By Stuart Wilson
It remains early days in the development of the Yemeni IT channel, but forward thinking companies are staking their claim now
First mover advantage|~|nassnauthoa200.jpg|~|Nass Nauthoa, GCC reseller channel manager at Intel|~|For any true IT channel aficionado there is something particularly alluring about emerging markets. In the Middle East, countries such as Yemen, although still at an early stage in their IT development, offer a tremendous opportunity for vendors and distributors alike to make their mark on a rapidly evolving channel landscape.
There are some IT companies out there that will be quick to claim that Yemen, with a total addressable PC market of just 30,000 units a year, nascent internet adoption levels and limited spending power, is not really worth the time and effort involved in building up sales channels and cementing business relationships. However, some major vendors now realise the importance of making a mark early in countries such as Yemen. Talking to channel players within Yemen, it is clear that they already appreciate the push and pull marketing efforts that major players such as HP have devoted to the country. And they want to see even more vendors follow suit.
Intel is one vendor that is certainly not slow in moving forwards when it comes to cracking emerging markets. The components giant recently held its second Intel Channel Conference in Sana’a. “On this round we had about 60 people in Yemen. Number of delegates is one thing but the quality is also important. The feedback from the team that were there from Intel doing the ICC was very good. They stayed on for an extra day for subsequent meetings with attendees,” said Nass Nauthoa, GCC reseller channel manager at Intel.
Without doubt, understanding the size and structure of the Yemeni IT channel remains a difficult task based on an element of guesswork due to the amount of product flowing into the country through unauthorised channels to circumvent import duties. While this situation produces some uncertainty regarding the total market size, it is also a primary factor in the tendency for many vendors and distributors to underestimate the total addressable market (TAM) for PC sales.
The official statistics from vendors and major distributors claim that the Yemen TAM for PCs is around the 30,000 mark per annum. Talk to the in-country channel players — those that are truly aware of the authorised and unauthorised product flow into the market — and you are much more likely to hear a figure around the 50,000 unit mark.
||**||Untapped potential|~|intelsanaatable200.jpg|~|Intel is already reaching out to local assemblers in Yemen through its channel conference events|~|Nabil Al Germozi, general manager at CEW, a 100-strong Yemeni IT powerhouse with activities spanning distribution, corporate resell, services and software integration, believes that even this may be a conservative estimate.
“It could be as high as 60,000 per year now with approximately 60% of units going to corporate customers and 40% to individual end-users,” he said. “The local assembly sector is very strong because of the weakness of the economy. Up to 85% of the PCs being sold in Yemen are probably locally assembled at present.”
The development of the PC assembly market and the emergence of genuine ‘local heroes’ in Yemen is being actively encouraged by Intel. “All markets go through a cycle and have to start at some point and Yemen is evolving along that same cycle. What we have seen is there are probably about six quite dominant local assemblers in this market and we have established relationships with these people. A couple of them seem to be scaling up their brand so we are talking to them to see how we can make that happen in a bigger way,” added Nauthoa.
Intel’s four Dubai-based distributors are all authorised to sell into Yemen and the vendor plans to launch its Intel Inside co-marketing programme in the country during the coming months.
With average PC selling prices hovering around the US$600 mark, coupled with related sales of peripherals and additional corporate spend on software and services, the overall IT market in Yemen is probably already worth in excess of US$50m a year.
Some 20 million people live in Yemen and it remains a market with massive untapped potential. Yes, spending power is limited and the country does not possess the economic power or scale of natural resources that other Arab states have at their disposal. Nevertheless, the sheer size of the population, coupled with programmes from organisations such as the World Bank designed to stimulate economic development in Yemen, could well usher in a period of sustained growth. Local channel players reckon that growth rates of 25% will be achievable during the next two years as market demand accelerates.
“The Yemen market is developing fast and there is a great deal of untapped potential,” said Abu Mohammed Ali Sarin, general manager at PC Sana’a, a major player in the Yemen channel landscape. “That is why it is a very good time for vendors to take action and start building a strong channel. Those that act first will enjoy significant advantages as the market develops.”
