Channel: The year ahead

Is 2004 to be the year of Linux, or will it be the time for consolidation. Several key channel distributors have their say on what to look out for as the channel breaks into the new year.

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By  Paul Barthram Published  December 23, 2003

|~|2004.gif|~|Will 2004 see consolidation within the channel?|~|While the Middle East's master distributors and resellers were united in identifying the highs and lows of 2003, they each have very different plans for the next 12 months as they look to grow their market and mind share throughout the region and beyond. Steve Lockie, managing director of Tech Data, Sumant Saran, general manager of Reddington Gulf, Vijay Saraf, marketing director at Emitac Distribution and Bahaa Salah, general manager of Aptec, speak to Channel Middle East and identify what the key plays will be in the local market during 2004.

CME: Resellers and distributors in the Middle East always seem to have some sort of plan to make more money, especially if they think margins are getting thinner every year. As a result, where are the new revenues going to come from in the next 12 months?

Steve Lockie: The networking business continues to show strong growth. I think where we're seeing very good growth at the moment is with the value players in that market. The Ciscos [of this world] are still very strong, but Linksys is a specific example of a franchise that's absolutely flying. Certainly in wireless as well, where they have clear market leadership. I think the whole wireless pace will continue, speeds are getting much better there, the cost points are being driven down.

Vijay Saraf: Support is one area that you cannot overlook. For a distie the revenues next year are definitely coming in the form of support, and it's a profitable business and of course we have to keep on adding new territories and new products to our portfolio.

Bahaa Salah: One thing we are trying to come up with is to have selective products where we can offer more than just distribution but add on value. So we have some software products where we're investing in more and more, in order to work as a consultant. So introducing the concept and work in the area of offering and delivering the solution and even helping with the after sales to offer good services to end users.

CME: Out of the emerging markets where would you like to most concentrate your efforts in the coming year and why?

Lockie: Of the major markets of course Iran and Iraq are still huge potentials but neither are addressable at this time. So you have to look back again at some of the smaller markets and you know we still see very good growth in Jordan, Bahrain, Kuwait, and Qatar.

Sumant Saran: Reddington is looking at Africa as the next growth engine, we definitely feel that is a market which is having a growth rate of 20% plus, and we are putting considerable investment into that market. I think Kuwait is coming up in a big way. Kuwait is good. I think Oman is doing a lot of e-government projects, and it's another interesting market, which we've seen growing very fast. And Qatar now because there's a lot of multinationals... I think these are the markets, which are going to see good growth from a Middle East perspective.

Saraf: I would like to concentrate our efforts more in Kuwait and Iran or some business in Iraq. Already we're working in Kuwait and we're going to have an office there, we already have the people there and they're onboard. Iraq of course, even if the whole thing gets delayed, the way it looks, things are going to improve hopefully in 2004. People will start transacting business after the basic security issues are taken care of and right now every vendor, every distributor is in the process of finding its way in there, and in the process of establishing the channel, so that when the market is ready they can be operating from day one. For the channel in general some of the CIS countries, the less developed ones, and of course Pakistan and nearby countries.

Salah: Qatar, Kuwait and Africa. Qatar because it's growing and the potential is high. Kuwait is still developing and is going to be a major contributor when approaching the Iraqi market and there will definitely be potential for business for us there. Africa is growing and improving very much in all different aspects, and there are some good investments there from the World Bank and America in this part of the world and it's going to reflect definitely on the growth of business here.||**||II|~|lockieman.gif|~|Steve Lockie, managing director of Tech Data|~|CME: Will the enthusiasm currently being shown for all things open source and Linux by many vendors be embraced by the local channel in 2004?

Lockie: I think the channel in the Middle East is still developing, still going through phases, and is still an important consultant to end users, as to what the correct technologies are, but the average guy on Kwalid bin Walid Street [in Dubai] really doesn't care whether its open systems or not, he's totally customer driven. The whole services model isn't as well developed here [as it is in Europe]. I wouldn't say there are no service resellers in the Middle East but it's certainly not to the same level as we see in Europe and the United States.

Saran: I think so yes. In Africa where US$60-80 for Microsoft Windows is quite a lot of money, the channel has been quite enthusiastic about Linux, but in the Middle East we have not seen resellers embracing it quite as enthusiastically as other markets.

Saraf: Linux obviously has its own market, its not going to be used by every office, every user, it has its own advantages on the cost side, but it basically depends on what your application is. I think it's going to do well for sure, but it's an awareness campaign. The more the vendor increases the awareness level it's definitely going to grow further. It's because of the economics, and if people understand the economics associated with using Linux, and there's enough knowledgeable people out there, it will sell but the awareness level that needs to be created.

