Fake fears

Several IT vendors in the Middle East are currently facing problems caused by an influx of fake product from the Far East. The decision on whether to seek publicity or stay quiet on their discovery of fake goods is proving a tough choice for the vendors involved.

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By  Stuart Wilson Published  April 13, 2005

Several IT vendors in the Middle East are currently facing problems caused by an influx of fake product from the Far East. The decision on whether to seek publicity or stay quiet on their discovery of fake goods is a tough choice for the vendors involved.

With many vendors now outsourcing manufacturing to facilities in China, it is inevitable that some of this knowledge is seeping out of the authorised facilities and being used to produce fake goods. IT is by no means the only industry affected by this phenomenon.

When this fake product does land in the Middle East, it presents vendors with a tricky dilemma. On the one hand, they feel obliged to warn people that there is a batch of fake kit entering the channel, but are acutely aware that the fear, uncertainty and doubt that this creates could actually harm sales of their original product and drive customers into the arms of competitors.

On the other hand, by keeping quiet, they run the risk that customers will inadvertently purchase the fake kit, have a bad experience and still believe they have been using original product. It is a tough call for any vendor to make. Typically fake product uses inferior components, the workmanship is shoddy and performance is poor.

For the resellers, there are also some tough choices to make. I’m sure that no one in the channel would ever willingly endorse selling fake product, but the margins can be pretty enticing at the end of the day. The temptation is always there to mix a bit of fake in with original kit — especially if they are fulfilling a large order — or even mix up fake and grey together.

In emerging markets, where customers may not be as skilled at spotting fake as they are in developed markets, the temptation to push a bit of dodgy kit in is even more tempting. And these are also the markets where concepts such as intellectual property rights, trademark infringement and processes such as taking legal action against those involved remain very much in their infancy.

Fake remains a global problem and major vendors are increasing their efforts to stop it at source (typically in China). That is never an easy task due to cultural problems and the nature of the organisations that are often the driving force behind this growing problem.

As well as those producing the fake kit, vendors also have the option of going after the companies importing the product into the region and working with the relevant authorities to ensure that appropriate inspection procedures take place at points of entry into the Middle East.

On paper this sounds like an attractive option. In reality, the movement of fake products is a massive global industry involving some very powerful people and it takes a brave vendor to blow the whistle and start chasing criminals.

Fake IT product is openly available across the Middle East and authorities need a clear strategy on how to tackle it. To date, many of the efforts put in place have been little more than half-hearted half measures.

Flexible friend

There are two trains of thought when it comes to implementing a channel programme in the Middle East. While some vendors prefer to shoehorn in a global programme no matter how inappropriate the terms and conditions are for the emerging channels of the region, others are pursuing a much more holistic and flexible approach.

At one extreme, a vendor can deploy an incredibly complex system where partners are split into distinct categories based on number of certified staff, revenue contribution, target customer base and even purchasing behaviour. These categories determine the rebates, margins, leads and even MDF that they receive. This is a model that works well in highly developed markets where reseller metrics are easily available and the vendor also has a strong understanding of the end-user landscape.

What are the pros of this model? Everyone knows exactly where they stand and what they are entitled to. What are the cons? It has no flexibility and requires a great deal of management and administration.

At the other end of the spectrum, a vendor can take a totally discretionary approach to its partner programme in the region and spread channel resources around as it sees fit. This can mean pumping more margin in at a certain point in the supply chain or focusing funds on channel partners targeting strategically important growth areas — be they geographic or vertical.

What are the pros of this model? The flexibility to tweak rewards enables the vendor to focus their channel efforts according to their needs. What are the cons? Partners have no visibility of what they are entitled to and nothing to benchmark their rewards against. Unless the vendor invests a great deal in regular communication with partners, it is easy for some to become disillusioned and believe that a rival is receiving better benefits.

At the moment, both extremes are being deployed in the Middle East by vendors. The truth of the matter is that the perfect model lies somewhere in the middle: a programme that offers structure to the channel, flexibility for the vendor and possesses an inherent agility allowing the go-to-market model to be modified as market conditions and company strategy change.

For resellers across the Middle East, understanding each and every vendor’s approach to partner programme implementation is becoming a vital skill to possess.

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