Finger on the pulse

Aptec CEO Ali Baghdadi, is no stranger to dramatic and attention-grabbing announcements. The company has seen several major realignments when the opportunity has arisen over the past several years, and another one is in the making. The name of the game today is services, and how Aptec and its channel can cash in big.

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By  Colin Browne Published  November 25, 2000

Aptec CEO Ali Baghdadi, is no stranger to dramatic and attention-grabbing announcements. The company has seen several major realignments when the opportunity has arisen over the past several years, and another one is in the making. The name of the game today is services, and how Aptec and its channel can cash in big.

If you make a commitment to deliver something to Aptec CEO Ali Baghdadi these days, you had better be sure you get it right, because this guy is obsessed with services.

During the course of a two hour interview at his Dubai office during a brief stopover, he expanded on plans to transform his business to fill what he believes is a gaping hole in Middle East channel offerings.

And the reality, as Baghdadi sees it, is that if he gets it all right, that is where the bulk of Aptec’s income is going to come from.

For Baghdadi right now, the development of services follows along the lines of one hour delivery times to areas where reseller concentration is high—such as Cairo, Alexandria, and ultimately Jeddah, Riyadh and Dubai—the establishment of virtual warehouses and marketing services for brands which are struggling to compete in the Middle East, and the making of Aptec as a fully-fledged, multi-brand third-party maintenance company.

And he has already started; a pilot project for one-hour delivery is already underway in Egypt. “[We have established] depots in concentration areas. If you go to Saudi Arabia, or some parts of Cairo, or even [Dubai], you will find a concentration of resellers in a mall or in a street.

"And one or two guys are muscling in and buying on behalf of all the others, because either they have the product availability and can get it faster, or they have some extra credit. But they are the most dangerous guys who carry the highest credit risk because they are buying and selling for [a cent or two] profit.

"At the same time, the others feel that they have no access to distribution. So we want to develop a depot close to those concentration centres and give the same service to everyone,” he says.

The service already has a snappy monicker: ‘Premium Delivery’, but although it is up and running in Cairo and Alexandria, it still needs a lot of tweaking before that one hour guarantee is concrete.

“We might guarantee it, but right now it is a ballpark figure. But [resellers] are used to 24 hour delivery. Any in-country distributor offers 24 hour delivery today, as standard. If you are lucky, you may be asked do you want AM or PM delivery,” he says.

In the mean time, the four week pilot that Aptec is running in Egypt right now, is being used to get the profiling of products right, for example.

“There is an awful lot behind it you see. You have the IT side, which has to be very tight; you have the analysis of so many profiles; you have the invoicing; you have the money collection; all these things, and we need the procedures in place. So we have started with what we think is the right approach, and I am sure that at the end of four weeks or so, it will be very different,” says Baghdadi.

“The product managers doing stock profiling, sit down every day and see what we have sold, what we had ordered, but could not deliver, increase this, reduce this, and when certain stock we put out there hasn’t sold by the end of the week, report on ageing,” he says.

‘Premium Delivery’ is free—for now; it may not always be so—and is limited to fast moving items and those which require little expertise. “We are not going to do servers and Cisco products and all that, but mobile phones, laptops, supplies. That is the sort of thing,” says Baghdadi.

But despite its necessary limitations, Baghdadi believes that the service will give Aptec an increased marketshare in which ever product it throws it at. “We are getting a better service to the reseller at the end of the day, and we know that the increase in marketshare alone, covers our cost,” he says.

Working that equation, he says that more than 50% of retailers’ potential business is lost due to lack of availability. “When it comes to the small reseller, people are walking in constantly, whether it is a mall or an independent store, and they simply don’t have the goods. So I would expect that the small retailers will be able through this service, to increase their business by up to 50%,” says Baghdadi.

There is a lot of work to do before areas in the UAE and Saudi Arabia follow the Egyptian model, because Baghdadi says that the focus currently is to try to get Egypt fully operational in all four centres (adding Asuit and Tanta to Cairo and Alexandria), which should be the case by the end of Q1 2001. “By then we will have a good idea of the costs and the potential increase in business because we’ll have had a good six months of data,” says Baghdadi.

“With this [service], we are going way into the channel, as close as we can. If we are talking about one hour delivery versus 24 hours or 48 hours, that makes a big difference,” he says.

The next step, is to back up those resellers with a service centre which will be free of the conflict which currently characterises such enterprises in the Middle East.

“One of the problems here is that there isn’t an independent service centre. Service tends to be done by a reseller who is authorised to service, and other resellers hate going to them because that means sending their customers to one of their competitors,” says Baghdadi.

The service centre that Baghdadi has in mind, will be a technical place which has the ability to repair a product, and fulfill the warranty promise, regardless of who you are and where you come from.

