Font Size

- Aa +

Thu 10 Jan 2008 04:00 AM

Font Size

- Aa +

Ready for action

As always, the New Year has brought with it fresh hopes and aspirations for a Middle East IT channel that continues to develop in both size and structure. With market experts predicting that 2008 will offer solid double-digit growth, increased commercial spending and opportunities in emerging technology areas, the prospects for the reseller channel look good.

As always, the New Year has brought with it fresh hopes and aspirations for a Middle East IT channel that continues to develop in both size and structure. With market experts predicting that 2008 will offer solid double-digit growth, increased commercial spending and opportunities in emerging technology areas, the prospects for the reseller channel look good.

But the next 12 months are also likely to be fraught with challenges, not least because of the rising costs associated with doing business in the Middle East. Profitability is undoubtedly poised to be one of the main areas of concern for the channel this year. Shailendra Rughwani, CEO at Experts Computer, and president of the Dubai Computer Traders Group (main picture), urges resellers to stick to their principles, maintain their margins and increase their breadth of services.

I suggest resellers keep the margin up and stick to their terms because no big business is created on low margin. At the moment everybody is just undercutting each other

"As the markets are growing, so is the level of competition and this is putting pressure on margins," he said. "I suggest resellers keep the margin up and stick to their terms and conditions because no big business is created on low margin. It's a real problem at the moment because everybody is undercutting each other, which isn't going to help anybody.

The ability to spot new market opportunities and develop additional competencies will clearly provide some relief for resellers desperate to strengthen their bottom line. But where exactly should they invest their money?

For enterprise resellers, at least, business continuity solutions and virtualisation technologies are two areas that research house IDC believes will explode, while the "second wave" of investment from the SMB sector will drive demand for business applications. "Lastly, I think we are going to see some consolidation in the IT services market - there are too many players in the region so you are going to see a lot more M&A activity," said Jyoti Lalchandani, VP and managing director at the MEA office of IDC.

"Market needs are changing and companies are going to be required to specialise rather than putting on various hats," added. "They will need to identify what areas of the market they want to play in and build the required skill sets to capitalise on the opportunity.

Resellers will also need to adopt a services-over-price attitude if they are committed to building a sustainable business model. Rughwani at Experts Computer agrees: "We as IT businessmen and entrepreneurs need to take this as a challenge because we need to get better in terms of services and knowledge of new products otherwise the specialist IT store concept is going to slowly fade away.

Rughwani isn't the only member of the Middle East channel with a view on the major developments that are set to shape the market during the next 12 months. Channel Middle East also contacted an extensive list of regional IT executives and asked them three questions about market trends, challenges and reseller profitability. Read on over the next six pages to find out what they have to say about the channel's destiny in 2008.
Asim Al-Jammaz
Vice-President, Al-Jammaz


What trends will shape the Middle East channel in 2008?

The market is full of partners, but very few of them are offering real value. Lots are offering what they have in their hands, or just signing vendors for the sake of signing more partners. 2008 is all about recruiting channels. Everybody has their own technology, but the winners will be those who recruit the right channel because there are so many other players in the market and programmes are very similar. How vendors communicate this to their channel will make all the difference. And it's not only about one-to-one communication, but being creative when communicating to the channel and convincing them to invest.

What are the main challenges facing the Middle East channel in 2008?

It is going to be financial challenges that are not only related to channels, but banks that sometimes - especially in the Saudi community - want to guarantee their money and are not willing to take risks with SMBs. This reflects back on me as a distributor when they don't pay me on time and I can't invest this money back into the channel. The second challenge is the quality of people, which is a very big problem. Some vendors are working out their own recruitment sites to assist their partners, but this will help more employees to move around between partners.

What steps must the reseller channel take to improve profitability in 2008?

Very simply, specialisation. If you want to continue doing business with commodities, you are not going to make any money. You need to up-sell - use this commodity business to up-sell and sell attached services and advanced technology to them. There are a lot of opportunities in the market for more managed services, product bundling and segment focus. Take any segment and find all types of solutions that this segment needs.
Ali Baghdadi
President and CEO, Aptec Holdings

What trends will shape the Middle East channel in 2008?

The market itself is not slowing down, it's continuing to grow with revenues from petro-dollars increasing. We don't see the market being affected by some of the disturbances in neighbouring countries, be it Pakistan or Lebanon. I think the market will survive these little hiccups. Even Iraq is not necessarily making any impact on the stability of the market.

What are the main challenges facing the Middle East channel in 2008?

The biggest issue that we are all facing is the rising inflation in the UAE and neighbouring countries. That is going to have a significant impact on the bottom line of many resellers. I think it is going to be a question of how well the resellers and other IT specialists survive and ensure that they continue to be profitable.

What steps must the reseller channel take to improve profitability in 2008?

