En route to Riyadh

Saudi Arabia has rapidly emerged as the market that no vendor or distributor with genuine pan-regional ambition can afford to ignore. Its strategic importance to the wider Middle East channel has grown enormously in recent years, prompting an unprecedented level of domestic and foreign investment that has made the Kingdom a compelling arena to operate. As the market shapes up for another year of strong development in 2007, Channel Middle East asks what it takes to succeed in Saudi.

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By  Administrator Published  April 1, 2007

When it comes to evaluating the growth potential of the Saudi IT channel the statistics speak for themselves. Hardware volumes outpace any other country in the Middle East by quite a distance and more than 1.3 million PC units are expected to be shipped in 2007 - a 25% jump on the previous year. Saudi is also witnessing similar growth at the high end of the market where it leads the region in enterprise software application spend.

Recent IDC data suggests that 45% of the Saudi market is carved up between just three verticals, emphasising how crucial it is for vendors to construct channels that can provide access into these salubrious customer bases. The communications sector stands out as the largest IT investor in Saudi and is poised to retain its "big spender" status in 2007, especially as the telecommunications market is preparing to open up to more competition.
"In the last two months, a tender for the third GSM operator and the second line operator has been launched," explained Abdulrahman Al-Dossary, managing director for Saudi, Yemen and Levant at ERP and database software giant Oracle. "This alone will create huge opportunities for the IT industry."

Meanwhile, agriculture, construction and mining - including oil extraction - and banking have emerged as the other major verticals investing millions of dollars into technology each year. New banking players such as Inma Bank and Bank Albilad have either opened or are on the verge of opening, while the government is said to have recently approved the entrance of around 12 foreign-established insurance companies to the market.

"The Saudi market is evolving fast due to recent developments such as the implementation of World Trade Organisation policies and free trade agreements with US and Europe," commented Ayman Mattar, regional marketing manager at Xerox Middle East. "It is one of the most important markets in the region for us going due to the increase in government IT spending and the economic boom resulting from the stock markets and oil revenue."

Iran aside, Saudi Arabia is by far the largest market in the Middle East, accounting for a whopping 45% of all IT spend in the GCC region during 2006, according to IDC.

That puts the value of the Saudi IT sector at almost US$3.9 billion, and if the number crunchers have done their sums right then the figure will soar to almost US$4.5 billion during the next 12 months. It is little wonder, then, that technology vendors are clambering to get a piece of the action and exploit a market buoyed by the high price of oil and economic diversity. "Saudi Arabia is a huge market when you look to the population and the level of infrastructure projects," said Jacques Chammas, managing director at distributor Mindware. "It continues to grow and improve technically, and things that were not on the government's plans 10 years ago now require a lot of attention and investment. The market requirements are becoming more complicated than ever before. Demand used to be for PCs and Microsoft products, but today's requirements are more focused on infrastructure and advanced technologies."

Building a channel in Saudi still represents a major challenge for vendors in the region, particularly as the market is populated by small businesses and divided across major cities such as Riyadh, Dammam, Jeddah and Khobar.

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