Future channel winners

Nicolai Tillisch, founder of consulting and coaching firm Dual Impact and author of ‘Effective Business in the Gulf’, reflects on the ongoing changes in the region’s IT channel sector.

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Future channel winners Tillisch says channel players will find it hard to compete if they don’t innovate.
By  Nicolai Tillisch Published  September 9, 2013

Nicolai Tillisch, founder of consulting and coaching firm Dual Impact and author of ‘Effective Business in the Gulf’, reflects on the ongoing changes in the region’s IT channel sector.

The Middle East’s scene for technology channel players is about to change beyond all recognition. The future is already visible. You can merely look at the US to envision just what the Middle East market will soon resemble. Commoditisation, consumerisation and radically more effective ways of serving customers have made life difficult for both smaller and larger resellers and retailers.

The slower pace of change here could distract you. The tectonic plates, however, are moving below us. Vendors have experienced a greater need for a variety of channel partners due to the amount of red tape and special local business practices. Today, software is increasingly generating value to vendors and can be distributed and updated seamlessly across borders, while the bring-your-own-device (BYOD) trend affects the market for imported hardware.

Furthermore, e-commerce has not yet been allowed to fully take off. The costs associated with both timely delivery of physical goods and proper payment methods are high, but the economic potential is so large that it will motivate new entrants and innovation levelling this situation out.

The leading international IT houses have not until recently applied their sophistication and economies of scale to develop local capabilities in system integration and managed services as they have done elsewhere—consequently, helping to fuel those other marketplaces. This is now occurring as the wider Middle East and Africa region becomes a strategic priority for them.

Most channel players will experience tough times because the margins on what they currently do are being squeezed at the same time as they are unprepared to tackle the new emerging business opportunities.

You could ask, what are the future channel winners thinking about right now? There are three obvious approaches that they already have considered or are about to consider. I hope you will join me in considering these options.

First, you can provide a value chain to vendors or make a piece of it available to them or others, which significantly improves efficiency. This will likely require sizeable investments.

Second, you can solve problems for individual customers by understanding and addressing their specific situations and concerns, not just trying to give them a marginally better experience. The capital requirements are likely more moderate, but the challenge lies in achieving service excellence on levels far beyond the region’s current benchmarks.

Third, you can build, at least temporarily, a separate market for a special technology based on exclusive rights or on your own intellectual property. However, this alternative’s success greatly depends on luck.

Instead, your company should depend on its ability to execute effectively and continually improve so it may succeed with either of the first two approaches—the efficient value chain and the customer-specific problem solver. Something as basic as the quality and discipline of the line managers determine whether your organisation’s full potential can be utilised. Precision and persistence become as important as positioning.

This is where the real change will occur, while most of the future channel losers will simply continue to do what they are largely doing today and will lose business accordingly.

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