The Power List
Distribution remains a key part of the Middle East IT market, but have you ever wondered how much money the top distributors are making, who they are selling to and what strategies they have to survive a fast paced changing IT landscape? Now in its eleventh year, the 2015 Power List brings the who’s who in the region’s IT channel. In the pages that follow, we reveal the top 17 regional distributors in this year’s Power List.
The 2015 Power List is designed to provide a more comprehensive breakdown of the region’s largest IT distribution players. This year, the profile of the companies featured shows that most of them grew their revenue an indication that demand for technology products is beginning to increase across the region. Although the PC sector has continued to witness sluggish sales for the past 24 months, Lenovo continued to deliver exceptional performance in PCs in 2014 with a record 60m shipments, and strong profitability, all while maintaining its number one position in the market for the eighth consecutive quarter. Lenovo’s PC business delivered even stronger results, with record market share and increased profitability for the full year 2014-2015.
Demand for tablets seemed to have slowed down while large screen smartphones [phablets] have continued to see growth making distributors to not only pay attention to the smartphone segment, but many have gotten involved by launching their own private label phablets.
Yet despite the dip that the PC market is undergoing, there is one thing that is common. Distributors have continued to look at ways of improving their bottom line by complementing their hardware volume business with value, solutions and services offerings that help them to guide their reseller partners on a path that cultivates higher margins.
The market remains unstable in some parts in the Middle East while developments in the cloud and mobility space are compelling most distributors to restructure their business models in order to remain relevant to their customers in a market that is constantly evolving.
Remarkably, distributors in the Middle East are aware that it will take longer for the market to experience the sort of growth highs it enjoyed at its peak prior to the global financial collapse in 2008. In fact, some distributors acknowledge that the market might never witness the sort of highs it saw in the lead up to the global financial shakedown hence the need to constantly innovate.
As is common place with this research, every distributor featured in this year’s Power List has been approached by the editorial staff of Channel Middle East magazine, to open their financial accounts and give us their audited revenue figures for the past financial year, in this instance for FY2014.
As was the case in 2014, the Power List 2015 features final audited accounts which all the distributors shared with us. The companies featured over the coming pages collectively made sales of over $7bn last year. This is a significant achievement given the challenges facing the regional IT market.
This year, it’s worth noting that Aptec, which had featured in this research for many years is again absent after it was acquired by Ingram Micro in 2012. As a listed entity, Aptec is bound by stock exchange regulations to report a consolidated global sales figure and as a result, they cannot participate in this exercise because the essence of this research is to get the regional numbers.
Another absentee is Jumbo IT Distribution, which misses out for the second year as its audited financials will not be ready in time to make it into this edition of the magazine.
So why have some distributors increased their revenues while others saw theirs drop? Although business models may vary, one thing that resonated for the most part of 2014 is the continued sluggish performance of the PC segment, with the knock on effect felt throughout other sectors of the IT industry. It’s worth pointing out that distributors with franchises to sell fast moving finished goods from brands like Lenovo, Apple, Dell, HP, ASUS, Acer, Toshiba, LG, AOC, Samsung and Microsoft unavoidably tend to be in the lead in reporting huge sales numbers due to the volumes associated with this kind of business.
It’s important not to draw too many conclusions from this because those distributors that have value-focused offerings appear to serve fewer accounts but don’t necessarily have a weaker customer base. They tend to work with VARs, systems integrators and solution providers for repeat business or generate a high proportion of business from services.
That aside, there are a handful of distributors featured this year that actually managed to grow their business on an organic basis because they secured new vendor franchises or went in search of untapped opportunities in other emerging geographies like the sub-Saharan Africa region.
We would like to reiterate that revenue is just one indicator of performance and certainly doesn’t suggest that a distributor with a higher sales revenue figure than another is “better” in any way. After all, the Power List generally excludes many prominent value-focused distributors because the very nature of their business means they simply don’t do the volumes that meet the criteria needed to warrant a place in the survey.
All those that made the Power List 2015, did more than $100m in revenue in FY2014, so any possible participants need to make this threshold at least.
We believe that it is imperative that all data published in these pages is substantiated to the best of our ability. We hope the measures outlined above will contribute towards building a more accurate and transparent IT distribution picture in the Middle East and create a level playing field for each distributor included in the survey.
As the Power List seeks to show the largest distributors by scale, we have the responsibility to ensure accuracy and authenticity of any figures we publish. We believe the Power List 2015 contains the top 17 largest Dubai- and KSA-based IT distributors operating in the market based on the data available to us at the time of research. However, we also acknowledge that there may be other IT distributors in the region which would qualify for inclusion so if you feel there are any glaring omissions then please let us know and we will consider those companies in future. Jumbo IT Distribution, misses out for the second consecutive year not because it didn’t merit a place in this year’s Power List, but rather the distributor’s audited financials will not be ready in time to make it into this edition of the magazine.