Revenue conscious

As the role of the channel continues to evolve, distributors and systems integrators have been compelled to provide services around the products and solutions they supply all in an effort to stay relevant.

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Revenue conscious
By  Piers Ford Published  June 25, 2013

As the role of the channel continues to evolve, distributors and systems integrators have been compelled to provide services around the products and solutions they supply all in an effort to stay relevant. Piers Ford looks at how SIs and distributors are broadening their horizons to earn recurring revenues.

As value-added distributors (VADs) come under increasing pressure to diversify and add to their traditional core portfolio of marketing, logistics and financial services, many of them are looking at systems integration (SI) as a stable and sustainable revenue stream.

With demand for SI high across the Middle East, this sounds like a good strategy. But a number of challenges remain, not least the ever-pressing skills shortage and a lingering sense that VADs lack the flexibility and expertise to meet the specific, focused needs of the big-ticket projects that are driving the market in the region.

The SI landscape is diverse across the Gulf Cooperation Council (GCC) member states, according to Frost & Sullivan’s Information and Communication Technologies Practice. In the UAE, the most advanced country in the region, competition is fierce as it has the best infrastructure in place, and a number of global vendors and systems integrators have chosen to set up their headquarters in Dubai or Abu Dhabi. But there is also strong growth in Saudi Arabia and Qatar, where the infrastructural developments associated with events such as World Cup 2022 are spurring demand on.

“Due to infrastructural developments that are taking place in the region, the vast majority of projects are partly supported by governmental funds,” said an analyst at the research firm. “The region is predicted to invest $2.3 trillion on infrastructure between 2010 and 2015. Furthermore, regional governments have also shown increasing support for ICT development in the region. Therefore, both green-field (new transportation, new hospitals and so on) and brownfield (airport and shipyard expansion, hospital renovation) projects are resulting in increased demand for SI services.”

But are VADs in the best position to evolve and play a key role in meeting this demand? Frost & Sullivan suggested that while their traditional range of value-added services has naturally helped them align their business models with SI and create demand for channel partners, only some will shift their focus to SI itself. For the rest, the priority will remain making sure that services and products are available in the right combination to meet customer requirements with a competitive price.

Acquiring the right skills set remains a barrier to SI market entry, with local talent thin on the ground and legislation, relocation costs and high salaries making it difficult to recruit from outside the region.

At leading Middle Eastern SI Gulf Business Machines, Chetan Parekh, regional sales manager for the Systems and Technology Group, said that nevertheless, some VADs are actively adding skills or partnering with specialist companies in order to take advantage of the burgeoning market.

“Today, organisations are changing and adapting to the new reality of having to do a lot more with a lot less, said Parekh. “More and more, they have to operate with decreased departmental budgets. The focus is not only on CAPEX reduction but also on containing and reducing the OPEX.

“SIs are basically a bridge between the technology vendors and customers. The customers’ challenges are the driving forces responsible for changing the way SIs approach their business. One recent trend is a noticeable move towards offering specialised skills. Mobility integration projects are particularly prevalent.”

Other areas where demand for SI services is rising include enterprise application software, cloud computing, security solutions and service-oriented architectures.

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