Golden days are gone, but GBM remains bullish

Systems integrators have really felt the force of the economic downturn in the past year, but Gulf Business Machines (GBM) is one player that believes it is in better shape than most. Miguel El-Khoury, director of the company’s 150-strong integrated networking and site services unit, explains why changes in the market place are calling for some strategic thinking.

Tags: Cisco Systems IncorporatedGulf Business MachinesSystems integratorUnited Arab Emirates
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Golden days are gone, but GBM remains bullish
By  Andrew Seymour Published  March 7, 2010 Channel Middle East Logo

The past year has been tough for the enterprise channel. What are your plans to drive the business this year?

One of the focus areas for 2010 is profitability, which is important for every systems integrator now. If you take the infrastructure business it is always low margin business, so profitability is key. Gaining market share is the other story. There are a few countries where we are number one in terms of revenue to Cisco because Cisco contributes to 70% of our business. We need to grow more market share and become the number one in the other countries. So profitability and market share are key objectives for us, as well as the arising issue these days which is accounts receivables.

The economic situation has changed dramatically in the past year. Does that mean you will have to do things differently to ensure profitability in the future?

Yes, we need to do things differently and we need to be careful about being more aggressive. We used to be better in terms of bottom line, even if the margins were thin, but we were always betting on over-achievement and over-revenue. However, it is now very difficult to over-achieve the revenue by a lot so you need to make sure that your operational cost is in sync with your anticipated revenue. We cannot be as aggressive as we used to be and secondly we need to be more services-oriented, rather than products-oriented.

Isn’t that easier said than done, particularly in this region?

I know it is difficult in this market, but the good news about this situation is that we were always services-driven and we were always careful about how we priced projects. Others were not and that is why I see a lot of these local or even multinational integrators suffering financially and thankfully we are not. We are not in our golden ages, but we are not suffering.

Is there anything more that vendors can do when it comes to helping channel profitability? And are vendors even paying enough attention to the subject?

To be honest with you, vendors always talk about partner profitability. How serious they are is another question. It is something I have spoken about for the last three years. I have been saying, mainly to Cisco — even before the crisis — that you have to be careful, you have to know the issues and concerns of your partners, and you have to think with us.

And do they take it seriously?

Yes, they do. But is it getting to the ground [level] and being implemented? Really honestly, I doubt it. But at least they have started to think, see and understand the challenges of their partners. I think that with a little bit of maturity things will get better over time.

If there is one particular thing you could improve from the vendor side, what would it be?

More than 90% of customers would always like to talk to and initially start the conversation with the vendors. Systems integrators come next. So a preferred partner model is key. For any vendor working with multiple partners, I believe that 80% of its business should be driven and supported through a specific partner, rather than sending the customer a kind of BOQ or shopping list. If you give this advantage to a specific preferred partner and then you really differentiate that partner — and the criteria of defining this partner could be manifold — then you give this partner a price advantage which is good enough for them to keep their volumes healthy and keep their services healthy, and a lot of the problems would be resolved.

What sort of percentage do services contribute to your networking business these days?

For me it is healthy to be in the range of 10%. We are always in that range and this year I am going to be very aggressive on the team to make sure we are above 10%.

Finally, there continues to be speculation that some large systems integrators, especially in the UAE, are struggling financially. What impact will the outcome of this have on the competitive landscape?

I believe these guys [which are struggling] will need some time, but I don’t believe they will disappear. These guys have matured, been there for a long time and they have strong sponsorships behind them. But I think that once they wake up from the sudden shock they will be careful about their margins, who they work with and the commitments they put in front of the customer. And that will drive a healthier market situation for systems integrators.

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