Is the IT distribution sector on the mend?

The most powerful distribution players in the Middle East and Africa (MEA) have painted a very positive outlook for the IT sector in 2018 and beyond as consodaltion in the industry takes hold.

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Is the IT distribution sector on the mend? Distributors are upbeat about business prospects in 2018. (ITP images)
By  Manda Banda Published  July 16, 2018

This month Channel Middle East reveals its 2018 Distributor Power List, our annual ranking of Middle East-based top distributors based on revenue. In compiling this year’s research, I spoke and interacted a lot with different people within the IT technology segment and came away very optimistic that the market is on the steady path to growth.

This year’s revenue figures have told a promising tale, with the distributors that made the Power List 2018 making up over $7bn in sales up from last year’s total of just $5.5bn.

Although the business climate in the Middle East is tough and competitive, most of the distributors this year saw modest growth, an indication perhaps that the sector is on a recovery path.

And while distributors are upbeat about business prospects in 2018, many are still keeping a close watch on the political instability in some parts across the MEA market.

It’s vital to note that the figures we have been collecting are from 2017 sales, and we are already past six months into a new year, which has already brought some optimism with most distributors expecting a positive outlook for the rest of 2018 and beyond.

As the sector has been consolidating over the last two years, most expansion plans that were on hold have now come back online with distributors looking to cement their in-country presence in the GCC, Levant, North Africa and sub-Saharan Africa.

At the same time, while distributors have been evolving and embracing value-add and solutions-driven business models, they are still being challenged by access to credit and better cash flow management. In addition, the implementation of VAT from January, 2018 has impacted some distributors as sales especially in Q1 2018 took a dip.

Although the VAT implementation will have a short-term impact of sales, it’s long term benefits many are hoping will see the IT industry as a whole being more transparent.

With the IT market continuing to evolve rapidly, distributors in particular are increasing their investments in partner enablement initiatives, training, incentive and rebate schemes. This has also been accelerated by the consolidation that the distribution sector has witnessed through mergers and acquisitions, and the demise from the market by some weaker players.

With most technology distributors featured in this year’s Power List expecting growth in 2018, it will be interesting to see if the survey will grow next year and a few new players make their debut in this all important survey.

What’s clear is that while they may still be uncertainty in the market, the regional distribution sector in MEA is on the mend. One can only hope that with every milestone achieved, the market is brought closer to maturity.

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