By Andrew Seymour
The lifting of US trade sanctions last year has suddenly made the Libyan market a viable proposition for IT companies previously forbidden from developing channels in this part of North Africa. But those who are now beginning to take the Libyan IT sector seriously are advised to tread carefully if they wish to build the routes to market required to justify their investment.
News of the US' decision to restore full diplomatic relations with Libya 18 months ago was greeted not so much with a sigh of relief, but a stifled cheer from the array of technology vendors frustrated by an embargo that had prevented them from growing their coverage of the MENA landscape. Several major brands - from Avaya to Western Digital - told Channel Middle East last year that with the restrictions eased, their intention was to start the process of establishing channels in the country.
For many foreign companies, however, the initial enthusiasm that accompanied the opening of the market has been replaced by the stark realisation that cultivating strong and reliable channels in the country presents a gargantuan challenge. Few vendors have publicised their partnership agreements or project wins, preferring instead to take a low-key approach to finding their way around a market that has clearly suffered from the restrictions imposed upon it.
There is some knowledge on the PC side, but when it comes to the Unix high-end datacentre type of business it is very difficult to find engineers who have been exposed to this type of business.
One of the most striking features of the Libyan market is that local resellers, computer shops and traders - and to an even greater extent end-users - have simply not been exposed to the sort of consistent channel landscape common in other markets. "Libya is lacking a distribution hierarchy as a result of the closed market due to the long years of embargo," admitted Vipin Sharma, VP EEMEA sales at UPS vendor Tripp Lite. "During that period, the resellers used to buy their goods directly from a Dubai Free Zone area and ship it to Libya to be resold in their outlets.
This method of conducting business has meant that the values and principles associated with a healthy channel aren't held in the same esteem as they are elsewhere, leaving fresh-to-the-market vendors facing a serious brand-building challenge. "The channel structure in Libya is not thriving as much as other markets in the region," remarked Jamal Maraqa, managing director at storage integrator Pro Technology. "We are working closely with several small firms and trying to establish a long-term relationship that is based on mutual profitability. Because these local companies didn't have a chance to work with distribution - only on direct import - we have to make sure that they realise the benefits of working through the channel structure.
At the moment, Libya is completely dominated by Chinese vendors which haven't been subjected to the same restrictions as American and European firms, according to Ahmed Youssef, who oversees the Saudi, Egyptian and Libyan operations of networking distributor FVC. "It has been an open market for Far East companies to go and establish their business so Huawei and ZTE have huge set-ups there," he said. "They are dominant when it comes to the infrastructure of the telcos. Since the embargo was lifted, Cisco and 3Com have begun paying attention and Cisco participated in the last main IT exhibition in Libya. They are working actively to compensate for the fact that the competition is already ahead of them.
For many of the US brands, the immediate aim is to enhance local awareness of their business and portfolio because they aren't blessed with the brand equity and customer links they would normally take for granted. This point is especially pertinent in the high-end space where the lack of experience around certain technologies is going to command a strong degree of channel education to rectify.
"There is some knowledge on the PC side, but when it comes to the Unix high-end datacentre type of business it is very difficult to find engineers who have been exposed to this type of business because of the sanctions," admitted Bruno Haubertin, partner and alliances sales organisation manager at server vendor Sun Microsystems. "Where we need to put in a massive effort now is in terms of training and engaging the partners into selling things that are different from a bunch of PCs. That also requires lots of investment from their side as well.
Several sources insist that many Libyan ex-pats who have worked or studied abroad are now returning to their homeland to take on roles in the public and private sector. That is also having a positive impact on the technology market although it will take some time before the deficit in skilled engineers and IT professionals is eradicated. "The Libyan IT market is unique in its status and level of maturity due to the limited access it has had to vendors and suppliers during previous years," said Pro Technology's Maraqa. "Our role is to educate and make sure that we deliver by implementing what we promised.
Pro Technology is one of the few companies to have invested in opening a fully-fledged office and showroom in Libya's capital, Tripoli. The company has taken on a 4,500 square feet facility as part of its expansion plans and strengthened its presence by recruiting several engineers to serve the market.
Networking distributor FVC, which carries brands such as TippingPoint and Polycom in its portfolio, has capitalised on the opening of the market by expanding some of its Egyptian partners into Libya, including the IT and telecoms units of business group Alkan. That gives FVC the assurance that it is working with resellers it knows are technically capable. "These partners have already proved themselves, been successful in the Egyptian market, and seen the potential growth area to expand into Libya because the two countries have some excellent ties in terms of partnerships and relationships," explained KS Parag, managing director at FVC. "They've actually set up affiliate or associated companies in Libya and then transferred their core competencies from Egypt to Libya.
Some companies, such as storage reseller STME and handset giant Nokia - the latter of which recently opened an office in Cairo - are using their Egyptian bases to address Libyan customers, while Egyptian business influence is expected to increase in the IT channel going forward, particularly as visa restrictions do not apply. Yet, after so many years in the shadows, those with aspirations to make a success of the Libyan market will require dedication and patience because controlling and understanding the maturity of the customer when it comes to buying IT equipment still remains difficult.
"The processes for RFPs and other basic procedures we are used to in the Middle East are very new there," observed Sun Microsystems' Gary Hopwood, who has visited Libya several times to oversee the vendor's progress with partners and customers. "So the decision time ends up being much longer because it is difficult to get used to proper RFP processes and selection criteria.
