The year that was…

From Iran sales embargoes to financial troubles in the channel, 2009 had it all

Tags: 3Com CorporationAvaya IncorporationHewlett-Packard CompanyJordanOracle CorporationRedington GulfUnited Arab Emirates
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By  Andrew Seymour Published  December 30, 2009

It might be a cliché to say that 2009 has been the most challenging year the Middle East IT channel has ever faced, but there are few other suitable ways to describe it when you consider the unremitting growth that the market enjoyed up until then.

The simple fact of the matter is that even with reams of potential and the best intentions, no market is capable of withstanding the ferocious combination of restricted credit availability and flailing end-user demand once it decides to strike.

With that in mind, it is little wonder that an analysis of the major trends and developments which have shaped proceedings during the past year reveals just what an eventful period it has been.

Of course, the warning signs were there from the very beginning of the year, particularly in Dubai, where the channel was left reeling after several traders defaulted on debts and fled the market.

Such tales were merely just the start of things to come, breeding anxiety and uncertainty in all tiers of the partner community, and prompting both banks and credit insurers to back away from the industry as fast as they could. 

It was soon after that stories also emerged of dealers telling distributors to come and retrieve unsold stock that they simply couldn't afford to pay for, an unprecedented step that illustrated just how desperate the situation had become.

In hindsight, such wider market problems did at least serve to highlight the importance of exercising greater financial diligence in the market, leading more than a few players to review the very metrics by which they ran their businesses.

Vendors such as HP even revised their rebate programmes in the wake of the credit crisis, answering calls from partners to recognise the real capacity of a market where the luxury of visibility was no longer afforded.

It wasn't only the UAE that felt the pressure. Dealers in markets such as Kuwait and Egypt also came under enormous strain, the latter suffering from a serious slump in corporate demand that caused channel players to dramatically scale down their inventories.

Saudi Arabia, by no means immune from the economic constraints experienced by its neighbours, was perhaps the least affected, evident by the number of vendors and distributors that continued to increase their focus on the country.

 Elsewhere, there were significant developments in Syria as it suddenly became a viable market for US vendors following discussions to lift trade embargoes on ICT products.

Meanwhile, the Jordanian market was relieved to return to something akin to normality after uncertainty over the government's plans to exempt PCs from sales tax during the middle of the year virtually brought the retail channel to its knees. For the record, the tariff was never removed.

It was also the year in which the always-sensitive subject of sales to Iran reared its head again after a US newspaper identified Redington as a "vehicle" for HP sales in the country. 

For anybody who has either worked in the Middle East channel or taken a moment to look at quarterly PC numbers for the UAE, talk of products ending up where they shouldn't is hardly a revelation.

Still, that wasn't the point, as Redington insisted it had done everything by the book and had a legitimate contract with HP for Iran sales, although HP subsequently terminated that as part of a tightening of terms with all distributors.  

Middle East channel dynamics were also affected by global changes in the vendor environment. The Sun and Oracle tie-up was the most notable, but deals involving Toshiba and Fujitsu, Hitachi and Simpletech, Avaya and Nortel, and, lately, HP and 3Com, all left the partner landscape pondering the likely ramifications.

Predictably, it proved to be another busy year on the channel job carousel front as a series of well-known executives changed horses, while restructuring at some major vendors created an over-supply of talent that also increased personnel movement in the market.

Several vendors, including APC, Juniper and Microsoft, used 2009 to refresh their partner programmes, aware of how much of an influence such initiatives can have over partner performance.

A number of new vendors, particularly smaller ISVs, as well retailers such as E-City and Office Depot, all deemed the Middle East worthy of their investment, although their outlays were arguably countered by those who scaled back. Smart phone maker i-mate was possibly the biggest name to tumble, making more than 30 staff redundant as it pulled down the shutters on its Dubai office.

For most companies, 2009 will be looked upon as a year of survival and stabilisation. Perhaps it will also come to be recognised as a period when the market's expectations experienced something of a correction, a much-needed occurrence in my opinion.

As many are fond of pointing out, the Middle East still offers the kind of growth rates and project opportunities that are not necessarily found in the more mature markets these days.

Channel players with their houses in order can therefore look ahead to the next 12 months with justifiable bullishness.

After all, things can only get better, right?

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