Finding form

Conditions haven’t been kind to the region’s largest IT suppliers during the last 18 months and that includes HP, one of the few multinationals with interests that stem from the consumer sector right the way up to the large enterprise. But after implementing a series of strategic changes, including a re-evaluation of its sales channels, the vendor is confident the worst is now behind it.

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Finding form (Isidora Bojovic/ITP Images)
By  Andrew Seymour Published  October 22, 2010

When HP’s new MD, Eyad Shihabi, breezes into the firm’s Middle East HQ in Dubai this month to take the reins, Mohamad Itani will quietly step down from the interim post he has held for the past few months and revert back to his original role of operations director.

But while Itani made it clear from the beginning that he was not interested in the MD job, he will undoubtedly have a major part to play in ensuring the new boss is brought fully up to speed on the inner workings of the company’s regional operations.

Nobody has a better handle on what HP’s Middle East business is all about than Itani, having taken the reins earlier this year in the wake of John Hoonhout’s resignation.
The good news, for Shihabi at least, is that he joins at a time when the vendor appears to be enjoying a revival of fortunes. Everybody knows what a torrid year 2009 was for the industry, and as the region’s largest technology provider HP found itself more exposed to the market downturn than most.

Itani admits business was not as brisk has HP had been used to last year — “we saw a slight reduction in revenue” — but he insists 2010 has shown an improvement in results.

“We have seen year-on-year growth in the past three quarters of a steady 30% in the Middle East and it is really because of a focused attention to each country,” he says.

That “focused attention” is actually reference to a series of operational changes that have reshaped HP’s regional business over the last 12 months, including a product refresh that the company claims has helped it gain more traction in large accounts. At the end of last year, a decision was also taken to spin off Saudi Arabia into an independent subsidiary, reporting directly to the company’s MEMA operations.
Given Saudi Arabia represents as much as 40% of the vendor’s overall regional business, the re-jig has given the new-look HP Middle East more room to home in on the remaining smaller markets that make up the region.

Itani says of the move: “It gave us a chance to focus on the other markets — the rest of the Middle East let’s call it — in a unique way, looking at Qatar by itself, Kuwait by itself, UAE, Egypt, and trying to really zoom down into each country to understand their required need, whether it’s in terms of infrastructure, support, sales or channel.”

The other significant strategic change that HP claims has impacted its businesses is one that all HP partners will be familiar with by now: the realignment of its channel sales team and the dissolution of its Solutions Partner Organisation, better known as SPO.
In its place emerged a new structure, with channel sales staff broken into specialities based around HP’s various product units, including imaging and printing (IPG), personal systems (PSG) and enterprise storage and servers (ESS).

The decision to abandon SPO didn’t necessarily go down well with all resellers. Some claim privately that they miss having access to a dedicated partner unit and a single ‘channel face’.

Itani insists, however, that the fundamentals are still there. “The SPO did not disengage or disappear — it still exists in one way or another,” he responds. “What we have done is divided the sales team into different subject matter expertise. Selling a consumer product or supplies requires a different strategy and sales team from selling an enterprise virtual array (EVA) machine. In the past we had one SPO trying to manage the overall business for us within the channel. But we took a step back to look at what it takes to help HP and the partners become more specialised, and that was one way of doing it.”

Itani claims the revamped structure ensures partners are better placed to get the support they need on a silo basis, but also points out that they still have access to the ‘horizontal’ tools they received from SPO.

“They still have one face driving the commonality between all the rebates, the relationship, the order entry and the supply chain — everything is still handled in a horizontal factor by the channel operations,” says Itani. “So the channel operation still exists and it is there trying to be the one face to partners. From a sales perspective, yes, we have broken it into pieces, it is best for the market and we’re seeing tremendous growth.”

The final key amendment to HP’s strategy was the realignment of its customer base into segments, with a particular focus on corporate global accounts. HP now has general account managers working with these large organisations to address the pan-HP portfolio.

“This is a very important shift for us because in the past we used to look at the customer on a silo basis, meaning that ESS would go there and PSG would go there and IPG would go there. Now, the general account manager will pull in the specialities that he or she needs from those business groups and try to work with the customer and act as one face to them,” says Itani.

There are around 30 of those top-level accounts in the Middle East and apart from major government clients — which are naturally focused on one country — they generally boast a broad reach across the region. This includes names such as Orascom, Emirates, Aramco and Etisalat.

Does that mean partners are shut out from these accounts? Not necessarily, according to Itani. He does admit that many of the very largest customers demand direct relationships, engagement and fulfillment these days, but insists that still leaves a huge amount of business for the channel to target.

“Right now, in 99% of the cases, the fulfillment is being done by the channel partners because they play the role of added value, whether it is the logistics, being the importer or installing the equipment at the customer side. And I don’t see this diminishing anytime soon. On the contrary, we are assigning more and more channels in the region — specialised channels to be more specific,” says Itani.

The telecommunications sector continues to be the driving force for HP in the Middle East, representing about 40% of total revenue contribution to its enterprise sales. However, the company has noted a shift in sales patterns during the last couple of years, mainly due to the level of IT spend that has emerged from government clients. Recent projects in the education, healthcare and defence segments have boosted HP’s position in the public sector, according to Itani, reiterating why it remains the region’s largest multinational IT employer.

“After the acquisition of Compaq in 2002, the total headcount in the region did not exceed 300 between the combined companies,” says Itani. “Today, with organic growth and acquisition, including Saudi Arabia, we are talking about 1,600 people.”

Unlike other vendors, HP’s strategy doesn’t just revolve around having all its resources concentrated in Dubai. Although 400 members of staff are based in the UAE, there are also 400 in Saudi Arabia and more than 600 in Egypt. The rest are scattered across markets such as Qatar, Kuwait, Bahrain and Jordan.

If there’s one thing the new Middle East managing director won’t need Itani to tell him, it’s that he has access to the sort of sales resources that many of its rivals can only envy. And that’s an advantage the company will need to make count as it bids to recover fully from the crisis that has engulfed the market.

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