Salah: It's a very good operating system, I have all respect for that. But to compete with the strength and power and reach of Microsoft over a long period of time... There is of course still the fact that a number of people have been happy using one certain OS for long enough. Whether you can change that or not is where the question mark lies.||**||III|~|blacksheep.gif|~|Bahaa Salah, general manager of Aptec|~|CME: Will online sales come of age this year, or do you feel there are still certain areas, which need to be improved before this can happen?

Lockie: I hope that for Tech Data in 2004 it will be the year of e-business for us, when it comes of age. We're already providing things like statements, back order information, order slippage information, quotes, everything is provided electronically already. I still believe the Middle East is in a fantastic position for these e-commerce initiatives, the e-business or the placing orders we place on the web, 100% of our business is placed electronically and we make significant savings by doing that with our vendors, even generating additionally rebates from several of our vendors for doing that, and that gets passed on to the price we can offer .I think when people accept that terms are cash on delivery and whatever else, then it's a fantastic system. We'd love to be doing more of our business over e-commerce but I think our business processes over the web will lead the market massively.

Saran: I can't really see online sales till somewhere by 2005-2006. The concept here is still very much a touch and feel concept where people would go and take a look, go and do some bargaining and then settle for it. I've yet to see a Middle East site that can come up with a lot of bargain offers, value offers for the mass market. There has to be some sort of engine or mechanisms to promote this concept.

Saraf: It's not that it's not working, I see a lot of people who have started using online services to buy air tickets, so it is starting. It's much better than what it was last year. The delivery system is a problem though. The cost associated with it and how people pay, but it's definitely improved. But the offers have to be really enough to make the online buying attractive, it may not happen as well as its happened in the West, because of the volume. You need to have the good offers and a big market size to make it attractive of course.

Salah: We tried very early to introduce this concept to the market. One click and everything takes care of itself. But this [concept] didn't work and I think the main reason behind that is the fact that everyone prefers to chase for better prices. So even if you see a price in front of you, you still get customers wanting to talk over the phone and negotiate a better price. ||**||IV|~|sumano.gif|~| Sumant Saran, general manager of Reddington|~|CME: What are you expecting to cause the biggest buzz in the channel this year? And the IT market in general?

Saraf: For a market like Saudi or UAE, there's a need for some sort of market consolidation. I think there are too many vendors, and too many players, too many resellers and too many distributors in said countries, there's no need for so many suppliers in the market.We have in fact been talking about it, and evaluating this ourselves, as of six months back. So it is on the talks and we have been hearing of some companies that have been evaluating the merger options it makes all the sense for a country like here where there are so many distributors here in the Middle East. There are talks and I think it will happen.

Lockie: Biggest buzz will inevitably be one or more of the larger distributors being acquired or going out of the business, I've no doubt in that. Salah: The notebook will keep growing dramatically. Some people say the percentage will flip from 40/60 to 60/40.

Saran: I think first would be a PC at US$400 and a notebook at less than US$800, and by the end of the year I can see those price points. That's going to fuel further growth, because people who have only one PC or one notebook at home for their kids might be thinking of having a further one or separate PC, so yes its going to fuel growth and I think Linux if they do it properly will be another big buzz in the market.||**||V|~|campari.gif|~|Vijay Saraf, marketing director at Emitac Distribution|~|CME: Will 2004 become the year the local channel embraces solution selling?

Lockie: I hope so, it's getting there, it clearly is moving forward. I don't think it will be there by the end of this year, or by the end of next year, but we are seeing progress. And we are seeing a more mature channel from where people are promoting themselves as retailers, and that's the only sphere they'll play in, and they're becoming specialist and they're winning and they're getting returns from it, and the vendors are recognising it, they're putting schemes in place to promote and support these people and financial assistance, we're doing similar things with VAR campaigns, so it's good all round. It's not just about being value added resellers, it's about being retailers or PC assemblers or whatever you choose to be, but be that and stick to that and focus and make it happen.

Saran: Not in my opinion. The guys who are into the SMB segment or are into solution selling are becoming bigger and bigger, so yes if you look at it from a perspective of solution based sales happening and going to increase for those particular organisations which are currently doing solution based sales then yes. But if you look at it from a person who's just moving boxes, is he going to get into solution based sales? The answer is no.

Saraf: Whether its 2004 or 2005 it has to happen. When we talk about solutions, we're not talking about very complicated stuff here, for a reseller who is into boxes, it can also mean adding some more value to the box, so a solution doesn't necessarily mean [catering for SMBs]...for every channel it means different things, for a small reseller selling boxes it can mean adding some more value to the box, and making things easy for the end user.

Salah: I think so, very much. What we've seen with 2003 is only the very beginning of giving attention to offering this market solutions, the more mature the market will be the more attention will be given to it. 2004 should be very good when it comes to solution offerings.||**||

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