PC Sana’a already employs 45 people and boasts three stocking points and two showrooms as well as close links to a number of major vendors including HP, Maxtor and LG. “We plan to sign more vendors in a bid to expand our product portfolio and offer more choice to customers,” continued Sarin. “The channel in Yemen is starting to segment and distinct categories are now being defined.”
||**||Software issues|~|sabbagh200.jpg|~|Farid Sabbagh, distribution manager at Fujitsu-Siemens Middle East|~|It is however a slow process and Germozi believes there is still some way to go before proper channel layers and roles are clearly defined in Yemen. “Everything is still mixed and we do not have a specific set of distributors serving a reseller layer below them. This is due to the experience of the channel and also the fact that it has really only been a boxshifting market until now,” he said.
One factor still holding back the development of Yemen’s IT market is the outdated intellectual property laws that continue to exist. In essence, software piracy remains legal in Yemen, and this has prevented software vendors from making genuine inward investment in the country. Without the presence of software vendors to drive forward the IT solutions market, the knock-on effect is a similar reticence from the hardware vendors to make an investment of their own.
“Software is a problem for Yemen — it is legal not to pay for software,” said Farid Sabbagh, distribution manager at Fujitsu-Siemens Middle East. “There are no laws. You can have a copy of whatever you want and no one can touch you. This is a big problem. I think when they fix this it will be more interesting for software vendors and when they go they always take the hardware vendors with them.”
The problems enforcing intellectual property on software are reflected in the development of Yemen’s nascent IT retail sector. Where Dubai has Plug-Ins and Jumbo, Yemen’s equivalent power retailer with a total of six stores is simply called ‘The Pirate’.
“The copyright law is more than 40 years old and more suited to painters and book authors as opposed to software vendors,” admitted Haider Salloum, marketing manager at Microsoft South Gulf. “However, Yemen is starting to go through the development stages that other Middle East countries have gone through. The government is working very hard with the UN and international bodies. When you look at what we have achieved in Egypt and the way that a knowledge-based economy can foster IT growth, Yemen clearly has great potential.”
||**||Inward investment|~|abdullamane200.jpg|~|Abdulla Mane, general manager at Technology Stars|~|Despite the obstacles facing the global software giants, there is already a limited software services and integration business in Yemen led by local players such as YemenSoft, Technology Stars and 3Soft.
Musad Abdulla Al-Qatami, head of systems development at Technology Stars, explained: “Yemen depended on software from outside the country for a long time. The rarity of experienced people in the sector led to minimal software development actually happening in Yemen. That is now starting to change as more local companies start to build up their operations.”
The Yemeni channel is ready to service the growth potential that exists and help build up the in-country IT market, but to do this well, they need the full support of vendor partners.
“A lot of education has to be done in Yemen regarding IT and this will happen when the software laws are in place. The government spending has to happen much faster to help drive the market as well. All the major business is happening in Sana’a and Aden but let’s not forget that Yemen is a country of 20 million people — there are so many places where business is being done,” said Sabbagh.
Abdulla Mane, general manager at Technology Stars, added: “The government, represented by the Ministry of Telecom and Ministry of Information Technology, is starting to put a great deal of effort into the communications and internet infrastructure to encourage the growth of the IT economy.”
The development of the Yemeni economy, increased levels of education at both a channel and end-user level, and inward investment from major multinational vendors are the prerequisites for sustained growth. “What HP and Intel have done in terms of channel education is a very positive move,” continued Germozi. “It is also providing real benefits for them. Many companies are selling HP products and it is a brand that customers are actively asking for.”
Inward investment and greater awareness from vendors of the product flow into Yemen would also put them in a better position to support their in-country partners.
“One of the problems that Yemen faces is that a lot of product still comes in through unauthorised channels,” added Germozi. “A great deal is from Dubai, some is from Saudi Arabia and there is a little bit from the Far East and even the US. With so much being smuggled in it is difficult to estimate the real market size.”
||**||Ready and waiting|~||~||~|Yemen has a vibrant IT sector showing great potential for growth. In the capital city of Sana’a, dealers, resellers and retailers congregate around two main thoroughfares — Hadda Street and Mogadishu Street.
Projects to promote home PC ownership have already started up with government employees able to participate in a monthly instalment ownership scheme. Internet penetration is rising — admittedly from a small base — and the government has unveiled ambitious plans to promote the development of the entire ICT sector during the next few years. Yemen could even emerge as a strategic hub linking the Arabian Peninsula to East Africa.
“In the past three years there has been noticeable trade in the IT field between Yemen and various countries in East Africa including Ethiopia, Djibouti, Somalia, Eritrea and Sudan,” concluded Mane.
The Yemeni channel is ready and waiting for more vendors and distributors to make the commitment and investment that this frequently overlooked market deserves.