of investment will develop pulling more and more vendors into the Kingdom and encouraging them to set up dedicated Saudi operations.
The investment in basic hardware infrastructure has created a platform for the growth of software and IT services investment in Saudi Arabia — a development that major vendors are keen to capitalize on. Major vendors now need to consider their approach to the Saudi Arabian IT market and whether or not to embark on a push or pull marketing technique when it comes to building demand. While the pull technique — based primarily around end-user events — may have worked well in the past, the development of the market is now reaching a point where vendors need to start building up their own in-country channel networks. Increasingly, this needs to be a multiple channel approach backed up by the vendor’s own local feet-on-the-street providing the customer with support, information and resources where necessary. Those vendors still trying to operate a remote channel strategy from facilities based outside Saudi will find themselves increasingly marginalised in years to come.