Serious about Saudi?

A spate of IT providers have rushed to open offices in Saudi during the past month, intensifying a trend that has been building up since the start of the year. But there is one big question that remains unanswered: just how committed are these companies to building a sustainable Saudi business and supporting the local channel?

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By  Andrew Seymour Published  November 29, 2006

A spate of IT providers have rushed to open offices in Saudi during the past month, intensifying a trend that has been building up since the start of the year. But there is one big question that remains unanswered: just how committed are these companies to building a sustainable Saudi business and supporting the local channel?

While the heavyweight technology vendors have had the resources to function inside Saudi for some years, the next tier of players — which have typically had an established GCC base operating out of Dubai until now — are finally seeing the value in having a dedicated in-country presence in the Kingdom.

In the last month alone, software vendors such as Sage, 3i Infotech and Trend Micro have either opened, or are in the process of opening, a locally-staffed Saudi branch office. Egyptian software services reseller ITWorx has just launched a Saudi arm to serve customers more efficiently, while distribution outfit Almasa recently appointed a regional director to begin putting in place the building blocks for a local KSA operation.

I fully agree that simply just opening a local office in Saudi is a statement of ambition in itself, especially as so many companies are content just to manage their entire Middle East operation from the UAE. Having an on-the-ground presence automatically brings you closer to customers, partners and, most importantly, the market.

However, the challenge for companies that are fresh faced to the Saudi market is how they go about building on their investment over the next 18 months, if they do so at all.

If you have just opened an office in Saudi, or plan to do so in the near future, then you should already be asking yourself a number of important questions. Do you just maintain a token presence with a handful of representative staff? Or do you actually put in place a series of measures to aggressively build the business out, even if it means using a significant proportion of your overall regional budget to achieve that?

The dilemma for many companies — and one which members of the Saudi channel are monitoring closely — is to what extent incoming vendors plan to develop their local operation.

Will the local office be able to provide partners with dedicated sales and marketing support? Is there going to be any concessions made for pre- and post-sales service? And are the technical and service centre capabilities that really add value to the channel going to be made available locally? These are the facilities that will be most keenly received by domestic business partners in the long run.

On top of that is how readily prepared companies are to expand outside of the capital city and into other major locations such as Jeddah. The Saudi market is spread across such a large geography that anybody with genuine ambition to address the market must already have formed a basic idea of how to develop the business beyond Riyadh.

Saudi Arabia is a market deserved of special attention. Already the consumption of PCs in the country is larger than any of the other Gulf states, while the Saudi IT services market is expected to be worth almost US$800m by the end of this year.

There is no doubt in my mind that manufacturers and suppliers of IT products which are committed to opening fully-fledged country branches with a certain amount of autonomy from their Dubai HQ are best placed to achieve long term success in Saudi. Let’s wait and see who takes the initiative first.

Data dodgers

Avid eChannel readers will recall an editorial a few months ago bemoaning the number of IT companies that are only too happy to send out statements boasting how fast they’ve grown in percentage terms, but decline to provide any conclusive numerical data to validate it.

Not only does that mean the growth they are reporting has absolutely no context, but it makes it difficult to build up a truly authentic picture of the market.

What’s to say a company that claims to have grown 25% a year isn’t tempted to inflate its figures to 30%, for example, just to make itself look a little bit better than it maybe is? After all, what’s 5% when you are choosing to withhold the actual sales figure anyway?

One clear danger I see with this is that it encourages competing companies to claim they are experiencing the same level of growth, if not greater, because they don’t want to be seen as inferior. Suddenly, you’ve got a whole market trading on false growth.

Anyway, back in September, I promised that we would ‘name and shame’ anybody attempting to hide behind fluffy percentage rates. So step forward the joint winners of this month’s “We’re growing really fast, but we won’t be any more specific than that” award: Jacky’s Electronics and Imation.

Okay, let’s start with Jacky’s. Like many companies, Jacky’s was keen to exploit the post-Gitex euphoria by informing the market that it had been named as the company with the highest revenues at Shopper by, er, itself.

I’m sure Jacky’s really did achieve the impressive 45% increase in sales that it claims, but its reluctance to talk real numbers means it is impossible to get any kind of insight into the volume and value of product that it traded during the show.

“Jacky's is a privately owned company and does not disclose exact figures,” was the reply from the company’s PR agency to our request for some slightly more meaningful figures. “However, based on feedback they have received from other retailers' sales figures, they are the highest,” concluded the e-mail, suggesting that its accolade of “retailer with highest revenues” wasn’t exactly derived from the most scientific of methods.

To be fair, the anecdotal information Jacky’s has released about the type of products in demand during Shopper, as well as the company’s assessment of the exhibition, is significantly more useful than many of its peers have served up, but if it enjoyed such a strong performance I still fail to see why it can’t substantiate that success with proper data.

Publicly quoted storage vendor Imation’s Middle East arm, meanwhile, was only too happy to brag about a 32% increase in sales that it supposedly made during the third quarter.

However, the self-styled “world leader” in removable storage solutions clearly wasn’t prepared to divulge exactly how much of a leader it is, preferring instead to keep the finer details of its progress in-house. “I’m sorry, I will not be able to give you the sales figure increase as it’s not within Imation’s policy to do so,” revealed the company’s PR firm.

Not a lot you can say about such a resolute answer expect that its selective attitude towards releasing data leaves the vendor's performance in the Middle East without any context whatsoever.

The growth opportunities in the Middle East market are clearly there for all to see, they're just not yet as transparent as many of us would like.

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