Supplying Saudi Arabia

The Kingdom of Saudi Arabia’s status as the largest IT channel market remains uncontested.

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Supplying Saudi Arabia Colin Summers, regional director, Commvault Middle East
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By  Piers Ford Published  November 14, 2011

The Kingdom of Saudi Arabia’s status as the largest IT channel market remains uncontested. What do vendors and distributors need to know to succeed in the Middle East region’s largest IT market? Piers Ford reports.

The Saudi Arabian ICT market continues to be a tonic for any palate jaded by the precarious global financial situation. Even the most conservative estimates suggest that it broke the $4 billion barrier last year and is on course for $5.2 billion by 2014, growing by more than 10% per annum.

Not only is the market maturing nicely, but it is also a hungry consumer of new technology, constantly raising the barrier in terms of demand for the latest technology products and services.

The government’s commitment to ICT investment across the board continues to be a major industry driver and influence. According to market research firm, for example, PC spend per capita will reach $173 within the next three years, largely thanks to the government’s Home PC Initiative. Nearly a third of the population will have a computer.

This booming landscape is great news for the channel in the Middle East’s most vibrant technology spot, as vendors invest heavily in programmes, partnerships and infrastructure that will maximise their exposure to the KSA’s ICT purchasers. But it also raises some important challenges, not least the prospect of a significant skills shortage as suppliers try to keep pace with demand for new technology, exacting logistical requirements, and local credit models that tend to squeeze profitability.

Growth drivers

Ehab Kanary, director of sales, KSA, Egypt and Bahrain at communications infrastructure vendor CommScope, has a typically robust insider’s view of the healthy state of the Saudi Arabia market.

“One of the main reasons is that our government is investing heavily in specific sectors such as education, healthcare and e-services,” he says. “CommScope is providing solutions to many new universities and schools being built and many more being planned. IT plays a key role in education today, so it is imperative that high-quality education is specified in these major initiatives. Likewise for the healthcare sector and e-services.

“A second factor that makes Saudi unique is our high youth population. We have a generation of people who have grown up with technology. They expect IT-enabled services and that creates demand for new applications which deliver better services.”

Like CommScope, which has been in the market for more than 15 years, software giant Oracle has been investing continuously in its KSA operation for almost two decades, establishing a vital local presence and a network of channel partners. Nagy Al Saeed, alliances and channels director, Middle East and Africa, says several other factors are influencing growth.

“Organisations are increasingly under pressure to maximise customer loyalty and satisfaction to retain their customers and win new ones amid fierce competition,” he says. “For this reason, an increasing number of businesses and organisations are looking for IT solutions to help them achieve their business objectives.

“Also, businesses, particularly in the financial and telecom sectors, are working hard to control costs and seek the help of IT vendors to implement best-of-breed products that would help them cut costs. Added to that, the government sector’s adoption of e-government plans to automate and streamline their services to the public sector’s employees and citizens has become one of the fastest growing arenas for IT vendors. Information security is another major growth driver; businesses and organisations across industries and sectors are focusing on protecting their information systems and data.”

Adel Qahwash, director at Saudi-based Al-Jammaz Distribution says government spend in new projects and the good economy which has been supported by strong oil prices is drive IT growth in the Kingdom.

“We see more maturity especially in the large enterprise firms due to the investments in education by different vendors. However, the KSA market is not a fast adopter of new technologies like other markets in Europe,” he says adding the UAE in the region does better.

Vendors tend to have well-oiled traditional two-tier distribution channels in KSA. Many of them have a strong local network of VARs and systems integrators that they deal with directly, as appropriate. Xerox, for example, has a local presence in Saudi Xerox Agencies Company (SXL), a joint venture that targets enterprise customers. It also has a master distributor, Computer Communications Systems (CCS), which focuses on printers and entry-level multifunction products for the SMB market. Both companies operate through a variety of channels. Xerox is also in the process of appointing ‘power’ retailers to push its affordable printer line-up.

Understanding the culture

“It is important that companies doing business in KSA fully understand the country’s culture and the business market as well as the Saudi legal system,” said Dan Smith, head of integrated marketing for the Middle East and Africa region of Xerox’s developing and emerging markets operations.

“A lot of businesses in Saudi Arabia involve government legislation, so a foreign company entering this market should be aware of the basic rules and practices in this area. Having a physical presence there is always an added advantage as this means being closer to our channel partners and customers.”

These cultural and business challenges are constant factors for ICT vendors and their channel partners, impacting on almost every aspect of logistical and trading activity. Even the size of the country presents some unique hurdles and requires vendors to have a complete understanding of the various markets it contains.

Logistical challenges

“KSA is so vast, it is almost a small continent,” said CommScope’s Kanary. “The eastern province is mostly focused on the industrial and petroleum sectors while the central province is where most of our government customers are. The western province is mainly made up of the private sector and religious tourism. We work across all sectors so we find that each region has its own individual requirements and challenges.

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