A Steadier 2014

By root


Inspite of the uncertainty about the regional economy following the continued political instability in Egypt, Iraq and Syria, the channel’s major stakeholders are optimistic about the next 12 months in the MENA region.
Many channel players found 2013 something of a rollercoaster, with dwindling hardware margins and regional political difficulties helping to give the year a stop-start feel and making it difficult for resellers to plan for the longer term with confidence.
Despite this, the advance of new technologies, a business community that has become increasingly consumerised in its use and expectations of devices and apps, and the impact of cloud and virtualisation on corporate computing models, are leading most commentators to predict steadier conditions and greater investment in innovative IT strategies across the public and private sectors for 2014.
“Comparatively, the year 2013 has been tough for the channel in terms of the bottom line,” said Shailendra Rughwani, CEO at Experts Computer, a Dubai-based solution provider company. “We saw a lot of pressure on margins even though the top line grew, depending on the focus of each company. Regionally, some countries were either closed for business or were slow. We saw a slowdown in countries like Saudi Arabia due to summer, and then immigration issues. We also saw slowdown in shipments to other Middle East countries mid-year.”
Broadly, however, SMB spend on IT held up throughout the year and resellers who have started responding to global trends such as cloud, big data and BYOD with tailored bundles of services are starting to reap considerable benefits. Understanding fundamental shifts in the market is crucial.
“The UAE has seen a marked growth in the SMB/SME sector,” said Ali Baghdadi, president of Ingram Micro – Middle East, Africa and Turkey. “Dubai in particular displayed growth emanating from many new start-ups and expanding businesses. Some free zones like TECOM can no longer accommodate new companies.
“Saudi Arabia continued its solid growth mainly due to the government’s investment in the public sector, education and infrastructure.
“The highest growth we have seen from the channel is from partners specialising in storage, virtualisation and unified communications. Smart handhelds and mobility solutions also drove growth but with the constant decline in ASPs, some partners have been caught with devalued inventories.”
While there is widespread agreement that UAE and Saudi Arabia will continue to spearhead channel success in 2014, other countries are stirring with considerable promise.
Ashish Bharti, president, Redington Gulf- Volume Division, said the channel outlook for 2014 seems different for each country in the region. Bharti said while stability has returned in some markets of the South Gulf region such as UAE, the scenario is opposite in Egypt where the market is still volatile.
“Iraq and Afghanistan will keep up with the growth,” said Boby Joseph, CEO of StorIT Distribution. “The political changes in some countries will play an important role in the coming year where they will boost business and customer confidence.
“Substantial growth will be seen in regions where factors such as political uncertainty and erratic infrastructure are not that significant. Levant – Jordan and Lebanon – will continue to be under pressure as long as the political situation and conditions in Syria continue. Other regions are more likely to grow and open up. Business in Iraq and Afghanistan will also grow exponentially in the coming year, making up for the loss in other countries.”
Saudi Arabia’s growth is strongly driven by the telecom sector, which is leading investment, according to Stephan Berner, managing director at security specialist Help AG. Government spending in UAE, including Sheikh Mohammad’s Smart City vision, will drive investment in high-performance network infrastructure.
“Aside from the enterprise IT spending, the MENA region has also seen significant growth in the device segment – smartphones, tablets and traditional PCs,” he said. “Gartner has in fact predicted a 64% increase in the region’s spending on mobile phones between 2013 and 2016.
“Smart consumers not only drive the retail segment – that much is obvious – but also affect enterprise decisions as organisations are forced to evaluate cloud services and BYOD offerings to support the influx of personal devices. Not only this, but networking vendors and channel partners focusing on network solutions and services have also seen steady growth in business owing to the need for greater bandwidth.”
One of the main reasons for optimism, said Sudarsan Chakravarthy, operations executive at Gulf Business Machines, is the increasing focus by Gulf countries on the non-oil GDP of their economies. This will bring greater reliance on IT to enable and support growth.
“While the overall IT market is poised for growth, it is expected to come from non-traditional areas,” he said. “This is where innovation and the ability to adapt will matter for Middle East channel players. “The Gulf is predominantly an SMB market, where small and medium sized companies play a major role, and this will increasingly be the case in the future.”
However, 2014 will also bring new challenges in the shape of emerging business and licensing trends which will shift many resellers away from traditional margin-delivering models. SaaS and business process as a service are already having an effect on this front.
Ramkumar B, senior VP, Redington Gulf – Value Division, said pay per use models driven by vendors pushing cloud adoption will become more prominent. He said service delivery on cloud platforms by channel is a new opportunity for those willing to invest. “Logistics will focus more on quality rather than quantity as cloud adoption increases. Out of the box solutions will become the order of the day,” he said. “In terms of finance, credit has always been an issue with the channel, this won’t change drastically and will continue to be managed.”
Ramkumar said enterprise IT is being redefined with the advent of mobility and cloud technology which leaves a lot of scope for innovation in order to realise the full potential of these technologies. “This will also create a big opportunity for security as a service and an opportunity for applications built for big data analytics, cloud and mobility. The channel needs to relook into their existing business process and find ways to make sure that they are able to integrate BYOD and cloud services into their portfolio,” he said.
