Serving the GCC market
In spite of the uncertainty about the regional economy and continued instabilities in some countries in the broader Middle East, the GCC has continued to roll out ambitious IT and infrastructure projects and continues to attract technology investments from channel stakeholders.
Despite the market challenges, there is a positive atmosphere prevalent in the GCC market. IT business models have continued to evolve in this regional bloc, in terms of utilisation, consumption and services.
However, optimism alone is not enough especially now that the world is so interconnected and a problem in one region or market could have repercussions in another.
For the GCC IT market, global events such as the Dubai 2020 Expo are no longer marks on the horizon. In addition, Saudi Arabia’s Vision 2030 and how the Kingdom is aspiring to establish a society of IT experts by enlisting the help from US technology giants and start-ups all points to the GCC being primed for huge infrastructure projects that will create major opportunities for resellers serving the IT market.
According to analyst and research firm IDC, annual spending on digital transformation (DX) initiatives in the Middle East, Turkey, and Africa (META) market is set to top $38bn by 2021.
And with technology investments relating to smart city initiatives across the Middle East and Africa (MEA) region estimated to total more than $1.3bn in 2018, according to IDC, the GCC market is set for more growth given that spending by the five cities that are currently sized in IDC’s database for MEA (Dubai, Riyadh, Tel Aviv, Istanbul and Cape Town) accounts for around half of the region’s overall smart city spending, with Dubai and Riyadh leading the way in terms of 2018 investments.
Sakkeer Hussain, director - Sales and Marketing, D-Link MEA, said the GCC has continued to show maturity in the IT market even though spending has slowed down largely due to the drop in crude oil prices. That said, Hussain pointed out that the UAE leads in terms of the number of projects being rolled out, IT spending and business in general following by the other smaller GCC markets. “For us, Saudi Arabia is by far the biggest market in the GCC but doing business in the Kingdom is not easy especially now that the country is moving away from its dependence on oil revenue,” he said. However, Hussain added that the SMB segment is doing well in Saudi Arabia for D-Link and its channel partners and the company has seen that with the tailored SMB networking offerings in the Gulf state.
Shailendra Rughwani, chairman, Experts Computer Group, said 2018 has been challenging so far even though the year started on a positive note and the first quarter was looking better but after that there was a dip in sales and business activity. Rughwani said this was mainly due to business in the neighbouring GCC countries being slow. “Business in Saudi Arabia was slow which affected export sales,” he said. “Other markets in the Middle East have been slow due to different political instability which has gone on for quite some time and this has impacted the overall exports sales from Dubai.”
He said adding to the political instability, currency fluctuations in North African countries and the commencement of sanctions in Iran have also been detrimental to the Dubai IT exports business.
Mario Gay, general manager, Nuvias MEA, agreed with Rughwani on business being slow in the GCC and said the market has undoubtedly been flat for the SMB sector, which is way behind in investing and adopting new technologies. Gay said what this means is that a large number of small to medium size resellers have seen their revenues under severe pressure. He added that on the other hand, large systems integrators have continued to progress and consolidate their position within large enterprise accounts.
At New Trend Computer Networks LLC, a Dubai-based systems integrator that specialises in networking infrastructure and solutions, CEO Ashok Kumar, said the GCC is one of the best regions compared to other channel markets globally because of the many opportunities that are found in the regional bloc. That said, Kumar pointed out that 2018 has been a different kind of roller coaster with many unpredictable changes and business models. “With much more focus on solutions, there has been drastic change from selling boxes to solutions and this year has been a year of transformation,” he said. “We are going through a somewhat successful 2018 with our key focus on the SMB market.”
Kumar said UAE and Kuwait are the two countries where New Trend is seeing a lot of positive prospects ahead with mainly Expo 2020 coming up creating more opportunities in areas such as hospitality, networking infrastructure, and IT upgrades in the retail sector. “Our main focus is on networking which is our strength and wireless is one sector which looks set to grow in an unprecedented way,” he said.
