Dumping the rule book

Computer 2000 Middle East’s Steve Lockie is determined to re-define the way resellers in Saudi Arabia, and the Upper Gulf gain access to cutting-edge solutions.

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By  Peter Conmy Published  August 31, 2000

Computer 2000 Middle East's Steve Lockie is determined to re-define the way resellers in Saudi Arabia, and the Upper Gulf gain access to cutting-edge solutions.

It is the last day of Computer 2000’s financial half-year and managing director Steve Lockie is in a photographer’s studio in downtown Dubai, relaxing as best he can under a set of spotlights and before a whirring camera.

The fact that Lockie is here is more impressive than it might appear on the surface—three months ago, on the last day of a month, much less a half-year, he wouldn’t have had the time to spare.

But Lockie has his mind on expansion, making plans that will see Computer 2000 Middle East turn over US$1 billion per year within the next five years.

In order to make that possible, he says, it has been necessary to establish a second line of management—reporting to he and his local board of directors—to essentially take on the day-to-day running of Computer 2000.

A result is that Lockie and his senior management team are free to focus on new ways of growing the business. And so far, it is paying off—at eight o’clock that evening, he signed an agreement with ARAMEX Kanoo in Bahrain, which he says will directly result in a massive enhancement of Computer 2000’s ability to serve the channel in most of Saudi Arabia, Kuwait, Bahrain and Qatar.

And that means money.

Expansion Plans: Bahrain & Saudi Arabia

In a nutshell, Computer 2000 will truck stock across the causeway from a new warehouse in Bahrain into Saudi Arabia and then onto the other destinations.

The proximity of that warehouse to its markets and the convenience of the causeway will slash delivery times.

There are two key dynamics at play here: in the first place, servicing resellers in Riyadh or Kuwait from Dubai has always been inefficient, with resellers waiting up to a week for delivery after they placed their orders; in the second, the amount of business that distributors and their vendor principals have been able to do in these markets has been a fraction of what Lockie believes it could be.

The arrangement with ARAMEX Kanoo will address both of these issues, and Lockie says that the untapped potential is so immense, that within 18 months, the Bahrain-based joint venture will overtake the long-established Dubai-based business in revenue, throughput, and turnover.

“We are currently growing at over 50% year-on-year. We have been constrained primarily by one issue and that is logistics. Logistics capabilities are what we consider to be the key issue in the marketplace,” said Lockie.

“The challenge is that most [IT] companies in the Middle East are based in Dubai, and the biggest market is not Dubai, it is Saudi Arabia.

"To get boxes in there and to act as a distributor, you have to be talking about a 24 hour service, you order it today, you get it tomorrow. It is a real basic thing, and how the market has allowed companies to survive that do not provide these basic, basic, basic services is [bizarre],” he said.

Lockie believes however, that better servicing key markets, no matter how elementary that may seem, is only part of the task if he is to meet his aggressive growth plans.

Though feeding resellers in Saudi Arabia and Kuwait—another high-growth market at the moment—should result in an increase in sales, he believes it is clear that the real opportunity is in broadening the base of resellers that Computer 2000 deals with in those countries.

“Today, if you look at our profile of business in most of the larger markets, we are doing significant business with few players. Those few players in turn are acting as sub-distributors; as augmenters of channel demand for want of a better term,” he said.

“But while augmenting channel demand is one model of distribution, it is not what the vendors want. The vendors know that anyone can ship a box, but what they want is development of channels and support of those channels.”

Lucrative Channels: SMB Resellers

The principal obstacle to developing what will certainly prove to be Computer 2000’s most lucrative channels—that of SMB resellers—according to Lockie, is that there is a huge disconnect between the SMB end user and anyone that can service them, because margins are so slim.

Resellers are terrified to try and do anything out of the ordinary. Lockie aims to change that reseller/customer relationship by focusing on end users directly to whip up demand amongst them, which Computer 2000’s resellers can then feed.

“We are going to be driving our own end user campaigns this year, and pulling that business back through targeted SMB resellers.

"And there will be many tools announced over the forthcoming months for those SMB resellers, based around end user requirements, not based around what the channel is telling us.

"Not that we don’t trust the channel, but clearly, our interest is to get boxes into end users hands, through the channel, and there doesn’t seem to be a lot of effort in this market and in many other markets to deliver what the end user actually wants,” he said.

SMB end users are screaming for solutions, goes the argument, but they have no idea what form those solutions could take, because they have no idea what is available to them.

“They are saying, ‘How can I invest in IT, if I don’t know what it is that I could possibly have?’.”

“We are being cautiously entrepreneurial; and maybe slightly more entrepreneurial than cautious. We have got to get going on this. [The deal with ARAMEX Kanoo] is constructed the right way, and there is a good legal framework between our two organisations.

"We understand the mix of products that needs to go in there, we understand what the resellers want, and the hiring process is way underway. We have had people out in territory now for a couple of months, just on the quiet,” said Lockie.

On Time Delivery

Working with an established freight-forwarding firm such as ARAMEX Kanoo has advantages which Computer 2000 has been able to leverage off, such as the relationships the company already has with local customs officials—relationships which are utterly crucial if they are to get goods over the border from Bahrain in time for those quick deliveries.

“They have really gone out of their way to work with the customs authorities to explain in great detail what we are trying to achieve. And I think this is an area in which you will see Computer 2000 much more active, working with people like the BSA, and operating on an open book basis with the customs people.

"Because what cripples our business and indeed our resellers business, is this practice of under invoicing and grey marketing. We are going to work hand in hand with the customs people to the point of providing basic reference points on pricing for product part numbers.

"It is in our interests because we gain more share, it is in our resellers interests because bona fide resellers that go out there and sell the product see the demand for that product, and they are not undercut by an unscrupulous trader,” said Lockie.

Strategy For the Future

Computer 2000’s ongoing strategy at this juncture revolves around a simple need that resellers have repeatedly told the company they have, which is availability; not just of product, but of Computer 2000 sales agents.

Until now, the company has tried to meet that demand by working through in-country sub-distributors, but Lockie believes that to maximize his opportunity, he needs a broader base of sales agents.

“We have recruited four sales agents just in the last week, and we are bringing another eight on even as we speak, and this is complementary to the field sales people,” he said.

Lockie is also clear on the need for further hubs in the mould of the ARAMEX Kanoo joint venture, in Egypt and either Jordan or Lebanon, to replicate the company’s ability to slash delivery times.

The only problem area he sees for now is Jeddah, where he believes a 48 hour service is about the best he can do until Computer 2000 establishes a distribution hub in Saudi Arabia.

But that is still an improvement, and in the mean time, as the Bahrain hub settles down to business as usual, it is time for Saudi Arabian SMB resellers to prove what they can do.

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