Another Dubai reseller runs away
Deira-based Maxreach exits channel with estimated AED70 million debts
Just when the Dubai Computer Group (DCG) has started to clear the channel of rogue IT traders, another Dubai reseller has exited the channel after failing to meet its debt obligations.
Sources close to the matter have told Channel Middle East that Maxreach, an IT reseller that operated out of Deira, is believed to have runaway after it failed to pay an estimated AED70 million ($19m) to five Dubai-based broadline distributors.
Shailendra Rughwani, president, DCG, confirmed the demise of Maxreach but pointed out that the company was not a member of the Dubai-based computer association.
Rughwani said the DCG has tightened its noose on the Dubai channel and the steps that have been implemented are helping to restore order in the market. He said none of the DCG members have been affected by the latest runaway. "It's the distributors that have been affected by Maxreach's exit from the market this time around. It boils down to the issue of credit and we have been talking about for some time," he said.
He added that this was expected as many distributors in the Dubai channel haven't taken heed to implement stringent credit assessment mechanisms before they can extend credit terms to channel partners.
Rughwani said the DCG has taken up the issue of credit and is now working closely with the insurance companies in Dubai to make sure that they have the right financial and company information on resellers they want to provide credit cover for. "We have been strict with our members and the actions we have taken in the last two months have helped in calming and ‘cleaning' up the Dubai channel," he said.
Hesham Tantawi, vice president at Asbis META, a member of the DCG, said while there is no foolproof measure available to prevent runaways, there is need for greater cooperation between distribution companies in the UAE. "There is need for distributors to share information on potential runaways," he said.
Remarking on the contentious issue of credit which many have argued contributes to reseller runaways, Tantawi said the levels of credit extended to a partner need to be constantly reviewed regardless of whether a distributor has insurance cover or not. "If a partner exits the market with a small amount that doesn't cause much disruption in the channel. What has been worrying about the Dubai channel is that the amounts involved are huge and not only affect individual companies but the wellbeing of the industry as well," he said.
Over the last couple of months, the UAE channel has through the DCG moved to tackle reseller runaways.