There isn't one answer or one solution. Every company has to become more efficient, more aware and have tighter control on spend. Pay for what you need, don't carry dead weights, introduce more profitable services, focus on what makes money and drop what doesn't make money. It is time to reflect. I think some people have to make some serious decisions because the worst thing to do is to leave it until the crunch comes. And what we definitely don't want to see is another series of bankruptcies or runaways.
Roger El-Tawil
Channel and Marketing Director MENA, Avaya

What trends will shape the Middle East channel in 2008?

Partners will move towards more of a systems integration model rather than only focusing on a single solution. Customers are expanding in the region and the need to have a one-stop-shop service is expected to arise in the coming year. They are also becoming increasingly educated on technology. Selling basic technologies will not make partners competitive. They will therefore have to provide value added services and applications above their infrastructure offering to become more competitive.

What are the main challenges facing the channel in 2008?

Staying profitable while expanding the portfolio will be a challenge for the channel in the coming year. A crucial challenge will be the availability of qualified technical resources in the market.

What steps must the reseller channel take to improve profitability in 2008?

They must add applications with specific vertical focus, as well as meeting customer pain points - the network will no longer be a utility. Services and high level customer support are key to achieving loyalty and profitability.
Mohammed Amin
General Manager MENA, EMC

What trends will shape the Middle East channel in 2008?

With the growth of the region and the opportunities arising from different emerging markets and commercial accounts, resellers will work on having more geographic coverage and reach in those areas. There is also a great opportunity for segmentation by industry and specialisation by solutions, which is something that we are reinforcing with our partners in the region for more qualitative, focused coverage.

What are the main challenges facing the channel in 2008?How to manage market growth and penetrate emerging markets at the right time, as well as managing to have a full portfolio of offerings. With the competitiveness of the market, partners have to expand their portfolio of value-added services.

What steps must the reseller channel take to improve profitability in 2008?

Pricing has become very competitive and to maintain a healthy operation with the slim margins that partners sometimes have to make to win deals, they have to put more focus on solutions and added value services sales.
Gilbert Lacroix
Senior VP EMEA Indirect Channels, CA

What trends will shape the Middle East channel in 2008?

High oil prices are driving millions of dollars into this market, which in turn is driving investment from government organisations, financial institutions and infrastructure companies. In 2008, these entities will increase their demand for IT, particularly IT which manages infrastructure - the field where CA plays.

What are the main challenges facing the channel in 2008?

We're moving from a world where people sell products to a world where people sell solutions. This is true for CA on a worldwide basis - you see us aligning around solutions, not products. The challenge this year is to align channel partners around solutions as well. Partners must become solution-enabled and vertically-focused experts.

What steps must the reseller channel take to improve profitability in 2008?

Many resellers try to be everything to everyone all the time. Those resellers need to increase their level of focus. Secondly, the reseller channel has to employ more professional, more talented staff. With these two steps, resellers can improve the quality and profitability of their offering.
Stephane Rejasse
Middle East Managing Director, Fujitsu Siemens

What trends will shape the Middle East channel in 2008?

The need for the Middle East channel to have the proper level of market differentiation and focus. Channel partners need to be absolutely clear about which segments of the market they want to reach, whether on the enterprise or volume elements, and not allow themselves to be distracted from their objectives. Only with that level of focus and differentiation can our channel partners add the necessary value to our customers' businesses.

What are the main challenges facing the channel in 2008?

The potential to lose focus. Partners need to understand market dynamics and their role within the market. Once they have the correct focus, then investment in staff and training are the next challenges to address.

What steps must the reseller channel take to improve profitability in 2008?

FSC is determined to help partners be more profitable by improving their ability to target opportunities in the market and then reward those partners who over-achieve. The delivery of differentiated services will also enable profitablity in 2008.
H.H. Prince Waleed Al Saud
President, BDL Group


What trends will shape the Middle East channel in 2008?

What happened in the past was a strong retail wave where you saw a huge pick-up of notebooks and other products related to the retail sector. Unfortunately today, we see the retail market getting weaker because of the depreciation of the dollar and high inflation - the individual that represents the retail market is finding it harder to spend more money. On the other side, we see oil going up, the governments are getting more money and therefore you see more governments projects. In Saudi Arabia we have three new cities coming up from scratch, while there is huge progress in Dubai. We expect spending on the commercial and SMB side to be significant and this is why we recently took the strategic step of getting the Dell commercial products.

What steps must the Middle East reseller channel take to improve profitability in 2008?

