Desktop drivers

The desktop PC continues to be the dominant form factor sold in the Middle East. Despite frenzied hype surrounding notebook growth rates, the real Middle East channel action is still very much in the desktop arena.

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By  Stuart Wilson Published  July 26, 2004

Staying power|~|desktopFSCteam.gif|~|Ahmed Khalil (right), Middle East regional manager at FujitsuSiemens, and Susanne Lewitzki (left), product marketing manager|~|The executives in charge of promoting desktop products for the big five A-brand PC vendors in the region all use notebooks because of the nature of their daily tasks and traveling commitments. But while the notebook is the workhorse of choice for many mobile workers, reports on the death of the desktop have been greatly exaggerated. Yes, notebook sales are growing at a faster rate than desktops. Nevertheless, desktop sales are also growing in the Middle East, they remain the form factor of choice in many business environments and are still a force to be reckoned with. Put aside the hype surrounding notebook growth in the Middle East, take an in-depth look at IDC’s first quarter figures for 2004 and the results speak for themselves. Desktop PC shipments in the Middle East climbed 26% year-on-year to 482,000 and accounted for a whopping 82% of all units sold across the desktop and notebook form factors. The desktop PC is very much alive and kicking in the Middle East IT markets. Value-for-money, a fixed location for the user or the need for high-end functionality can all drive a desktop sale. “There will always be a place for desktops,” says Sameh Farid, regional manager personal computing division at IBM Middle East. “In some situations the notebook has no real advantage over desktops.” In sectors such as education and corporate accounts, the up-front capital investment is a decisive factor in persuading customers to opt for desktops. “Often it is only the power users needing to travel that see real advantages in buying a notebook over a desktop,” adds Sameh El-Deeb, category manager for commercial desktops at HP PSG Middle East. “For normal clerical functions the ownership costs of desktops are a winner.” Michael Collins, Middle East general manager at Dell, concurs: “Desktops appeal to businesses and home users looking for optimal price-performance where mobility is not needed. Desktops provide flexibility and expandability, which is a key requirement for performance users.” There is also huge variation across the Middle East in the ratio between desktop and notebooks sales. “The desktop business is still crucial to FujitsuSiemens in the Middle East,” says Ahmed Khalil, regional manager. “Markets like Egypt, Lebanon and Jordan are driving desktop sales. These three countries are not as mature as the UAE, Saudi Arabia or Kuwait and have non-oil based economies. Desktop PCs easily account for 80% of the form factors sold in these countries.” Even vendors with a track record of success in the notebook space have not turned their back on the desktop space. “The desktop is here to stay,” says Philip Ashkar, business unit manager for desktops and servers at Acer MEA. “We still see the desktop as a central part of our product portfolio. Innovation is still happening and the demand is still there from corporates, SMBs and consumers. Acer desktop sales in the Middle East climbed 14% year-on-year in the first half of 2004 and that was purely driven by run rate sales.”||**||Pushing desktop value-adds|~|desktopashkar.gif|~|Philip Ashkar, sales and marketing director at Acer Middle East|~|For A-brand vendors, the business market is where the real action lies — especially in the public sector. This is where the 10,000-plus PC tenders lie and A-brand vendors can push their total cost of ownership (TCO) and return on investment (ROI) arguments based on security, manageability and services. These are the areas where A-brands look to value-add, differentiate themselves from the competition, and start building long-term customer links alongside their large account resell partners. Dig down a bit and the value-add features that A-brands use to approach large desktop tenders are strikingly similar. Collins at Dell points out four core values for its Optiplex PC range: ‘Stability, reliability, manageability and serviceability’. For El-Deeb at HP, the desktop marketing message is focused on ‘security, manageability and quality of service’. IBM strikes a similar selling chord with its vision of autonomic computing in the desktop arena built around ‘self-configuring, self-healing and self-optimising business desktops’. These value-add functions can drive service sales for channel partners reselling desktops. “Being a premium product gives resellers the opportunity to make a little extra in margins,” says El-Deeb. “The features in our business desktops allow partners to deploy services as part of a wider solution. To do this the product needs to have the feature set and the tools. In areas like security it is possible to upsell products and options and customers are willing to pay extra for these.” The value-add features on business desktops from A-brand vendors also serve to build brand loyalty. With some corporate accounts now entering the realm of second or even third time buyers, the days of selling into greenfield prospects with little or no experience of PC-buying are drawing to a close. “Enriching the customer offering and educating resellers about features means higher loyalty and customers that are less sensitive to the price competitiveness in the market,” explains Farid at IBM.