Server spike

Server sales in the Middle East continue to soar, but the market remains dominated by a couple of vendor heavyweights. The simple fact is that some vendors — who have a much stronger position in markets such as Western Europe — have so far failed to replicate their success in this region.

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By  Stuart Wilson Published  November 23, 2005

Server sales in the Middle East continue to soar, but the market remains dominated by a couple of vendor heavyweights. The simple fact is that some vendors — who have a much stronger position in markets such as Western Europe — have so far failed to replicate their success in this region.

They may have great products and fantastic price points, but, to be perfectly honest, without a decent channel-to-market, they may as well not bother selling servers here at all.

The third quarter server shipment figures from IDC once again showed healthy growth rates in the major Middle East markets with Saudi Arabia and the UAE continuing to lead the way in volume. Within both national markets, one or two vendors hold the bulk of the market share. The most dramatic change occurred in Saudi Arabia, where Dell catapulted itself into the number one position, shipping 14 times the number of x86 servers in the Kingdom compared to a year earlier.

This massive spike in sales meant that Dell shipped 2,270 x86 servers into the Kingdom and claimed almost 42% market share. In total, x86 server shipments into Saudi Arabia in the third quarter hit 5,414 units — more than treble the amount shipped in the third quarter of 2004. HP maintained a strong position in Saudi Arabia — despite losing the top spot to Dell — and shipped 1,888 servers into the Kingdom, accounting for 34.9% of the market share.

The question that needs to be raised here is whether or not Dell’s third quarter success is related to a couple of massive projects or whether it is sustainable run-rate business that can be continued quarter after quarter? Whatever the answer, you certainly can’t knock a vendor that experiences such a spectacular year-on-year growth rate.

Despite the multitude of vendors selling x86 servers in Saudi Arabia, the market remains heavily dominated by Dell and HP. Together, these two vendors alone account for more than three quarters of the market and other major A-brand vendors have so far failed to make significant inroads into the market.

IBM picked up third spot, shipping in 625 units in the third quarter to take 11.5% of the total market. Acer picked up fourth spot with unit shipments of 231 x86 servers — a small amount but a significant rise on last year’s figure. DTK rounded out the top five places in Saudi Arabia, selling 43 x86 servers into the Kingdom in the third quarter.

The UAE witnessed a more modest 62% year-on-year rise in server shipments to 4,884 units as demand continued to grow. While Dell managed to wrest the top spot from HP in Saudi Arabia, it was unable to repeat this feat in the UAE. HP remains the dominant x86 vendor in the UAE by a country mile, doubling its sales year-on-year to 3,455 units — a massive 71% of the total national market.

IBM came in second in the UAE, shipping 409 units — a modest 11.7% increase on the previous year — while Dell picked up third spot, selling 380 units in the third quarter. Fujitsu Siemens and Acer rounded out the top five positions in the UAE, grabbing 3% of the market each. For both major markets, ensuring that vendors have skilled distributors and trained resellers on board is a priority. Without this basic channel structure, it is almost impossible to boost sales.

For those vendors that truly want to challenge the dominant players in the server space, they need to take a long hard look at their existing routes-to-market and channel breadth and understand exactly why they are failing to make an impact. Vast tracts of the x86 server space have already commoditised to a certain extent and there’s really not that much difference in specification and pricing points between vendors.

Those vendors that are serious about boosting their position in the Middle East server market need to start building their channel from the ground up. That means finding and encouraging distributors to stock and push their servers. That means recruiting, training and incentivising second tier resellers to actually consider alternative brands when talking to customers.

Alongside their channel development efforts, these vendors also need to ensure that adequate post-sales service levels are available to satisfy customers. The server space is the doorway to business accounts including the SMB space — the next target area for many major vendors operating in the Middle East.

I’ve spoken to several vendors about their plans to accelerate server sales in the Middle East and Africa region and more often than not their ambitious plans and aggressive strategies fizzle out within a matter of weeks.

It’s not rocket science building a channel and it’s really not that difficult to do. There’s no point creating pull demand in the Middle East market if you don’t have your push strategy up and running first.

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