I think the biggest problem that we see in the channel is that people don't have faith in their income. Some people just get excited and they want to burn prices to get more revenue. I think that if the resellers had a little bit of faith in themselves, and they controlled and maintained the retail prices they are advised to, then they would make a lot of profit. We do force them to stick to the retail price and we close a lot of accounts if they don't honour that. In some countries, Saudi Arabia for example, we don't buy small quantities. Sometimes we buy 10K or 15K of notebooks and try to sell them in one month, and if you don't have real control of the channel then the end-user price will be a mess.
Guido Romagnoli
Director of Sales and Business Development of Channels MEA, Cisco

What trends will shape the Middle East channel in 2008?

The Middle East channel needs to be ready to transition from a ‘greenfield growth' attitude to a more ‘differentiated growth' strategy. Customers and resellers are becoming more selective about which channel to use. This means that the channels, together with the vendor, need to decide where to focus their investments. There are three logical dimensions: geographic specialisation, technology specialisation and vertical specialisation. Each channel and vendor needs to have a clear view of the current and future channel landscape in order to plan and enableprofitable growth for channel partners and the best qualified coverage for end-users. At Cisco we take this very seriously.

What steps must the Middle East reseller channel take to improve profitability in 2008?

Revenue and gross margins can be improved by differentiating from the competition and improving the product versus services mix.

We selectively invest in education, joint business planning, marketing programmes and increasing partners' vertical expertise. In addition, we help our partners to attach more professional services to each product that they sell. A second area where we support our partners is payment terms, which in the Gulf region can be very cash-flow challenging for resellers. While we stretch our partners with participation in more sophisticated projects we need to help them in adjusting their credit line and cash-flow. We have engaged with GE, Standard Chartered, Citigroup and Castle Pine in order to give our best partners 90-day terms and extra credit line.
Michael Collins
Middle East General Manager, Dell

What trends will shape the Middle East channel in 2008?

We expect to see growing IT investment and vendors launching new routes to market, product lines and service offerings. Mergers and acquisitions are likely to continue at vendor and channel level, while technology trends will include virtualisation, data warehousing and mobility. New partners will evolve in the region with focused solutions in verticals and in the distribution channel the trend will be the move towards value added services in logistics and after-sales support.

What are the main challenges facing the Middle East channel in 2008?

Maintaining and increasing profitability due to increasing operational expenses. Increases in living and salary costs, for instance, are affecting profit and ROI expectations from investors. Bad debt and customers with high credit risks present challenges for the channel, as does the hiring and retaining of local and international talent.

What steps must the reseller channel take to improve profitability in 2008?

Resellers must focus on value added solutions and services, and they need to strengthen partnerships with IT vendors and software and application providers to offer a complete solution as systems integrators. Additional steps that resellers should consider taking include developing skills in support services and professional services, and educating staff to cope with new technologies and offerings.
Khaled Hejazi
PSG Country Manager Saudi Arabia, HP

What trends will shape the Middle East channel in 2008?

You have to think big - we need to start moving away from box- moving to a really solution-driven business and that will shape the market positively. Shipment-wise, we need to think about sell-out, not sell-in, generate demand and then work on fulfillment otherwise the continuous push from partners will not be good enough.

What are the main challenges facing the channel in 2008?

In 2008 I can see that there is a lot of money in Saudi Arabia and there will be a lot of spending on IT. Issues like the stock market won't present a challenge. The only issue to worry about in 2008 is going to be seasonality, which we have to be aware of.

What steps must the reseller channel take to improve profitability in 2008?

The market is maturing every year and people tend to think differently and find ways to make things happen more profitably. The specialisation that we came up with in previous years is driving partners to focus on what they want to do. This will allow partners to add more value and achieve stronger profitability. We are likely to see growth of 20% to 30% until 2010.
Raj Shankar
Director, Redington Gulf

What trends will shape the Middle East channel in 2008?

The Middle East will continue to be a growth engine for most vendors, and therefore distributors. Given this growth story, I expect to see trends such as regional distributors going in-country, some in-country distributors trying to emerge as regional players and consolidation through small and medium distributors either being bought out or exiting this space. The trading opportunity out of Jebel Ali will reduce over time because the arbitraging opportunities will become uninteresting.

What are the main challenges facing the channel in 2008?

Profitability will remain the primary challenge - lower return on a higher capital deployed in the business. Currency revaluation or de-pegging will have a short term negative impact, while currency arbitrage will allow traders to bring in goods from outside the region.

What steps must the reseller channel take to improve profitability in 2008?

To step up value added services to customers and adopt prudent risk management practices to secure the capital.
Samir Al-Schamma
General Manager GCC, Intel

What trends will shape the Middle East channel in 2008?

PC penetration in this region is still relatively low and the overall market continues to grow at a good pace across all product segments of desktop, server and mobile. This is being driven by the massive investments in education, infrastructure, real estate, services and business projects across the region so these are positive trends for the channel to capitalise on.

What are the main challenges facing the channel in 2008?

