Daring to look ahead

There are still noticeable inconsistencies when it comes to how vendors and the channel interpret the health of the Middle East market right now.

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By  Andrew Seymour Published  May 17, 2009

There are still noticeable inconsistencies when it comes to how vendors and the channel interpret the health of the Middle East market right now.

Speak to distributors and resellers and you’ll be left in no doubt that the market has been knocked for six by the downturn. Credit is hard to come by, payment delays remain a concern and the level of demand continues to be worryingly unpredictable.

Hold the same discussion with vendors and the picture doesn’t appear to be quite as bleak. They will acknowledge that the situation is somewhat different to last year, but few will express the level of anxiety conveyed by the channel.

I suspect vendors are merely trying to put a brave face on things, as they are more inclined to do in such difficult circumstances. After all, they don’t want to be seen to be playing down their prospects too much. And as I’m sure their public relations teams will have advised them, it is far better to talk about ‘opportunities’ than challenges.

But one thing that seems certain across all tiers of the channel is that companies are already looking to the final few months of the year to provide the relief they are craving.

It is quickly emerging that the September-December period is going to become a huge battleground, with both vendors and resellers anticipating a spike in business following a summer season that is likely to be even slower this year.

One vendor I spoke to recently said its operation was already gearing up for the final four months of the year, almost to the extent that it had written off the chances of the third quarter delivering any sort of meaningful contribution. Employees at the company have been instructed to take all annual leave over the summer, ensuring that it is firing on all cylinders come September.

I’m sure other organisations in the channel are taking similar steps if they also expect the tail-end of the year to mark a radical improvement on the previous few months.

If that is the case then it will be interesting to see how the channel readies itself for this development, particularly in terms of inventory. After all, there have been murmurs of discontent from some resellers that certain product lines — mainly in the electronics arena — have become incredibly difficult to source of late.

Whether that is a vendor-specific lead time problem or simply a case of distributors scaling back inventory after getting their fingers burned at the start of the year is unclear, but if there is to be an uptick later in the year then adequate levels of stock in the supply chain will be essential.

Of course, one problem with putting too much emphasis on the fourth quarter is that the general lack of market visibility at this point in time remains poor, while the hazards of placing too many eggs in one basket is known to all.

There might be enough business out there for companies to hit their numbers month-to-month, but accurately predicting the direction of the market is likely to remain complicated for a while yet.

Even if the market is pinning its hopes on the green shoots of recovery sprouting in the fourth quarter, you have to wonder to what extent channel development is being constricted in the meantime.

I have attended several events recently where vendors have stressed the importance of value add in the channel, but it’s difficult to see how resellers and VARs can justify some of the investments their principals request when their immediate priority in the current climate will be to bring in new business.

It is perfectly reasonable to expect manufacturers to ask more of the channel, but at the same time they have to be realistic about the situation their partners face. Partners understand the need for a long-term strategy, but at the same time most are not in a position to think beyond the short-term, at least for the time being.

According to numerous management figures in the channel, there are more CVs floating around the Middle East market than ever before, a sure-fire sign that companies are either reducing headcount or not hiring at all. Last week Microsoft Gulf confirmed it had axed an undisclosed number of positions — a move that simply wouldn’t have been conceivable a year ago.

It is widely perceived that the Middle East market is more robust than its counterparts elsewhere in the EMEA region, many of which will struggle to post growth this year. For the sake of the channel’s health let’s hope that proves to be the case. Q4 might be some way off, but maybe it could just be as decisive as many expect after all.

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