Guarded growth

This year’s profiled companies in our annual Power List Survey, have painted a picture of optimism with most reporting growth in their 2013 sales. Could this be a sign of good times ahead in the channel?

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Guarded growth ((ITP Images))
By  Manda Banda Published  June 25, 2014

Conditions can change very quickly in the IT market and nowhere is that evident than in distribution. Rewind the clock 12 months and IT distributors in the Middle East were speaking hesitantly about growth prospects in the market amid a decline in PC sales, reflecting the general narrative of a sector that has only ever really been limited by the level of its own desires.

The rapid growth of tablets and smartphones, saw more distributors talk emphatically about audacious expansion plans and strategies to venture into the mobility sector with some players unveiling their own private label brands.

Those bold moves unveiled a year or so ago seem to have started yielding dividends as majority of the distributors featured in the 2014 survey have grown their revenue by as much as 20% in some cases.

The reckless methods employed during the buoyant times are now being swapped with a market that wants to grow and remain credible in the eyes of the vendors, whose products it distributes and the resellers it serves.

The Middle East IT distribution sector remains as squeezed by the declining hardware margins and this has led to the reduction of credit facilities and financing meaning resellers have hard to look for alternative ways to bid for big IT projects.

This year’s Power List – an unrivalled guide to the largest Middle East distributors with offices in Dubai and KSA – contains interviews from each of the 16 companies profiled. The result is a fascinating insight into the essence of the regional distribution channel during the past 12 months.

Remarkably, those profiled this year were not surprised by the slow growth in PC sales despite earlier promises of huge refresh cycles in the commercial sector as Microsoft discontinued its support for Windows XP in April, 2014.

What was also common was the distributors’ aspirations to expand their operations, which came across in their outlooks for the year.

Virtually all of the executives interviewed cited profitability and effective cash flow management as their main concern and focus for 2014, with several resolute they would rather sacrifice revenues than engage in risky deals or behaviour that could jeopardise their bottom line.

Taking into consideration the companies that that made the list, the distribution business they conducted in financial year 2013 was over $6bn.

While this reflects the impressive rate at which the Middle East distribution sector has expanded, distributors are under no illusions that recording high sales growth in 2013 translates into profitability. For many, the key objective remains to be safeguarding the bottom line while growing the top line.

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