We’ve assigned a channel account manager to Libya, and are in the process of understanding the Libyan channel and determining our next steps. First indications look promising.
Sun's strategy since the turn of the year has been to align closely with other vendors such as Oracle - understood to be one of the few US brands to have staff permanently based in Libya - in order to share experience and local knowledge. "Libya is a country where the opportunities are huge, but it is going to take time to get the customers to a certain level of understanding about the technologies we are bringing and also to get the channel partners up to a level where we are happy to work there on those kind of projects," admitted Hopwood.
Like many other vendors who are getting to grips with the Libyan market, Sun has opted to develop a one-tier strategy for its high-end solutions, appointing Al Wasl, CIS and GIT as its initial partners. The company also relies on Dubai distribution partner Aptec to supply entry-level Intel- and AMD-based volume products into a registered Libyan customer base of around 25 resellers.
Infrastructure management software vendor CA is another brand that has taken its first steps towards developing a channel in Libya. "We recently signed up our first partner in Libya, ITS Canada, and we are now working to train and certify them," explained Quentin Cornelius, director of EMEA East channel sales at CA. "We've also assigned a channel account manager to Libya, and are in the process of understanding the Libyan channel and software market and determining our next steps. First indications look promising."
Elsewhere in the software market, Opennet - the master distributor for Red Hat Linux in the Middle East - has also started making visits to the Libyan market alongside representatives from Red Hat's European subsidiary. "We have dealt with the territory at arm's length for some time," explained general manager, David Allinson. "The most recent visit we made to Libya was really a fact-finding mission to see what's going on, what level of activity there is in the marketplace and to take a look at potential partners."
Allinson admits Opennet's initial objective is to identify in-country partners and provide them with the necessary tools and skills to support customers, in addition to educating the market about open source. "We are already talking at an early stage about delivering training within the country," he revealed. "We have an education division, which operates out of Dubai but also has the capability to deliver on-site training. In the past we have had people coming from Libya to attend training courses, but with demand we are able to deliver out in the field where necessary."
With many vendors aware that finding reliable partners with links into important sectors such as government and oil and gas holds the key to success, the verdict from most commentators is that a diligent, rather than aggressive, approach will prove to be the most effective method for channel development in the coming years.
In addition to demonstrating considerable patience, companies expanding into Libya also need to bear in mind other idiosyncrasies that could influence their performance in the market. Factors such as limited hotel space, an undeveloped banking network and a legal structure that one market report describes as "multi-layered", have to be taken into account, as do logistical hazards. "With the poor distribution structure and the huge area of the country, the geographic coverage is the biggest challenge we have encountered," confessed Sharma at Tripp Lite. "While Tripoli is the capital city, and one of the biggest markets, other cities such as Benghazi, which is over 1,100 kilometres from the capital, is also considered to be an important market."
Tripp Lite says that a major regulatory change introduced at the tail end of last year has also posed another challenge that has negatively impacted its business. "The new law mandated that there should only be a sole distributor for each brand, but with over 1,000 products - varying from a basic surge suppressor or network CAT6 patch cable to a highly sophisticated parallel online double conversion UPS unit - it will be very hard for a single company to do the sales and service for that wide a range," explained Sharma.
Unsurprisingly, reliable market data is difficult to obtain too. Many vendors blame lengthy project life-cycles and channel fragmentation for the dearth of accurate statistical data on the value of the market. Some sources have suggested that Libya has the potential to ship as many as 40,000 PCs a quarter, but such an estimate seems grossly optimistic given the size of the neighbouring Egyptian market - with a population ten times as large as Libya - is barely worth 350,000 units a year. That said, vendors Intel and Microsoft recently confirmed a deal with the Libyan government to supply 150,000 rugged laptops that cost US$200 each to build. The order for the Classmate-branded PCs is understood to have been directly placed by the education ministry, although the cost of the deal remains undisclosed.
One distinctive feature of the market is that it is regarded as government-centric, with some sources estimating that 75% of IT spend is driven by the central purse. The telecommunications sector is also significant and with more than 90% of Libya's export earnings stemming from oil production, the oil and gas vertical is also luring outsiders.
"The obvious attraction is there are a lot of oil companies and if you look at what we are trying to sell, which is Red Hat Linux, it has a lot of currency within the oil sector," said Allinson at Opennet. "A lot of people who have traditionally run big systems on Unix are increasingly migrating to the Linux platform. We also have a massive reference account in Aramco in Saudi Arabia," he added.
Companies capable of building strong links into the key verticals are certain to prosper in the coming years as the Libyan IT market begins to flourish and becomes less reliant on third party exports. Both fixed-line and mobile telecommunication improvements are expected to generate huge infrastructure investments, as will Libya's ambitious plans to double oil production to three million barrels a day in the next five years. The private sector, meanwhile, retains a more modest profile in Libya, but is anticipated to increase as foreign investors establish local operations.
Yet, when all said and done, the Libyan market needs to be put in perspective. It's young, fragmented and opportunistic - characteristics that will prevail long into the future. "You can see people grabbing opportunities even though they are not related to that business at all," commented Youssef at networking distributor FVC. "But they have grabbed that opportunity and they just want to fulfil it. There are definitely companies targeting long-term business, but you still can't segment the market properly yet.For all the latest tech 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.