The next chapter [ITP.net (United Arab Emirates)]
(ITP.net (United Arab Emirates) Via Acquire Media NewsEdge) With IT distributors seeking to roll out best practices, efficiencies and effectiveness across their supply chain, how can they increase their competitiveness and relevance to channel partners.
These are interesting times for IT distributors in the Middle East. They remain the lifeblood of the industry, but their role is evolving and the most successful are placing greater emphasis on achieving greater efficiency by implementing best practices across the different operations in their supply chain.
Some of these shifts are being driven by the strategy of global vendors, who are increasingly focused on the SMB sector in the region. Others are heavily influenced by the rise of new business models – not least cloud-based computing – which are changing the way organisations buy IT products and services, and forcing distributors to re-evaluate the ways in which they can retain and boost their competitive edge, and remain relevant to the IT supply chain.
"The role of distributors in the Middle East region has continued to evolve over the last 12-18 months," said Renjan George, managing partner at Dubai-based VoIP telephony and networking solutions provider DVCOM Technology.
"Value addition, after-sales services and training, has started to take even stronger precedence over box shifting, which has prompted regional distributors to continuously invest and position themselves as solutions providers.
"The logistical, economical and even political climate changes in the region have affected the complete operational infrastructure of technology distribution. This has not only changed the relationship between the distributor and its channel partners, but also the relationship with the vendors it represents. Education and preparation have become key. Vendors need to understand the eco-political climate and they will continue to depend on distributors to provide them with this intelligence."
As Meera Kaul, managing director of Optimus Technology & Telecommunications, pointed out, regional distributors have little control over these issues. But they need to react by creating buffers within their own eco-systems, and supplement deals with other products and financial models.
"Most distributors are working with vendors to streamline production and supply chain cycles based on better managing channel product forecasting, cash flow and logistics," she said. "However, the process is not complete without the deployment of better business planning and forecasting by resellers and customers. The effectiveness of supply chain management and the production process starts with efficient forecasting."
But this shift is not without its own complications – not least because any shift from a product to a service and training focus is bound to make overall operational processes more complex, and change project timelines and lifecycles. And distributors must address these complexities in-house.
Shane Mahney, general manager at regional value-add distributor (VAD) EMT Distribution, said there is no doubt that business has been challenging for IT distributors in the region. Mahney said consequently, a few companies have had to shut-down their operations in the region. "It is very important for VADs to insure all their accounts to minimise the risk, said Mahney.
"Recruiting specialists in each domain from stock and cash flow management, working more closely with vendors and channel partners, and having a bird's-eye view of market trends are essential to succeed and survive," said George.
At StorIT Distribution, group managing director Suren Vedantham described how his business has used some of these techniques to weather the global financial storm and capitalise on regional recovery.
"The last two years have been testimony to our strong fundamentals in value distribution, which helped us come out of the economic downturn in the shortest possible turn-around time, and also continue our double-digit growth rate year on year," he said.
"Building on our strengths in our core domain expertise, identifying new opportunities arising out of the evolving industry landscape, setting new challenges and achieving them makes our space as exciting now as it was when we started operations in the region.
"Owing to the market dynamics which are different to the rest of the world, and of course some very prudent measures taken by regional governments, the Gulf has been rather quick to recover from the global economic downturn, compared to other developing markets.
"In fact we have seen exciting opportunities for business created as a result of massive government investments in the areas of education, healthcare, and oil and gas. We have been swift to realise these positive trends and align ourselves with the growth opportunities."
At another regional distributor Asbis Middle East, Hesham Tantawi, vice president, said the market conditions in the region have improved slightly although the volume distribution side is witnessing a sharp decline in PC sales and this has affected most distributors and resellers in the components space.
Tantawi said what Asbis has been doing for the past 10 years is to reduce its dependence on components business. "We have invested quite heavily in diversifying our business and are continuing to develop our mobile solutions business around the Prestigio brand," Tantawi added. "Our goal is to make Asbis the one-stop-shop for tablets and smartphones in the Middle East region. With the investments and foundations we have laid, we truly believe that our diversification has cushioned the company in times of challenging business conditions."