He pointed out that compared to the first half of financial year 2017, New Trend has seen 130% growth for financial 2018 over the same period. “With our strategic partnership with Cisco-Link and UniFi, we are working on multiple hospitality and retail projects,” he said.
With countries in the GCC at various stages of their smart city projects and digital transformation initiatives, solution providers are being urged to look for and develop markets that will prove the strongest in terms of technological influences and growth prospects.
Gay said the vast majority of business has always been in the UAE and Saudi Arabia in the wider GCC market. “This has been even truer in the last 18 months,” he noted. “However, despite some political challenges in the region, I believe that we will have positive surprises coming out of Egypt. Political stability, connected to several others macro-economic factors, may well result in potential growth.
He said if one looks back at history, Dubai has always acted as a hub and cradle for new technology adoption in the region. Gay pointed out that the “Smart Dubai Paperless Strategy” and “Dubai Blockchain Strategy” are drivers for innovation in large enterprises and government organisations, but at the same time are shaping the entire ecosystem, with the need to invest in new and emerging technologies.
“SMBs will have to continue to spend if they do not want to stay marginalised. Additionally, the need to adopt digital transformation, in line with Dubai’s vision for 2020, will further drive business needs in the GCC,” Gay said.
D-Links’ Hussain agreed with Gay on Dubai being the technology hub and added that by far, the UAE and Saudi Arabia have continued to be resilient markets for a lot of technologies including networking infrastructure and solutions.
He explained that some of the main influencers for technology spending are the smart city initiatives that are being implemented in the two biggest IT markets in the GCC and have spread to other smaller markets like Oman, Kuwait and Bahrain. “Channel partners serving the UAE and Saudi Arabia channel have an opportunity to benefit from the many technologies like artificial intelligence (AI), blockchain, machine learning, robotic process automation and cloud solutions being rolled out in the two markets,” he said. “In addition, the Expo 2020 will open up a lot of partner opportunities. I believe that all channel stakeholders (vendors, distributors and resellers) need to be upbeat about business prospects in the GCC market because of the many government, public and private sector projects being implemented.”
Hussain observed that despite a slowdown in IT spending and some projects being shelved, there are some good initiatives in these countries as governments lead with smart city projects. “From a D-Link standpoint, we are also seeing a lot of opportunities opening up for us and our channel partners in North Africa as the telecoms segment opens up because of deregulation happening there,” he said.
With channel partners looking at different ways to adopt new business models as the IT sector in the GCC has evolved in terms of IT usage, IT consumption and services, pundits say it is critical that resellers embrace the change that is happening.
Rughwani said there is a shift happening in the channel where the traditional model of trading is on the decline and a major shift towards different IT services is gaining momentum as hardware focused-resellers look for long term survival. “The decline in hardware margins combined with the lower demand from GCC markets has severely affected the Dubai channel sales.Consolidation and change in strategy is required at present for the Dubai-based IT hardware resellers in order for them to survive and grow in the coming months and years,” he advised.
New Trend’s Kumar added that the GCC countries are marking a turning point in 2018 by overcoming some of the challenges they have faced over the years and are adapting to trends that are reshaping the IT market such as cloud, cyber security and AI. “With IT infrastructure being a necessity and a mandatory investment for businesses, we haven’t seen any investment reduced from the clients we serve,” he said.
While the GCC market has the most attractive prospects than any other market in the MENA geography, serving this regional bloc demands that resellers and solution providers move with time.
Nuvias’ Gay said in the past, having a broadline approach paid off in terms of sales growth, because it was a way of capitalising on all possible opportunities. He said this was true for both distributors and resellers. “Today, the focus is on competencies and specialisations that offer good margins for distributors and resellers. Cloud innovative solutions that operate in a secure and compliant environment with fast implementation will always earn resellers high margins,” he said. “CEOs will no longer have the patience to wait two years for an ERP or CRM implementation. And then it doesn’t work properly. These are the realities happening and channel partners should take heed if they are to succeed in serving and developing long term businesses in the GCC.”