Whichever way you look at it, 2006 was a memorable year for the Middle East IT channel. From credit conflicts and audit disputes to management changes and soaring growth, the market was never short of incident. Channel Middle East reflects on the key moments of the past 12 months and gazes into its crystal ball to predict what channel life will be like in 2007.
Buckle up and hold on tight because 2007 is going to be another year of frantic change and development in the Middle East IT channel. Vendors are realising there is more to the region than Dubai, partner strategies are being reviewed, and technology convergence is driving new opportunities. 2006 might have been a monumental year for the Middle East IT channel, but we are heading towards the next stage of the market's evolution and it threatens to be the most intriguing phase yet.
Research house IDC recently put its head on the block by predicting that 2007 will mark the year of "hyper disruption" as IT vendors embrace new models in an attempt to satisfy their appetite. This disruption, according to IDC, is the result of a global technology market that is only set to expand a mere 6% during the next 12 months, meaning growth is going to be harder to come by than it used to be.
IDC claims that the disruptive shifts it anticipates will lead to a whole raft of changes, including channel-oriented players taking a more direct stance, indirect vendors developing radical new strategies and the small business sector finally being given the significance it deserves.
While that might be the case in theatres such as Western Europe and North America, will it translate to a market like the Middle East? Probably not. Most companies in this region are still enjoying low double-digit growth at the very least, and that means they do not face the same pressure as IT providers outside the region. Furthermore, the blurring of direct and indirect models simply isn't conceivable here because the channel remains such a vital component of the overall technology delivery model.
That doesn't mean the region isn't going to be without its own form of disruption in the next 12 months, however. The clear message emanating from many vendors is that the way they manage their Middle East partner networks is going to change this year. The emphasis is switching from simply engaging with anyone and everyone to actually redefining the profile of partners that they need to be working with moving forward.
The likes of HP and Cisco have already introduced an element of specialisation to their regional set-ups, preferring to reward those resellers that invest and develop in their technologies and services than those who may sell their brand occasionally. This same vision is now set to be applied by other vendors, particularly those that have been in Dubai for one or two years and operated a fairly modest internal structure with a couple of sales staff and one or two technical guys.
These types of manufacturers - and the market is full of them - have simply focused on getting their house in order and hitting their numbers during the past few years, but they are now showing signs that they are willing to push on to the next level. The majority at last seem to recognise that the long-term growth of their business will come from empowering a select group of resellers with the necessary skills and business acumen, rather than addressing a huge crowd of partners that sell the product infrequently.
This in itself will create its own kind of disruption in 2007, both in terms of the channel programmes that need to be put in place, and in the way this model is executed. It will also pose challenges of course. Can these vendors really identify the companies that best suit their strategy or will they find it too difficult to resist the lure of a sale when partners they aren't particularly interested in come calling? This all ties nicely into how manufacturers are developing their geographical spread, a topic that is set to become a big theme this year.
The Middle East IT market finds itself at a very exciting stage of its development. We are really starting to witness true momentum in terms of manufacturers, and distributors for that matter, moving beyond Dubai and into surrounding markets.
The pace of change in Saudi Arabia - with the advent of economic free zones and freight airports - could easily transform the dynamics of the local IT channel in the Kingdom beyond belief, while Egypt, the Levant and other areas of North Africa are all starting to attract serious investment from some manufacturers. We've seen the billion dollar vendors staff up in these markets over the past few years. Now it is time for the next tier of technology providers to shed their inhibitions and expand into these markets.
Such a shift can only be welcomed and encouraged. If a higher level of local support and investment is ploughed into these markets, then it will increase the prospect of strong and profitable business being conducted by the reseller channel.
The word disruption might be fraught with negative connotations, but that doesn't mean it has to restrain the Middle East channel in 2007. Quite the opposite in fact.
Microsoft gets tough
The year started with a bang as Microsoft revealed plans to overhaul its global OEM product billing model following discrepancies over the payment of royalties by distribution partners. In the hardware space, Sun Microsystems began 2006 in style by signing Al Jammaz as a volume distributor in Saudi and 3Com vowed to expand its distribution coverage in the Middle East - little did it know that those plans would be stalled by its separation with broadliner Tech Data just seven months later.
AMD ready for fight
AMD declared its intention to give Intel a run for its money in the Middle East after officially confirming the appointment of Gaith Kadir as its new MEA boss. The vendor quickly proved it was more than just talk by signing a distribution contract with Almasa, which itself experienced a turbulent month. While Amr Atef, the boss of its PCs and peripherals unit, headed for the door marked ‘exit'; the regional distribution outfit welcomed a new boss to the fold in the shape of Frank Sheu.