Distributors are widely in agreement that stock management, logistics handling, product forecasting and cash flow management remain the cornerstones of a successful business development strategy – not least because they are also the make-or-break elements of sustaining top-quality customer service. Beyond that, there is increased emphasis on streamlining and developing best practice.
EMT's Mahney said this part of the distribution is getting constant consideration all the time. "We work closely with resellers and vendors to be able to prepare accurate forecasts and future pipelines to better control inventory levels," he said. "This is only applicable for hardware products, where as in software we have more flexibility and control."
"The greatest focus for distributors has been on offering comprehensive, 360-degree solutions," said George. "Evolution and investment in the areas of solutions education and after-sales processes are also being focused on, and that must continue.
"As distributors are the bridge between the vendors and resellers/channel partners, it is very important for them to understand their role and work closely with both parties to keep them educated in developments on either side. Equally, they need to ensure that partners are properly trained, enabling them to acquire the requisite skills to identify a customer's challenge – and scope, design and implement a solution."
Mahney said there is a greater emphasis on business process among distributors now especially in areas like IT security, virtualisation and cloud computing. "The emphasis is on value and without value-adding, VADs can't survive for long time and will not be successful," said Mahney.
Optimus's Kaul said the whole supply chain needs to work more efficiently and make better use of forecasting techniques.
"Using predictive analysis and improving data points to ensure better forecasting are key to streamlining the supply chain on the production side," she said. "The entire channel should realise that information accuracy and analysis are key to ensuring better margins and efficiencies for everyone in the ecosystem.
"No support process is complete without a value-added focus. To ensure better forecasting techniques, historical data must be analysed using the business intelligence (BI) tools available in the market – and this must be tempered with current data. The growth of efficiencies starts with the alignment of the entire channel with best practice in product positioning and the supply chain process."
Making yourself relevant to channel partners and vendors, particularly in terms of their success, is vital if you want to thrive as a distributor in such a competitive landscape. This is particularly important for specialist players.
"As long as we are able to maintain our superior domain expertise while we innovate and adapt to evolving market and industry opportunities, we will continue to be the leading specialised value-added distribution company in the Middle East region," said StorIT's Vedantham.
"The only thing that can set a distributor apart is playing the role of an educator and a service provider," agreed George. "Financial and time investments are required in these landscapes, and this will help regional distributors to strengthen their position as an irreplaceable link in the chain. Any distribution strategy should also include the development of reseller skill sets that support project-based business."
George said new business opportunities will depend on distributors adding width to their product and service offering with a greater emphasis on strategic process implementation and operation management. To that end, he said: "You will see lots of distributors going in search of green-field markets in other regions."
More generally, according to Meera Kaul, distributors should move away from their traditional role as technology conduits, and assume a more dynamic and innovative role as 'technology proliferators'.
"Innovation requires a remarkable infrastructure talent pool – and entrepreneurial support," she said. "To grow this ecosystem inn our regional markets will require a very evolutionary mind set, not only within the channel but also with the support of those who lead channel development and sustenance."
In other words, vendors must also play a part in nurturing and influencing these developing trends. And this will be an important factor in growing the SMB markets where both vendors and distributors have set their sights.
"New technologies will enter the regional channel ecosystem, and these will require regional channel partners to acquire skill sets that they do not possess. This will spur growth in training, certification and implementation skills.
"A further growth in mobility will also lead to a huge impetus on custom mobile development in the region, and the channel will have to change its mind set to accommodate regional application players as it looks to monetise these opportunities."
Changing role of distribution
With the role of IT distributors constantly evolving, efficient stock management, logistics handling, product forecasting and cash flow management can determine success from failure.
"The role of distribution has became crucial in the past 12 months, because distributors are not only expected to fulfil their main functions of value addition, logistics, credit terms, stock management etc, but are also expected to be more flexible in how they engage with their partners due to stiff competition," said Shane Mahney, general manager at EMT Distribution.
Mahney said EMT always takes time to discuss with resellers the individual requirements on a project-by-project basis. "That way we ensure we get an understanding and recommend the integration of other solutions that we are offering," he said.
Renjan George, managing partner at DVCOM Technology agreed and said: "Financial and time investments are required in these landscapes, and this will help distributors strengthen their position as an irreplaceable link in the supply chain. Any distribution strategy should also include the development of reseller skill sets that support project-based business."
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