Looking Down

A solid reseller base is vital for a successful SMB sales model. Vendors discuss what the Middle East channel needs from an SMB-focused programme.

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By  Stuart Wilson Published  August 29, 2006

Spending surge|~|jdoo200.jpg|~|Justin Doo, managing director at security software outfit Trend Micro’s Middle East and Africa operation|~|The proportion of overall IT spending derived from small and medium businesses (SMBs) in the Middle East is on the rise. It is a trend that major vendors have woken up to. Their efforts to develop a strong and deep SMB channel have risen sharply during the past year as they start to look down at the sales opportunities below the enterprise market. The SMB channel is all the rage right now. From dedicated channel programmes through to ambitious reseller recruitment exercises, vendors are locked in a battle to build the strongest and most comprehensive routes-to-market to serve this burgeoning Middle East market sector. Justin Doo, managing director at security software outfit Trend Micro’s Middle East and Africa operation, explained: “Why is the SMB channel so important? Well, if you want to be brutally honest about it, then it is because the SMB customer base represents such a large volume of business. Up until a couple of years ago many vendors took revenue from the SMB space by selling enterprise products with a large chunk of their functionality greyed out. That is starting to change.” “Not many vendors have developed real SMB-focused products but I believe that those that have are starting to achieve greater traction in the market. The product is only part of the story though. In the SMB space many of the customers trust the resellers that serve them to recommend a solution,” he added. The development of specific SMB-focused products has gone hand-in-hand with the launch of dedicated SMB reseller focused channel programmes as vendors work overtime to ensure that the margin potential for their solutions remains competitive in an increasingly crowded market.||**||Margin matters|~|kkhan200.jpg|~|Khalid Khan, SME channel manager for Avaya in the Middle East and North Africa (MENA|~|For Sumit Kumar, regional manager at networking kit vendor US Robotics, predictability and profitability are the foundations of a successful channel strategy. “The reseller has to be profitable selling your products,” he declared. “That sounds like a simple statement but not everyone gets it right. The timely payment of rebates to channel partners is critical. It should not be a situation where first quarter rebate payments finally come through in the third quarter to resellers.” “It is also important that vendors make sure that there is no price war between their SMB-focused reseller in the market. The resellers need to stick to the agreed sales price and make margin dependent on their partner status and the rebates that they are entitled to,” he added. The importance of partner profitability cannot be underestimated in the SMB reseller channel. It is a point that vendors will return to time and again when discussing the unique benefits that they offer partners in the Middle East. Khalid Khan, the recently appointed SME channel manager for Avaya in the Middle East and North Africa (MENA), said: “The number one priority for channel partners and something that they expect is reasonable margins and at the same time they probably also want to see margin improvement. As a vendor, we can help their margins through other features of the channel programme such as marketing support, technical support, lead generation activities and knowledge transfer.” “We are confident that our resellers earn solid margins from working with Avaya and retain a close relationship with our channel. There are not a huge number of SME channel partners for Avaya in this region but we are currently evaluating our channel profile to determine whether or not we need to expand this further,” he added.||**||Better benefits|~|skumarusr200.jpg|~|Sumit Kumar, regional manager at networking kit vendor US Robotics|~|Networking vendor 3Com already has a strong reputation among resellers serving the SMB customer space. 3Com’s track record of channel engagement in this sector is impressive and the vendor appears keen to build on its existing market momentum. According to Manish Bhatt, SMB marketing and business development manager for 3Com in EMEA, the vendor currently works with some 45,000 resellers across the entire EMEA theatre. “If you are a reseller today, the most important thing for your business is margin and profitability,” confirmed Bhatt. “You need to make sure that you are maximising the bottom line at all times and resellers need to know that there is the opportunity for enhanced rewards if they commit to a vendor.” “For 3Com, our job is to make sure that these SMB-focused resellers have access to the latest products and understand the technology. They require training and also want the ability to differentiate their offering in the market. Couple this with access to leads, promotions and marketing support and you are on the right track towards a winning channel programme,” he added. At present, the networking vendor community is leading the way in the rollout of dedicated SMB channel programmes in the Middle East. Cisco Systems has devoted extensive resources to building up a strong channel-to-market to service the growing demand for its solutions from SMBs in the region. Claire Jones, SMB regional sales manager at Cisco, explained the benefits and services that the vendor provides to its resellers: “There are dedicated channel account managers that extend full support and attention to channel partners addressing their business needs and requirements. There is also an active pipeline of flowing leads and an intelligent online pre-sales and warranty support programme. Resellers also have the opportunity to purchase demonstration equipment at special discounts allowing them to add more energy to their sales force and maximise profits. In addition, Cisco offers ongoing promotions, channel incentives and access to market development funds that support the partners go-to-market tactics.”