2004: year in review

It was certainly an action-packed year for the Middle East IT channel. From George Bush naming a Dubai-based distributor allegedly involved in the smuggling of banned nuclear centrifuge components through to the ongoing credit crisis affecting parts of the second tier reseller channel, there has been no shortage of developments in 2004.

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By  Stuart Wilson Published  December 29, 2004

It was certainly an action-packed year for the Middle East IT channel.

From George Bush naming a Dubai-based distributor allegedly involved in the smuggling of banned nuclear centrifuge components through to the ongoing credit crisis affecting parts of the second tier reseller channel, there has been no shortage of developments in 2004. So, let’s look back at the major events that shaped the year.

January: AMD appoints Thacker as master distributor for the region hopeful that 2004 will be the year that it finally reduces Intel’s massive market share in the region. Sage bags Accpac to boost its midmarket ERP and accountancy software portfolio. Citrix identifies Saudi Arabia and Kuwait as its top targets for 2004 and HP merges its Enterprise Systems Group (ESG) unit with HP Services to form the Technology Solutions Group (TSG).

February: The Middle East IT channel grabs the attention of the world. Dubai-based SMB Distribution has its fifteen minutes of fame as US president George Bush accuses the distributor of being a front for the distribution of nuclear technology to countries such as Libya, Iran and North Korea. SMB’s vendor partners quickly distance themselves from the company. On a slightly brighter note, IBM launches its PartnerWorld partner programme in the Middle East to reach out to a wider reseller base.

March: Cisco appoints Logicom as its regional distributor alongside Tech Data. The move comes hot-on-the-heels of Cisco terminating two Middle East distributors after uncovering evidence of rebate abuse that also involved its own staff. Cisco then launches operation ‘Sandstorm’ to completely revamp its MEA channel structure. SMB’s premises are placed under police guard and employees sent home.

April: Post-SMB, Samsung outlines it plans for a multi-channel distribution strategy in the UAE with Redington, Trigon and Tech Data all working with the Korean giant. On the reseller front, Royal Star makes a break for it leaving behind close to US$1.4m in bad debts, according to channel sources. Distributors get the heebie-jeebies and look carefully at their credit risk. Identifying the runners — those looking to run away from day one — and the riders — those caught in negative cashflow and trying to trade their way out of it — becomes a priority.

May: HP’s EMEA channel supreme Jos Brenkel tells Middle East resellers to be wary of Dell’s channel strategy in the Middle east. “Dell goes in, uses the channel, takes the customer base and eventually walks off,” said Brenkel. A heated debate ensues between the benefits of a closed distribution and open distribution model. With pros and cons to both models, 2005 will once again be characterised by major vendors battling for the best partners and genuine channel reach. With Acer moving up fast, there is certainly no shortage of vendors to choose from.

June: eSys announces plans for a Jebel Ali PC assembly line with a capacity of 30,000 units per month. Tech Data puts in place a micro-credit channel financing initiative to help increase channel breadth and erode the role of sub-distributors in the region. The drive for sales in Iraq continues with HP naming its dream team of partners: Almasa, Emitac, Scientific Medical Systems and Kuwait Danish Computer Company. Samsung mulls over the possibility of launching its notebook range into the Middle East in 2005.

July: Mindware becomes a 3Com distributor putting its extensive networking skills to good use. Maxtor appoints eSys as its fifth EMEA distribution partner much to the consternation of existing partners. Saudi Arabia announces plans for an ambitious PC promotion to encourage home ownership. Almasa adds Hitachi GST to its growing HDD portfolio and Veritas takes its storage message out to the region’s SMB resellers. The local assembly business cranks up a notch as ART debuts in the region.

August: Carly Fiorina shows her ruthless streak after HP’s server and storage division posts a US$208m loss in the second quarter. EMEA boss Kasper Rorsted is shown the door along with senior executives Peter Blackmore and Jim Milton. Dell continues to build its channel in the Middle East underlining the vital role resellers still play in this region. This time it’s Jumbo Electronics as Dell looks to increase its exposure in the UAE retail market.

September: Dubai’s Computer Street descends into chaos as the credit crisis takes a turn for the worse. Police are called to forcibly close shops as the channel rumour mill goes into overdrive. Intel decides to end the rebates on its boxed CPUs. D-Link unveils a comprehensive channel programme for the region and Acer appoints Empa to cover the markets of central Asia. BenQ adds eSys as a JoyBook distributor in the UAE (note that Almasa and BenQ end their distribution agreement soon after).

October: Gitex brings its usual collection of news and announcements. HP announces tentative plans to set up a regional logistics hub in Jebel Ali to serve vast tracts of the ISE region. There is a mixed reaction from CDPs who expect clarification of the facility’s exact role in early 2005. Major software vendors underline their commitment to the channel cause. Citrix embarks on a drive to recruit SMB resellers and Computer Associates’ reinvigorated local organisation — containing a strong contingent of ex-Intel employees — declares that 2005 will be the year of the channel in the Middle East. Asbis and Maxtor terminate their distribution deal as the repercussions of the HDD vendor’s decision to appoint eSys continues to reverberate.

November: Taiwanese distribution giant Synnex grabs a stake in Redington and Ingram Micro comes clean on its plans for the region. Yes, MEA is still on the agenda according to Hans Koppen, Ingram’s EMEA boss, but Eastern Europe comes first. Will 2005 be the year that Ingram Micro takes the MEA plunge? Several local PC suppliers are taken for a ride by an elaborate Iraqi scam. Posing as official government representatives, victims take a financial hit and even supply kit for a make believe Ministry of Education tender. Asbis makes a move in South Africa to flesh out its pan-EMEA credentials.

December: The fallout from IBM’s decision to offload its PC business to Chinese giant Lenovo looks set to rumble on well into 2005. The channel’s initial reaction has been positive with many anticipating the emergence of a genuine competitor to Dell and HP’s dominance. While IBM price points will surely become more competitive, what the channel really needs is for the PC giants to start taking more interest in reseller margins. Away from the hardware business, the enterprise software landscape witnessed two big deals: Oracle finally nabbed PeopleSoft and Symantec announced its intention to snaffle up Veritas in a mammoth all-stock transaction. Local partners now need to carefully weigh up the pros and cons of working with these industry heavyweights in 2005.

The year ahead looks set to be just as interesting as the MEA channel matures apace. The advice to the channel is the same as always: get big, get niche or get out. The role of re-export and sub-distribution will be eroded even further as vendors deploy more resources in the region and distributors look to go in-country. As the overall market size grows, vendor behaviour, distribution models and reseller strategies will have to evolve. 2005 promises to be a year of channel change once again as the pace of evolution shows no signs of slacking off.

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