Intel tells MENA disties to sell where they want
CPU vendor scraps territorial contracts for open distribution model
In a move that it claims is partially motivated by the desire to increase channel credit levels, Intel has given all six of its distributors in the region the go-ahead to sell into any Middle East and North African market they wish.
The unprecedented step means distributors now have free reign to supply CPUs to customers throughout the MENA region, rather than being confined to specific geographic territories as their contracts previously stipulated.
It is understood that the only exception is Saudi Arabia, where Intel is persisting with its existing set-up.
The change in policy effectively allows Intel's GCC distributors - Empa, Logicom and Mindware - to sell to non-Gulf customers for the first time, and gives Asbis, Metra and Raya the green light to develop business outside of Egypt and North Africa.
Intel revealed the new strategy to Middle East distributors following an internal initiative dubbed ‘Middle East Plus'. Ozerk Ege Ertem, Middle East, Turkey and Africa sales manager at Intel, insists it will result in channel partners benefitting from increased access to products and credit lines.
"We were working with our distributors on limited locations, but as we are seeing more opportunities in every market and our distributors are willing to open new offices in new countries we said let's set them free and enable them to open business in whichever country they want," he explained. "So getting new opportunities in new countries was one of the reasons for it, as well as increased availability of distributor credit for the channel."
Ertem said some resellers in the region were maxed up from a credit level and the move to allow distributors to sell across borders would provide fresh sources of credit.
It should also make it easier for partners to access the products they need locally, rather than turning to European distributors for stocks, which Ertem says has happened in the past, particularly in North Africa.
Additionally, claims Ertem, the new arrangement will push distributors to be more active in the markets now open to them, which should lead to faster implementation of Intel programmes in the region.
He played down suggestions that removing territorial restrictions could make it harder for Intel to track the movement and consumption of its CPUs in future, however.
"We put a lot of effort in tracking systems and all our distributors have reporting systems that are ready, so we know who is doing what in each country," he said.
Shahood Khan, sales director at Intel distributor Empa, agreed the alteration in policy was a chance to increase the business.
"This will give us an opportunity to grow in other regions and even in other product lines. There are some territories where we were requesting franchises, like Algeria and Tunisia, but because of existing distributors there that was pending and Intel was not willing to open it up. But now that has changed we can approach those markets," he said.
The shift in strategy comes after a difficult period for the Intel distribution channel. Steve Dallman, VP and general manager of Intel's reseller organisation, admits that a lot of distributors saw sales stall last year, leaving them overloaded with inventory.
"We took back a tremendous amount of inventory over and above what their regular stock rotation was and the only thing I asked from the distributors was that they would take that cash and put it out on the street," he revealed.
Dallman claims that Intel has been working behind the scenes to support distributors by increasing the amount of money in place for credit insurance. It has also launched a working capital programme to protect the investments that distributors make in inventory and encourage the availability of its full product portfolio.