Station masters

The place of the workstation in the Middle East IT market has always been out of the limelight, as if a distant cousin to the more mainstream desktop PC. Despite this, workstations are still a major product focus for several key vendors, especially with constant demand fuelled by regional expansion in infrastructure and the visual industries.
Station masters
By Julian Pletts
Tue 08 Jan 2008 04:00 AM

At the ground level of the channel, some resellers are beginning to witness a degree of overlap between the traditional desktop PC or notebook and the workstation. The other end of the channel is seeing Middle East vendors increasingly rely on the channel to make sure the end-user's investment and continued smooth running of these complicated systems is secured.

"Most of the workstations being sold in the region come from PC and laptop manufacturers, so what happens is they are coming to the market from below," revealed Basil Ayass, systems practice MENA at Sun Microsystems. Like many of its workstation vendor counterparts, Sun concentrates on a small and very select channel in the Middle East. It claims this is the most sensible approach because not only is the product highly specialised, but the applications and requirements of end-users can be extremely complicated. "We don't have multiple partners. Over the whole region - 21 countries - we have less than 100 partners because we are very selective," said Ayass.

It looks like traditional PCs are entering into the workstation market, but the truth is otherwise. Traditional PCs can never match workstations because of the fact that they are completely different

One of the most important aspects of the business at the reseller level of the workstation market is the strength of relationship with distribution and vendor partners. End-users do not just drop into their local suppliers and pick up a box and some software. Workstations are diverse and powerful machines that run complex software, such as 3D Studio Max, and carry out highly specific processes, such as rate racing, that are unique and carefully tailored to each end-user's specifications.

Therefore the process of making a workstation sale is highly involved on the reseller's part and will include prolonged periods of consultation, testing, demonstrations and implementation. It is only with a hand-in-hand affiliation with the distributor, and perhaps just as importantly the vendor, that the process can run smoothly.

"We don't just go in and give the customer the hardware," explained Bilal Hamoui, sales manager at enterprise reseller Emirates Computers. "You need to manage the software and we are in a position to provide them with the hardware and software and integrate the whole thing together. A lot of our work is tied to having a tight relationship with partners that offer the solutions in various industries. This includes oil and gas application providers or media software vendors like Autodesk, which allow us to configure and certify a workstation to ensure the maximum performance out of the systems that we give to our customers," he said.

Talking to major players in the Middle East high performance computing channel, there seems to be a dispute over the impact that traditional PCs are having on the workstation market. There are those who feel that with the radical drop in price and the increased availability of better chipsets and computing power, the high-end desktop can challenge the muscular workstation at its own game. But there are just as many - if not more - who confidently assert that even a high-end PC can not come close to touching the computing power of a highly specialised workstation.

Advances in Intel and AMD chip technologies, coupled with the reduced cost of memory, has led some sources to suggest you can now source an equally fast PC with as much memory and at a cheaper price than a workstation. Mena Migally, business brand manager at Lenovo MEEP, holds a similar opinion: "The development of technology, especially in graphics and processors and support in the PC market, is definitely putting less emphasis on the workstation models."

On the other side of the fence there are those like Haseeb Soleja, product manager at Fujitsu Siemens, and HP's category manager, Yan Bergeron, who rally against the idea of PCs entering the workstation market. Soleja says the evaluation is not realistic and superficial. "It looks like traditional PCs are entering into the workstation market, but the truth is otherwise. Traditional PCs can never match or catch up with workstations because of the fact that it is a completely different mantle," he commented.
HP's Bergeron is just as adamant about the inadequacies of the PC compared to the workstation. "Traditional PCs continue to evolve in performance and features over time but their application, compared to thin clients or workstations, is still very limited.

He also argues that workstation capabilities, such as multiple CPUs, high-end graphics cards and physical elements including an expandable chassis to facilitate memory upgrades, are reasons why workstations still go the distance.

There are more margins in services and upgrading of service contracts. People in oil and gas don’t tend to change their machines or applications very often so service and support is very important to the reseller

Emirates' Hamoui even goes as far as concluding that workstations are set to take a bite out of the commercial PC sector. "The way I see it, workstations will eat out of the PC market and not the other way around. I cannot see a PC that can really replace a workstation considering the professional application of a workstation. It will do it much slower and at a higher risk," he said.

Conceivably, there is also the possibility that PC resellers might be able to expand their skills sets and make a move into the workstation market, especially when many of the vending names in the market, such as Dell and HP, have product arms in both categories. In reality, despite the increased power of traditional PCs, this does not seem to have materialised. However, Lenovo's Migally does point out that in selling to corporates, resellers are beginning to consider high-end PCs as a viable part of a bundle. "That is more common with corporate resellers that are offering more of a solution rather than just selling PCs to the end-users. They will be selling them as part of a complete portfolio," he said.

If Sun's Ayass is to be believed then the channel should also be mindful of another peril in the workstation space. "There is a trend of virtualisation, I don't see it as a challenge to Sun, I see it as a threat to the workstation market," he warned. "There have always been products in the market that offer you the desktop and thin clients so that you get a screen at your desk that gives windows or your applications but it didn't have the capability to cope with the graphics or visualisation, which is why people continued to buy workstations. Now we are seeing that capability become virtualised and consolidated. The user would not need a workstation; an expensive, electricity-hungry computer under the desk to produce their graphics.

