The 2009 Power List

Distribution remains a fundamental aspect of the Middle East IT market, but have you ever wondered how much money the top players are making, who they are selling to and what strategies they have in place to survive the difficult market conditions this year? Welcome to The 2009 Power List…

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By  Andrew Seymour Published  April 11, 2009

Distribution remains a fundamental aspect of the Middle East IT market, but have you ever wondered how much money the top players are making, who they are selling to and what strategies they have in place to survive the difficult market conditions this year? Welcome to The 2009 Power List…

Circumstances can change very quickly in the IT market and nowhere is that more evident than in distribution. Rewind the clock 12 months and wholesalers in the Middle East were speaking emphatically of double-digit growth and audacious expansion plans, reflecting the general mood of a sector that has only ever really been limited by the level of its own ambitions before.

But the situation today couldn’t be more contrasting. The swashbuckling — some may even argue reckless — methods employed during the buoyant times are now being replaced by an unprecedented display of diligence as wholesalers contend with a market that is visibly feeling the effects of the global economic crisis.

Distributors cite profitability and cashflow management as their main priorities this year, with several adamant they would now rather sacrifice revenues than take risky deals that could jeopardise their bottom line.

Distribution remains as squeezed by the financial downturn as any other sector. The reduction in loan facilities means resellers are placing fewer orders because consumer and corporate demand has subsided, while the overall lack of credit availability has disrupted the flow of day-to-day business that distributors had become accustomed to.

For the first time ever, this year’s Power List — an unrivalled guide to the largest Middle East IT distributors with offices in Dubai — contains interviews with senior executives from each of the 15 companies profiled. The result is a fascinating insight into the psyche of the regional distribution channel during this challenging time.

The aspirations that distributors have to expand their operations still come across in their outlooks for the year, but they are now accompanied by a substantial degree of prudence that can only be beneficial for the long-term health of the channel. Virtually all of the executives interviewed cited profitability and effective cashflow management as their main priorities this year, with several adamant they would now rather sacrifice revenues than take risky deals that could jeopardise their bottom line.

The 2009 Power List is designed to provide a more comprehensive breakdown of the region’s largest IT distribution houses than ever before. As well as publishing the contact and ownership details of each company, we have indicated the primary brands they carry, giving you a summary of the core IT vendors responsible for generating their revenues. Distributors with the rights to sell fast-moving, finished goods from brands such as HP, Acer and Microsoft inevitably tend to be the ones reporting larger sales numbers due to the volumes associated with those businesses.

We have also documented the Middle East and Africa countries where distributors operate local sales offices or warehouses. Many wholesalers have proved it is possible to develop a regional customer base from the confines of Jebel Ali, but this information also allows you to see which players boast points of presence throughout the region. Additionally, each profile includes updated figures on the number of active accounts and employees at each company. Distribution has always been a fairly labour-intensive business in the Middle East compared to other regions where a greater level of e-commerce and automation occurs, which explains why more than 2,700 people work for the 15 companies featured. The number of active accounts represents the approximate quantity of customers that distributors transact with on a quarterly basis and provides a snapshot of reseller breadth.

It is important not to draw too many conclusions from this, however. For instance, those appearing to serve fewer accounts don’t necessarily have a weaker customer base, but tend to either rely on an established VAR or sub-distribution network for repeat business or generate a high proportion of business from select retail accounts.

Given that inclusion to The Power List is dependent on scale — or revenue — we can reveal that the 15 distributors featured over the coming pages generated US$4.275 billion in sales last year, an increase of 24% on the US$3.440 billion recorded the previous year.

While this reflects the impressive rate at which the Middle East distribution sector has expanded, it has to be pointed out that much of the growth is likely to have come from the first nine months of the year — prior to the global downturn tightening its grip on the market.

Distributors are under no illusions that recording sales growth in 2009 will be an extremely difficult task, but for many the key objective is to safeguard the bottom line so that they are still present this time next year.

Click here to go to the Channel Power List 2009.

Revenue verification

As The Power List seeks to indicate the largest Dubai-based distributors by scale we have a responsibility to ensure the accuracy and authenticity of any figures we publish. This year we have taken measures to verify annual revenues by requesting distributors to provide evidence of the sales figure they state.

Due to the publication date of this article, most distributors do not yet have copies of independently-audited financial accounts for the most recent calendar year.

However, all distributors in this year’s Power List have either shown us a copy of pre-audited results or provided a figure they claim to be accurate. To build in an extra layer of verification, we have also asked each distributor to show us a copy of their audited accounts for 2007. You will therefore see a ‘VERIFIED’ stamp next to figures we are satisfied are genuine based on viewing independently-audited financial statements.

We intend to adopt the same policy next year by requesting evidence of the 2009 figure (where possible) as well as independently-audited accounts showing confirmed 2008 revenue. If for any reason the 2008 figure conflicts with the number provided to us this year by what we consider to be an unacceptable margin then we reserve the right to exclude the company from The Power List.

It goes without saying that revenue is only one indicator of a company’s size and should not be interpreted as a statement that one company is better or more significant than another.

However, Channel Middle East believes it is imperative that all data published in these pages is verified to the best of our ability. We hope the measures outlined here will contribute towards building a more accurate and transparent picture of the Middle East market, as well as creating a level playing field for each distributor included in the list.


Editor’s Note

We believe The Power List contains the largest IT distributors with Dubai offices operating in the market based on the data available to us at the time of research. However, we acknowledge that there may be other IT distributors which would qualify for inclusion so if you feel there are any glaring omissions then please let us know and we will consider those companies for the future.

It is probable that both Aptec and FDC merit a place on this year’s list based on our estimation of their 2008 revenues. However, Aptec declined to provide any guidance of its sales figure as directed by its board. Based on the performance of distributors with comparable portfolios, we would estimate Aptec’s sales to be in the range of US$200m to US$250m. FDC had not got back to us with the required information before our deadline. Again, based on the company’s portfolio and coverage we would estimate FDC’s distribution revenues to be in the range of US$150m to US$200m.

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