||**||Engagement model|~|tallydp200.jpg|~|Deepak Prakash, regional manager at Tally|~|Vendors also need to make sure that their offerings — and also their interactions with SMB channel partners — are simple, structured and well thought through. Accountancy software powerhouse Tally has taken the SMB channel by storm since its successful debut in the Middle East market in the second half of 2005. “What it is important to know is that the SMB sector does not always require a high-tech solution but one that is simple and works,” explained Deepak Prakash, regional manager at Tally. “These customers are concentrating more on their day-to-day business.” “The SMB channel has in time developed the expertise to manage this business segment,” he added. “Since we started working in Dubai we have worked very closely with the SMB resellers. Besides more margin one definite need for these resellers has been for us to create the reach to new customers and to create new opportunities in the form of new products.” While the vendors themselves will typically look to engage with SMB resellers from a marketing and training perspective, distribution partners also play a major role in helping to develop and manage the channel to market. “Distributors play a major role in the success of addressing the two tier space,” continued Jones at Cisco. “It is through the distributors’ value-add offerings that vendors such as Cisco are able to reach far more channel partners from various IT backgrounds that offer complete networking solutions to SMBs.” According to Tally, its distribution partners are not only involved in catering to the immediate needs of the channel, but also play an active role in devising channel engagement programmes. “Currently, distributors not only manage stock for resellers but also provide them with technical support,” commented Prakash. “We know of instances where distributors have sold packages to partners using their own references to help the resellers achieve the sales that allow them to meet their target incentives. Distributors are as important to us as the heart is to the body.”||**||Building breadth|~|reltawil200.jpg|~|Roger El Tawil, channel and marketing director at Avaya MENA|~|While all the vendors talk a good talk when it comes to promoting their own margin potential, there is undoubtedly significant variation in terms of what resellers can make. As always, resellers need to pick their vendor partners carefully and understand the various pros and cons on each offer. For example, a vendor that has massive brand recognition at an end-user level (marketing pull) may not offer the best margin potential if there are too many resellers competing for the same business. In this situation, undercutting on price can destroy any margin potential. Conversely, a vendor offering high margins may appear attractive to a reseller, but if there is no demand, no lead generation and the solution itself is not of the highest quality, then the channel would be best advised to steer well clear. “Resellers want a product that is relatively easy to sell to SMBs,” added Doo at Trend Micro. “It needs to have a reasonable price point, it should be relatively easy to deploy and relatively easy for the customer to use. We are actually cherry picking the resellers that we deal with in the market and we are looking after their margin needs. We need to make sure that the sales team within the reseller are incentivised to go out and proactively sell the Trend Micro solution. It is not rocket science: the more they sell the more they can get.” Having the right product roadmap to cater for the evolving needs of the SMB customer space may sound like a no-brainer but not all vendors get it right. Tales of stripped down enterprise offerings that do not really meet the needs of SMB customers are commonplace in the IT market. One vendor that believes it has got the right product strategy is Avaya. Roger El Tawil, channel and marketing director at Avaya MENA, explained: “Avaya offers SMB customers a clear roadmap to migrate to the latest technology. There is a space in the market where there are customers looking for a migration path to IP systems. This provides a significant opportunity for our existing partners and also for potential new partners in the region as well.” Creating channel breadth but protecting partner profitability remains a complex balancing act for vendors in the Middle East. Getting the sums right can go a long way towards creating a happy and healthy channel.||**||Channel choice|~|cjones200.jpg|~|Claire Jones, SMB regional sales manager at Cisco|~|“We have the channel breadth,” said Bhatt at 3Com. “We have focused on the channel and have invested some of our margin as a vendor into our resellers. We are not like some of the other vendors in the market that are making 70% profit margins for themselves. We give resellers the opportunity to specialise and want to reward the channel for doing business with us. The feedback that we have had from the market is that 3Com is one of the most generous vendors in terms of margin opportunity for the channel.” Assessing a vendor’s level of commitment to the SMB channel can be a tricky affair. For some vendors the SMB space is the traditional heart of their business while for others it represents a relatively new target segment. “For US Robotics the small office home office and SMB segment are the target markets for 90% of the products that we manufacture,” said Kumar. “This makes the SMB channel vital to us. As such, our channel programme focuses on a healthy rebate structure, price structure and total transparency in terms of our future plans. Everyone knows where they stand in the channel community and exactly what benefits they are entitled to.” SMB-focused resellers are spoilt for choice when it comes to deciding on the vendors that they want to partner with in the Middle East. Make no mistake about it; vendors understand that the reseller is vital in reaching out to SMBs. This is a customer base that is far too fragmented for a vendor to contemplate any sort of direct sales model. In terms of the balance of power, resellers with an established customer base are in an excellent bargaining position when it comes to establishing a relationship with specific vendors. With more and more vendors building up their own staff resources in the Middle East, their ability to dedicate time and resources to the construction of an SMB-focused channel will also increase. Resellers need to assess the programmes on offer carefully and pay close attention to the margin potential. ||**||

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