Net margins

Mobile computing has been the proverbial tidal wave as far as the Middle East consumer IT sector is concerned

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By  Julian Pletts Published  October 14, 2008

Mobile computing has been the proverbial tidal wave as far as the Middle East consumer IT sector is concerned. Now that SMBs and enterprises are firmly on board, the surge of the notebook, and now the incredibly popular ‘netbook', is only going to gather momentum.

We sat down with DTK - the first regional assembler of such a product - as well as the main men at Intel and Microsoft to find out if this rapidly emerging hardware sector will breathe new life into the Middle East PC channel.

Why have you decided to invest in the netbook market?

Charbel Fakhoury, General Manager, Microsoft Gulf (CF): The launch of our netbook range of devices represents an area that we see growing and is intended to increase the penetration of PCs in the region.

This category of netbooks will provide an affordable option for more portability and on a familiar device so that people don't have to learn a new operating system. Intel is also part of this because we all envisage the same result - accessible technology for people that cannot afford to have a notebook.

Nimer Al Attal, Managing Director, DTK Computer Middle East (NA): We have tried to increase the penetration in the market. Maybe in Dubai we do not appreciate that the penetration in the market is low because people can afford to purchase a notebook that is worth maybe US$2,000.

Today we have one billion PC users, but we are still trying to reach more and the netbook is one of the initiatives that can reach out to increase PC acquisition for people that cannot normally afford it.

This netbook can address people who want to own a PC but do not want to lose the functionality that comes with the notebook, such as Windows and Office - the common applications that everybody uses.

Samir Al Schamma, Intel GCC (SA): DTK is the first notebook vendor to launch a netbook in our region. They have seen a market and they are latching onto it.

Secondly, Intel, and indeed our technology partner Microsoft, works with all of the vendors to launch their products and we would like to see more products launched in this market. It is a huge opportunity for all of us. It is not just limited to one vendor to capitalise on the opportunity open to them.

How important is it that large multinational components and software vendors support regional PC brands?

SA: It is very important that we support regional manufacturers such as DTK. It is critical that we give them the attention and support needed to compete with the multinational brands.

They each continue to go into the market in their own way and the notebook vendors have their own areas of interest, but we do not distinguish between one vendor and another. Ultimately we want to see the market grow.

How do you ensure the promotion of affordable computing does not lead to the further squeezing of already very tight profit margins for the channel?

NA: This is the challenge for everyone, not only DTK. We believe that working with Microsoft and Intel to make a machine that is not only affordable, but available on the shelf, tackles this problem.

CF: For us it is more about balancing performance and affordability. People are buying devices but saying, ‘what can I do with it?' Not only can I do work on DTK's netbook, but I can run all of my music or photographs.

My son can use it for school and my wife can use it to put all of her recipes on. It is the value that you get. You pay US$500 for an i-phone today and what can you use? In the end it comes down to the value that people get from the investment.

SA: It is all about the usage model and whether people see value. If it satisfies the usage you need you're probably willing to pay the price that is appropriate. Price performance is important - you want to get maximum performance for minimum price.

Connectivity is the common thing in the usage model and in that case virtually nobody asks about the price.

The reality is that you will get some users who will buy the netbook because it is their first PC and that is what they want. And you will get another who has a 20-inch multimedia laptop and they're looking for something to go with that as well. And that segment is really growing.

There is still uncertainty in the market over the main audience for netbooks. Which markets will bear the most fruit for retailers and resellers in the mobility sector?


SA: Every government and ministry of education that we talk to in the region has a mission to get all of the students to use technology and they all realise that IT skills are as important as reading, writing, maths and science.

The good news is that teachers have had access to the technology for some time through their own laptops, but now with netbooks the students can have that option.

The Intel Classmate PC is a perfect example of a purpose-built netbook for education. That is just one choice. DTK and other devices will be other choices.

NA: I see the point of going to the SMB, but this product is aimed at retail and today a lot of SMBs are buying most of their hardware and software from retail outlets. We see the retailers playing a big role in serving consumers, but they are not serving the small-end business. If the consumer wants a netbook they will go and buy it from the retailers.

You will see SMBs using netbooks because it is useful - I would like to have this machine sitting in front of me when I am seeing the customer. A lot of executives think, ‘I wish I had my laptop, but I cannot carry my laptop with me everywhere.'

Where should the PC channel consider making investments in the future?

NA: Education is very important, as well as retail and telcos. Telcos need devices that can help them demonstrate the use of bandwidth to the end-users. So this allows telcos to give the end-users the device on which they can use videos or chat - and for a normal application in an office.

In the emerging markets, such as Egypt or Tunisia, the purchasing power will be less so products like this will be relevant.

CF: The channel should invest in understanding the user's needs and looking at the value to the user because at the end of the day you need to target what people want, what they look for and what they pay for. At the same time, you need to provide the right support so people have good service.

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