End of an era

This month's Gitex event also announced the end of one of the most remarked partnerships in the Mideast.

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By  Eliot Beer Published  September 24, 2007

Earlier this month what many assumed to be a routine press conference at GITEX turned into something quite extraordinary. Three men sat in front of a crowd of journalists and, in calm tones, announced the end of one of the most remarked partnerships in the Middle East.

When SAP's Ernie Gunst revealed SAP AG had bought out SAP Arabia's exclusive licence to distribute the vendor's products in the region, there were a dozen questions to ask. But essentially, the main one now is: what happens next?

In terms of the immediate future, within the next couple of months the SAPs will announce specifics of the transfer programme for customer support contracts, as well as SAP Arabia's new name. After this, SAP AG will be looking to appoint new partners in the region, something which Gunst says should happen over six months or so.

But SAP will now have a bigger job - rebuilding its relationship with enterprises in a region which has suffered from too little attention and too little investment for many years. The persistent rumours and tales surrounding the SAP AG/SAP Arabia partnership have devalued the vendor's strong global reputation - something that rivals such as Oracle will not have been slow to capitalise on.

Between the two disastrous court cases brought by SAP AG against its partner, the news that Saudi Aramco - already handled direct from Germany - refuses to allow its staff to communicate with SAP Arabia, and SAP CEO Henning Kagermann's comments last year that the vendor's regional presence was "not perfect", SAP has a lot of work to do.

The markets have already shown cautious approval - in the days following news of the buyout, SAP AG's stock rose almost 4%. But the real work will come in the months and years ahead, as SAP attempts to revitalise its regional business, and start growing its sales.

At the moment many suspect that much of the vendor's Middle East revenue - reported to be around $42 million a year - comes from service contracts, rather than new deployments. This goes some way to explaining the enormous sum SAP AG paid SAP Arabia - its potential regional market for enterprise systems is huge.

To make the most of this, the vendor and its new partners need to engage with regional enterprises - and quickly. Middle East IT professionals are faced with a good number of options when it comes to enterprise software - and SAP will have to make a convincing case.

For these regional decision-makers, this news can only be a good thing. Finally faced with the prospect of genuine choice in the SAP market, enterprise leaders will be able to make the most of distributors and integrators hungry for a sale - as opposed to the inevitably more leisurely approach a monopoly can take.

The Middle East IT sector has now reached the end of an era. With this passing of the last of the great exclusive distribution deals, the region's enterprises can look forward to a much more dynamic market - and hopefully more high-quality implementations.

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