Redington tops class
Channel Middle East
published its 2006 Power List in March with distribution giant Redington finishing top of the class after raking in annual sales of US$445m. The top 15 Middle East distributors collectively earned revenues of more than US$3 billion in the full year leading up to the list, emphasising the rapid pace at which the market grew. Meanwhile, Acer divulged plans to co-establish a desktop plant in Saudi and Oracle named IraqCom as its first ever approved education partner in Iraq.
FSC settles for Dubai
FSC upped the stakes in the regional PC battle after it finally decided that the UAE, and not Egypt, was the best location to launch an assembly plant. "The decision was finally taken for Dubai as the Egyptian government had been pulling back - so there was a little delay," admitted CEO Bernd Bischoff. Elsewhere, Online Distribution secured Juniper rights in the Middle East while 3Com faced up to a series of staff departures that included regional boss Wael Fakharany's defection to Emitac.
First cracks appear
The first signs of a credit crisis in the Dubai channel emerged after assembler and sub-distributor Fortex-MID ran into cash flow problems and saw a number of cheques bounce. Computer Street was also the subject of raids from the Dubai authorities, which swooped on a number of unnamed resellers and seized counterfeit D-Link products worth US$16,000. In other news, Emirates Computers signed up with EMC while Tech Data Middle East lost its Symantec distribution rights.
Credit crisis bites
The Dubai credit crisis took full hold as a number of bad debt cases sent shockwaves through the channel and caused panic in Computer Street. June was a busy month for Sun Microsystems, which gave Aptec distribution rights for its software portfolio and inked a Middle East deal with storage integrator STME. In the consumer space, ABM opened a second Apple store in the UAE, while there was good news for the Iraqi IT channel as the country's inaugural ICT alliance was formed.
Channel calls for calm
The extent of the Dubai credit crisis became apparent as members of the distribution community urged for calm following a spate of runaway reseller cases. Logicom was one of the worst hit, issuing a statement to the Cyprus Stock Exchange that it was chasing outstanding debts of US$6m. Meanwhile, management software giant CA gave the market a glimpse of what was to come by setting up an office in Egypt. Retailer CompuMe also announced expansion plans with a store in Bahrain.
All change at HP
HP Middle East revealed it was looking for a new SPO boss after it tendered the resignation of Dell-bound Hazem Bazan in the same month that it also strengthened its operations in Bahrain by acquiring the local IT services business of NCS. Dubai's Computer Street responded to the turmoil of previous months by forming an organisation to ensure best practice in terms of business ethics and credit management, while Balall Yaqub settled into his new role as CEO of distribution outfit Emitac.
Tech Data boss bows out
The wind of change blew into the offices of Tech Data Middle East as Hanspeter Eiselt jetted into Dubai to take over from out-going managing director Adnan Al Falah. Salim Ziade took over from Hazem Bazan at HP, while Toshiba revealed that its partnership with Al Futtaim had led to business being established in some of the emerging markets of East Africa. The Dubai credit crisis continued to be a major talking point as Al Misk and Fortex-MID both pledged to repay creditors.
Looking at Libya
A raft of vendors, including CA, Avaya and Western Digital, waxed lyrical over the Libyan channel following the opening of trade barriers with the US earlier in the year, while Samsung revamped its Middle East sales model for IT products. Seagate also instigated a shake-up as it unveiled its post-Maxtor distribution structure in the Middle East. Components vendor Super Micro, meanwhile, was landed with a US$150,000 fine for knowingly exporting products to Iran without a licence four years previously.
Spotlight on GITEX
GITEX dominated November as the cream of Middle East IT descended on Dubai for the annual funfest. There was also plenty happening elsewhere in the region, particularly in Iraq where a number of kidnappings in Sina's Street shook the reseller channel. Software vendor Sage opened an office in Saudi while Foxconn admitted it was working with distributor Pishtazane to hold its first ever customer event in Iran. Redington, meanwhile, unveiled plans for a new distribution centre.
eSys hits back
eSys' dramatic fallout with Seagate over a sales audit stole the headlines and led to eSys' top bosses frantically reassuring associates that it remained in good shape. "Just because a plane passes through a bumpy patch, it doesn't mean it can't fly anymore," quipped EMEA director Pavan Gupta. Mindware confirmed plans to shift its warehouse facilities to Jebel Ali while
Channel Middle East
also revealed 3Com was in talks with Tech Access about distribution rights in the Middle East and Africa.