Trying to do too many things, spreading resources thinly and not achieving relevance. Simply latching on to many things leads to adopting a "me too" strategy. In this competitive market the channel needs to look for differentiation opportunities.

What steps must the reseller channel take to improve profitability in 2008?

Profit and market segment share can be increased when the channel capitalises on first-mover advantage through product and technology transitions. At Intel we have a great roadmap of products rolling out that the channel can focus on to drive adoption,up-sell and differentiation.
Katie Spurgeon
Channel and Alliances Manager MENA, Symantec

What trends will shape the Middle East channel in 2008?

Larger companies will represent fewer vendors. Large vendors, in turn, will rationalise the number of partners they sell solutions through, but increase the partner base for pure product sales.

What are the main challenges facing the channel in 2008?

As the major vendors make acquisitions and add to their product portfolio, the pressure increases for them and their partners to sell solutions - meaning products grouped logically - as opposed to point products. With this extra demand, partners are under pressure to rationalise the number of vendors they are working with. Partners in the Middle East will need to decide their value proposition to customers and with which IT vendors they have the best value proposition.

What steps must the reseller channel take to improve profitability in 2008?

They need to consider their cost of sale, investment in skills, and even more "soft" skill investment in their sales people so they can articulate specific solutions aligned with the business needs of their customers.
Madhav Narayan
General Manager and Head of Sales and Marketing, IT Division, Samsung

What trends will shape the Middle East channel in 2008?

There will be increased investment in the region due to the oil dollar surplus. A lot of the investments will go into infrastructure and hence a significant share of IT and business process improvement. The commercial business - large and medium enterprises - are expected to show huge growth. The channel has to restructure to meet the growing needs of commercial clients. This means bringing in value through integrated offerings including, and not limited to, services.

What are the main challenges facing the Middle East channel in 2008?

There are many on-going projects in the region, which are going to attract more and more tourist traffic and hence the consumer business is expected to see interesting growth. Big box retailers are going to seeincreased footfall and distributors will need to be geared up to deliver best value to the large retailers. The retailers themselves need to be proactive to convert the increased footfall to maximise business.

What steps must the reseller channel take to improve profitability in 2008?

The channel on a macro-perspective needs to mature and not just sell boxes, but deliver benefits. Resellers need to identify niches for themselves and restructure to diversify their service offerings to remain profitable. The IT business is currently used as a vehicle to generate cash for investment into other areas. Companies need to hire good talent for better productivity, but less people for more productivity will be the order of the day.
Chris Cornelius
Managing Director MENA, Sun Microsystems

What trends will shape the Middle East channel in 2008?

The separation and specialisation of distributors will amplify over time, with very large actors distributing growing volumes of commodity products and a few highly specialised value players managing to distribute or integrate complementary products into solutions. Medium-sized vendors will increasingly rely on local partners, not only for reselling their products, but also with stronger agreements for brand representation, joint venture or trade agreements.

What are the main challenges facing the Middle East channel in 2008?

The inflation impact on pricing is becoming a challenge as products become cheaper in Europe. And the service level in our region still leaves a lot to be desired. We see increasing cross-border selling activity, with foreign distributors and integrators positioning themselves aggressively in our markets. Only service quality can protect the local players.

What steps must the Middle East reseller channel take to improve profitability in 2008?

Specialisation, differentiation and strong service investment to protect the customer base as well as develop new recurring revenue streams. Software and services are still the most profitable areas of the business, as well as development and integration. Technologies such as RFID, video streaming and monitoring, real-time imaging, biometric recognition, disaster recovery and new human interfaces are full of potential in a region like ours. The Middle East is an early adopter of new IT technologies and this is one of our clear assets in maintaining and increasing profitability.
Santosh Varghese
Regional General Manager MEA, Toshiba


What trends will shape the Middle East channel in 2008?

Notebook demand will continue across 2008 with growth of 40% year-on-year. There will be buoyant consumer demand and the commercial notebook market will enjoy momentum as SMB, education and large accounts transition to mobility. Demand for smaller screen size - 13.3-inch and 12.1-inch for example - as well as dedicated graphics and HD-DVD will be in demand as most consumers will be in renewal mode and replacing old notebooks and desktops.

What are the main challenges facing the Middle East channel in 2008?

The high cost of doing business, with inflation catching up in most of the countries across the region. Depleting margins and reducing ASPs mean you will need a proper product mix in order to achieve year-on-year sales growth. Shorter lifecycles will necessitate the need for efficient inventory management and lifecycle management, especially at distributor level.

What steps must the reseller channel take to improve profitability in 2008?

Focus on growing revenue rather than volume. A proper product mix of entry, mid and high-level products will ensure better margins rather than selling entry-level models at or below cost. Focus on up-selling with add-ons to complement the main products, such as top-up warranty, external storage and onsite warranty packs. Finally, create product expertise among staff.

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.