Ramkumar pointed out that technical skills to manage these services will be required and hence the channel has to be more aligned with VADs and vendors to make sure their businesses are aligned with the requirements of today’s enterprise. “Margin offering is high in areas where there is distinction or customisation and low where there is commoditisation as in the case for most IT products,” he said.
“Pure technology or pure cloud provision have seen great pressure on margins,” said Dan Smith, head of integrated marketing for the Middle East and Africa region of Xerox’s developing market operations.
“Adding value to either can increase margins and increase the stickiness of offerings. Managed Print Services are an example in printing where pure technology provision is open to intense market competition yet the provision of a service can be long-term and have great value. Channels should look for opportunities to become deeply embedded with customer organisations, and margins will follow for good service provision.”
The consumerisation of IT is also reviving margin prospects in specific product areas such as printers, with retail playing a stronger role in sales. At Brother International, senior marketing manager Jai Shankar, said growth has prompted retailers to open new outlets and the company extending its partner base from 14 to 18 during 2013.
“GCC countries remain the most stable in the region and, given the coming move to adopt a single form of currency, the business segment is expected to experience more positive results like easier trading and healthier competition among businesses as currency variations will vanish,” he said.
“We are now seeing major shifts in terms of the consumerisation of corporate IT and this is all happening through the channel.
Generally, though, services will increasingly determine the channel’s fortunes in the coming year across the MENA region.
At Experts Computer, Rughwani said his company would be telling Dubai Computer Group (DCG) members to focus on solutions selling and keeping up to date with the latest devices, with Expo 2020 an important target on the distant horizon.
“With the upsurge of tablets, there has been some slowdown in the PC hardware sector, but we expect it to pick up in 2014 as Microsoft looks at launching new mobility products to support Windows 8, following its takeover of Nokia,” he said.
“The margins are in new products and solutions. As regular products are now sold by every store and the margins are totally low on hardware sales, it is better to focus on new products and solutions to make margins.”
‘Killer Services’ in 2014
While the market across the region is greedy for new devices and services, the proliferation of new technology – including cloud-based services – can be random and confusing. The channel has a key role to play in consolidating trends and helping customers to make business sense of these new models – particularly in specific areas such as security.
“In the enterprise security space, the challenge still faced in the region is that much of the new investment is happening without proper guidance,” said Stephan Berner, managing director at Help AG.
“While budgets are now being allocated solely to security purposes, organisations simply do not know what they need to buy.
“This is why I believe that one of the most demanded services in the security domain will be penetration testing and vulnerability assessment. These help uncover potential security loopholes. Once these have been discovered, investments can be made that deliver holistic protection against cyber-attacks.
“This is a service that we are seeing a lot of regional interest in. It is also something that we are very optimistic about since it is easier for us to compete based on our services and also, the revenues are better than for simply pushing boxes.”
Berner also said that application development for enterprise mobile applications will be an area for the channel to watch.
“The market is crying out for solutions and is full of opportunities,” said Ingram Micro’s Ali Baghdadi. “While parts of the GCC may be leading growth in absolute numbers, many other countries are ready to upgrade their IT infrastructure.
“Some stability in countries like Egypt, Iraq and Libya will trigger opportunities here. Some new models relying on remote delivery via cloud may develop rapidly to access these markets remotely,” saidBaghdadi. “Top notchsolutions rather than apps are the drivers going forward. With smart devices estimated to grow by 39% in 2014, supporting solutions and apps will make their mark. Watch out for the Internet of Things and M2M [Mobile to Mobile], too!”
The non-stop rise of BYOD
There’s no doubt that BYOD is a dominant global trend in corporate IT. In tandem with the cloud, it is changing the way many businesses and organisations manage and deploy their IT strategies – and it is creating significant value-add opportunities for the channel on the services front.
“There will be trends that continue for the short term or ‘by consumption’ offerings,” said Dan Smith at Xerox. “For instance, the opportunity to increase server capacity through cloud offerings, on demand, when required, rather than needing high levels of redundancy built into actual hardware.
“Another example is reflected in BYOD strategies deployed across matrix organisations. Users are choosing their device, their configuration and their place and method of work. IT strategies must reflect this demand while protecting IP, network integrity and security risks. The future is bright for those channel players who can advise and provide, both in planning and delivery.”
Boby Joseph, CEO of StorIT Distribution, said the channel needs to have complete BYOD offerings in place – and be ready to work with enterprises to deliver them to a hungry community of end-users.
“To take advantage of the cloud services, the immediate thing which will come into play is the hybrid model, where part of the legacy system runs on premise and part of the system goes onto the cloud,” he said.
“For this, the channel will have to provide customers with services and product integration. So hybrid services are most likely to be fully adopted first and the channel will need to be equipped with the skills to sell them.”

A Steadier 2014 - Help AG: Next-Gen Cybersecurity Services in the Middle East
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