||**||Funky form factors|~|dekstopdell.gif|~|Michael Collins. Middle East general manager at Dell|~|Although awareness of TCO and ROI is becoming more prevalent among business buyers during the sales cycle, some are still swayed heavily by the up-front cost. Often the decision-making process depends on the traits of the individual buyer. “TCO and ROI is getting more important,” says Ashkar. “But it is not yet at the level we would like it to be. It is more about adding value in the design, in R&D activity and in the software that is bundled such as manageability tools. These are the unique selling points that vendors need to have as technical specifications are almost identical.” While HP is widely recognised as the top brand in both the notebook and desktop space, the latter form factor still accounts for the majority of unit sales. Acer’s split in the region currently stands at 60% desktop units and 40% notebooks. It is important to consider the history of each vendor in the region when looking at these splits. FujitsuSiemens already sells more notebooks than desktops in the Middle East according to Khalil. The difference between a business-focused desktop PC and one aimed at the consumer segment is already clear to see. Major vendors see this diversification accelerating as both ends of the spectrum explore new form factors and functionality. At a consumer level, convergence is the primary force revolutionising the humble desktop PC into a home entertainment hub. IBM stands out from the A-brand community by only playing in the commercial desktop space and not dabbling in the consumer arena. For the others, the race is on to build the next generation of home entertainment PCs with whizzy functions aplenty. Suzanne Lewitzki, product marketing manager at FujitsuSiemens, says: “With products such as the Scaleo C, we are looking at multimedia concept PCs built around convergence. These move away from the classic PC design and look more like a Hi-Fi. These products also open up new retail channels to sell into.” Ashkar agrees: “The look and feel of the consumer desktop has changed. Acer now has its enjoyment centre line that has a totally different look and feel to the standard desktop line aimed at first time buyers of a multimedia consumer PC.” In the business market, the form factor is also evolving rapidly. “The market is moving quickly to small form factors,” says Farid at IBM. “The more you shrink the box, the more challenging it becomes and a vendor may need to use non-standard components such as notebook opticals. The challenge then is to control the cost.”||**||Blade runners|~|desktopIBM.gif|~|Sameh Farid, regional manager, personal computing division, Middle East, Egypt and Pakistan at IBM|~|Looking even further ahead, blade PCs are looming large on the horizon. These devices reside in secure datacentre environments giving customers security and also the virtualisation benefits currently more associated with servers. El-Deeb at HP explains: “Blade PCs will change the rules for desktop PCs in the Middle East during the next few years. It is not a thin client but a true PC with dedicated storage and processing power. The user still has input devices at his desk and the blade solution allows new PCs to be configured in minutes. It also provides a compelling TCO case.” Eventually, corporate customers will start looking at outsourcing desktop provision, support and services to vendors and paying a fee per seat, although the region is only taking tentative steps in this direction at present. Farid at IBM says: “This could involve replacing PCs every 24 months, providing a helpdesk and any support that is needed. We are already seeing some pioneers in this managed services arena in Kuwait and Saudi Arabia. This is where the autonomic features on IBM PCs come into their own allowing remote helpdesks to solve more than 90% of software and configuration issues without physically visiting the user.” While vendors have the resources for a direct marketing touch with large accounts, channel strategy plays a vital role in pushing their desktop PCs to the midmarket and SMB segments and communicating the benefits. IBM has witnessed a fundamental shift in its desktop business mix in recent years. “Over the last two years we have started seeing more and more business coming from deals for 50 users or less,” says Farid. “More than half of our business is now from very small customers and two-thirds of desktop sales are made through distributors holding stock… Our business has changed and the focus is now on stable run rate business rather than big bulk deals.” Resellers do have a choice of desktop brands to work with and A-brand vendors make good use of channel incentives to keep them loyal. “Most of them are very committed,” says El-Deeb at HP. “They appreciate the breadth of the portfolio we offer and know that the accelerators in the PartnerOne channel programme enable them to make more money by showing commitment.” For desktop vendors with a channel strategy, ensuring clear communication between direct and indirect sales policies is vital. Not all desktop PC vendors have made the situation crystal clear in the Middle East. “Acer is 100% indirect and this is a strong sales tool,” says Ashkar. “When you talk to customers and channel partners there is often confusion surrounding our competitors. One day they are indirect, the next day they are direct. Being consistent in the market approach is an extremely important factor.” For desktop resellers, the value-adds provided by A-brand vendors are the road to extra margin. Yes, it is still possible to sell a no-name box based purely on speeds and feeds — some customers still want this, but the margin will be minimal in most cases. Learning how to market and sell the TCO and ROI benefits of A-brand systems can pull in a couple of extra points in margin and open up the door to long-term services provision with customers. Research from Gartner concluded that only 26% of the total cost of ownership for a business PC was the initial outlay to buy the hardware. A-brand vendors are all hungry for channel partners with access to business buyers — be it at an SMB or corporate level. The onus is on them to provide resellers with an attractive margin proposition that ensures channel loyalty and profitability. Despite the frenzied notebook hype, the humble desktop PC market has serious staying power and remains the dominant form factor in the Middle East. Large public sector installations, first-time buyers, serious gamers and those needing to stick to a budget will continue to fuel the desktop market growth. ||**||

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