It must also be remembered that back in the 90s, many commercial companies were put off thin clients when they ran their systems on them and found they were not reliable enough to answer their needs.

On the whole though, vendor counterparts seem to meet the suggestion that virtualisation is any sort of challenger to the workstation space with wide-ranging scepticism. "Looking at what workstations can do, virtualisation can not even compete," was one workstation vendor's response. Another felt the threat from virtualisation was nominal because both markets are "going their separate ways".
Emirates Computers, in its role as a reseller, regards virtualisation as more of a technology that can work in parallel to workstations. It says that by hosting some applications on a server, end-users can free up memory and processor power that would otherwise be tied up in the workstation. This would allow the end-user more freedom to multitask and make the best use of their resources. For the time being at least, however, it does not seem a viable alternative to the superior power that a workstation can offer. Such a sales technique is more successful when a reseller bundles a workstation with other offerings, such as a server, virtualisation software or thin clients.

According to vendors, stocking is another issue distributors in particular will have to consider in the coming year. "Availability is one of the major challenges since you have no run-rate or limited run-rate and each product has to be customised for the consumer," said HP's Bergeron. The intricate nature of the systems can lead to long implementation cycles that slow down profit generation so resellers need to consider tactics to combat this problem. This could include working closely with their channel partners to ensure hardware and software solutions are carefully bundled or have coinciding delivery periods.

Putting aside the increased power of the traditional PC, the run-rate issue, and the potential - if perhaps diminutive - incursion of virtualisation, resellers still stand to make considerable margins from selling workstations in the Middle East. "We are talking about a niche market with specific requirements. The margins are a lot higher than what is offered in the desktop PC market," said Lenovo's Migally.

Sun's Ayass says that the level of margins a Middle East reseller can expect to make vary greatly depending on the vertical that they are addressing. But he also adds that there are many strategies that resellers need to employ to increase their profits.

"When you are selling small volumes you can expect high margins. But when you are selling to an end-user like Kuwait Oil Company with 300 workstations then you can only expect razor thin margins," asserted Ayass. "It's a niche market - less than 5% of the PC market in terms of revenue and in terms of units it's even less than that. It's a small market, but at the same time it is also a high- value market. Workstation customers are a lot more loyal," he added.

It is important that resellers make the most of their available opportunities in consultation, implementation and support to court the loyalty of the workstation end-user.

More often than not, resellers are able to generate a large amount of revenue from services, over and above the shifting of product. In fact, most resellers view the market not in terms of how many boxes they can shift, but by the amount and duration of extra services they can sell. Resellers operating in the workstation channel also have to demonstrate a comprehensive set of systems integration skills.

"There are more margins in services and the upgrading of service contracts. People in oil and gas don't tend to change their machines very often and the applications do not change or mutate drastically so service and support is very important to us and we do make more out it than we do from the initial hardware sale, " admitted Emirates' Hamoui.
Sun's Ayass says the training that it provides to resellers can also then be passed on as a value-add. "You will be surprised. Resellers' margins rise to between 50% and 80% when they are adding service to their sales, as opposed to a box-mover where margins can vary from 5% or 10%, to 15%, if they are lucky.

The good news from the workstation reseller's perspective is that they are in a sellers market when it comes to value-added services. It is the reseller that brings together the package or specification that normally includes the workstation, the software, possibly a thin client or even a server and perhaps any virtualisation options they may choose. As commentators are keen to point out, workstation systems are highly modified and targeted to answer the specific needs of the end-user so it is the reseller that is best placed to liaise with all the vendors concerned, from manufacturers to ISVs, to ensure solutions are set up and continue running without problems for long periods.

HP's Bergeron says that the value-add is just as important, if not more so, than the hardware sale. "They have to be a full-scale operation from pre-sales upwards and show an ability to discuss an industry vertical in great depth," he said. "Secondly, they will have made an investment in terms of hardware so they can give some demo units to the customer to help them try out the products. And the third thing that we look for in a reseller partner is the support element because it is so critical for an engineer's or designer's work that resellers are able to offer quick and efficient support.

If you are a reseller that gives the virtualisation threat any kudos then you would do well to ensure your market plan and channel relationships include a strategy that gives customers virtualisation options. "Our workstation resellers are still focused on workstations," asserted Sun's Ayass. He advises that they do not need to switch to virtualisation, but says that they need to be aware of the trend so that when it does become mature enough to start cannibalising their sales they can take advantage of it.

The workstation market in the Middle East certainly remains a niche market. But it is also a prosperous one that continues to keep pace with global growth trends. The last set of quarterly data on the workstation market from US-based Jon Peddie Research revealed worldwide shipments grew 17% year-on-year to 718,000 units, driving the value of the market up to US$1.7 billion.

The Middle East workstation channel remains niche, but only in the sense of how it varies from the mainstream PC market and calls for highly specific skills. It is certainly a large market in which resellers can look to procure impressive margins by ensuring their toolbox is laden with value-added skills.

If resellers can tailor their approach to each end-user, implicitly understanding their business and workstation requirements, there is no reason why the high-performance computing market cannot be a hugely profitable arena for many channel players.

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