“In order to do it right, we have to be trained by the vendor on that particular product, we have to hold the right spares and have the right equipment. At the moment, some resellers have it for specific vendors, but there isn’t a proper service centre you can go to for all your needs,” says Baghdadi.

Aptec has a model in place in Egypt today, where it is a certified service centre for Epson, Ericcson, IBM, Compaq, Hewlett-Packard, APC, and Cisco.

“So for a start, that is a service centre offering, that is independent from the reseller where resellers can feel that they are going to it, or can even send their end user to it, feeling that there is no attempt to [poach] them,” he says.

The company has followed that model by establishing service centres in Saudi Arabia and Dubai, and is in the process of securing the appropriate vendor certifications, giving it the geographical expansion it believes it needs. The next step is to expand the actual range of services on offer, drawing on the experience it has gathered through its UK subsidiary.

“We have started for instance, a cabling installation service. We can send a person to survey and give them a price that we can do it for, so the dealer can enhance the offer to his own end user in terms of networking solutions,” says Baghdadi.

A further example is Aptec’s CUSP programme under which end-users will be offered at the time of purchasing, a support system which offers minimum down time on selected units such as printers. “CUSP offers a swap out. We send a driver with a loan unit, who installs it, takes the [faulty] one, brings it back to the service centre where it is fixed, and then it is swapped back.

"So the downtime is limited literally to swapping the two. It just gives the customer the piece of mind that if anything goes wrong, he is insured,” says Baghdadi.

“All the evaluation, the set-up, and the help required, is done by technical staff over the phone before the product is sent out,” says Baghdadi. And so is establishing whether or not the product is actually faulty or not. Baghdadi says that 40-45% of the time, the product isn’t faulty at all.

“So [a customer] hotline is the other half of the equation, and of course behind those two, the service centre has to be there to fix it,” he says.

Of course, certain products are more complex than that; Aptec isn’t about to offer this service on servers. “I am not into recovery services, I am not into re-installing software. I can’t offer it on everything. But it is still better than whatever is being offered out here,” says Baghdadi.

And CUSP doesn’t—as it might at first imply—require that Aptec invests heavily in stock, according to Baghdadi. “We are dealing with vendors with very low failure rates. It is calculable. We have done it. You are talking about failure rates of 1.5-2% in most cases.

"If I sell 100,000 printers, I expect that 1000 will go down in the year, about 100 per month. But if I block it weekly, I need to hold 25 printers in stock because I turn it around very quickly,” he says.

And it is pure money for Aptec. There is a premium for products bought with CUSP, and renewal at the end of the year is for a price.

A further service which Aptec might rightly describe as pure money, is one in which Baghdadi sees himself playing a consultancy and ‘virtual warehousing’ role for brands without the clout, nor the corporate backing, to penetrate this market.

“We get calls by vendors every week, and they all want us to do a channel development programme for them, and invest and distirbute them. But we can’t. We have a very clear idea about the range we can carry and the number of vendors we can support succesfully.

"But we want to help. We see an opportunity there. We also know vendors who are still shipping with atrocious logistics and taking an awful long time in getting their products to us, and to other distributors in the region,” says Baghdadi.

“And some vendors would love to have a warehouse in the region, but their corporate policies do not allow them to set up a subsidiary,” he says.

“The Jebel Ali authorities are very flexible in terms of giving us extra warehousing, so I can get units and offer those under my legal umbrella. I can put in computer systems that offer virtual warehouses that belong to these guys, so I can manage their stock for them. Now, it is not my stock, I am not buying it, but they can view [my warehouse] as a satellite warehouse. I will even call it their company name, as a service.

"So, a fulfilment service from the warehouse, managing the warehouse, managing the IT sysytems that surround it, and shipping to their customer, on their instructions.That is just one thing which would suit the kind of vendor that doesn’t have a warehouse at the moment,” says Baghdadi.

“Now you go a futher step and take company xyz in the United States who would really love to have their product here and sell it, we say: ‘OK, we’ll offer you this: at a fraction of the cost of setting up a company here, I will give you a secure chunk of a warehouse, a virtual system, which you can access and control, and you just tell us what you want to ship, and to whom. I can also, for a fee, promote your product.

"I have a database of over 10,000 resellers in the region, by country, by category—you choose—and I will do you a marketing service. I will put your product in front of people. But you generate the message, you generate the artwork and so on. I will pass that benefit,” says Baghdadi.

Baghdadi is very clear however, that developing the market, is not his business. “I simply give them the ability to be here, I am not even their distributor. They can appoint Computer 2000 for all I know,” he says.

“There is a tremendous amount of money to be made in services, for us and our resellers. A tremendous amount. And it is being ignored. If we enhance these services, and make money out of them—and each one of them has to make money ultimately—that is where the bulk of our income is going to come from,” he says.

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