Sink or swim

Liquidity constraints are testing the Middle East enterprise channel’s resolve

Tags: Systems integratorUnited Arab Emirates
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By  Andrew Seymour Published  February 7, 2010

Quite how life in the enterprise channel is going to pan out this year seems to be up for discussion in the Middle East market at the moment and it is not difficult to see why.

IT providers throughout the region suffered some serious setbacks to say the least last year and that has cast doubt over their ability to recover and re-establish themselves again.

Out of all the market sectors that got pounded by the downturn - and let's be frank, nobody escaped unhurt - the general consensus in the Middle East channel is that the corporate segment came off worst.

I'd be surprised if any systems integrators or solutions providers can reflect on the past year without conceding that their business was damaged in one way or another. The same goes for the vendors and distributors which generate a heavy portion of their sales from supplying to those companies.

The problem didn't just arise from the fact that enterprises slashed their IT expenditures with unprecedented ruthlessness or that projects which had been in the pipeline for months were suddenly put on hold. It was that the channel found itself massively squeezed by liquidity constraints as collecting payments from customers proved to be a far more complicated affair than usual.

Bearing that in mind, it's hardly surprising that VARs ran into severe cash flow difficulties as they grappled to retrieve payments for business they had either finished or financed themselves.

So what now for the Middle East enterprise channel given such recent turmoil?

For a start, you would certainly think that changes to the landscape are inevitable if the situation doesn't improve this year. Some integrators have already been forced to shrink their business to cope with the challenges they face, while rumours about the dire financial health of more than one large systems integrator refuse to go away.

The encouraging news, if you can call it that, is analysts insist enterprises can only hold off from important technology investments for so long, especially now that IT is so intrinsic to organisational growth. Commercial refresh cycles in some critical parts of the infrastructure sector should provide respite as well.

In the Gulf, particularly, there is also plenty of talk about the materialisation of major IT projects in sectors such as energy and banking, which will be warmly welcomed by everyone with a stake in the enterprise market.

At the same time though, it is hard to ignore the widespread expectation that the consumer and SMB markets are where the real action is poised to take place this year.  

Could it just be that we see more and more integrators driving deeper into the midmarket as a way to offset lingering apathy among large accounts? It's certainly not inconceivable and some players are making noises in this regard, but the opportunity is only a finite one when you consider that the midmarket remains overshadowed by the SMB space in this region.

I have no doubt that vendors, and to a degree distributors, have a more influential part to play in shaping what happens in the enterprise market than normal this year.

High-end vendors who have been talking up the value of their channel ecosystems for years now have a chance to put some of their proclamations into practice.

After all, they have as much obligation to influence decisions at the user end of the market as the VARs themselves, arguably more so in an environment when business is less forthcoming.

And the way things look, it is as important for them to understand the financial and operational challenges that partners face as it is to ensure the availability of specialised support, demand generation services and competitive pricing.

Many channel players in the enterprise sector have had the wind knocked out of their sails during the past year. As things stand, there are a whole host of factors that will determine how capable they are of recovering quickly, if at all.

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