The 2017 Power List research is designed to provide a more inclusive analysis of the Middle East and North Africa (MENA) largest IT distribution players.
This year, the profile of the companies featuring in this all
important research reveals that most of the distributors with an exception for
a few companies dropped their revenue.
Could this be an indication that the regional IT sector is still struggling?
Although the PC sector has continued to witness poor sales for the past 10 consecutive quarters, most PC vendors have been innovating their products and solutions offerings to the market. Demand for tablets seemed to have slowed down in 2016 while large screen smartphones [phablets] have continued to see growth making distributors to not only pay attention to the smartphone segment, but many have gotten involved by distributing some of the top selling large screen smartphones.
Despite the dip in PC sales, other sectors of IT like networking, storage, security, servers, managed services, professional services, analytics, big data and hyperconverged infrastructure have continued to witness growth led by most companies wanting to adopt cloud-based IT models.
Distributors have continued to look at ways of improving their bottom line by complementing their hardware, software and services business with value-led businesses that help them to provide guidance to resellers. Overall, the market in MENA is still tight as the conditions on the ground that led to the challenges that partners are experiencing have not completely been wiped out. Reduced credit insurance cover, prolonged sales cycles, lack of liquidity in the MENA IT and a squeeze in margins are some of the challenges that distributors and their reseller partners have had to deal with.
Interestingly, IT distributors in MENA are well aware that it will take longer for the regional IT market to experience the sort of growth highs it enjoyed at its peak prior to the 2008 global financial meltdown crisis.
As is common place with the survey, every distributor featured in the 2017 Power List has been approached by the editorial staff of Channel Middle East magazine, to open their financial accounts and give us their audited revenue figures for the past financial year, in this instance for FY2016. As was the case in 2016, the Power List 2017 features final audited accounts which all the distributors shared with us.
The companies featured collectively made sales of over $6.5bn last year. This is a significant achievement given the challenges facing the Middle East IT market. This year, it's worth noting that Ingram Micro's Aptec, which has featured in this research for many years is again absent after it was acquired by Ingram Micro five years ago.
As a listed entity, Aptec is bound by stock exchange regulations to report a consolidated global sales figure and as a result, they cannot participate in this survey. Distributors that have exited the market since the last research was done in June 2016 include Global Distribution FZE, and Prologix. Other absentees from this year's survey include: Jumbo IT Distribution, DESPEC Mera FZE, Mindware FZ LLC, Logicom Group Middle East, BDL Group, Metra Computer Group and Golden Systems Middle East, which miss out for this year's research because their audited financials will not be ready in time to make it into this edition of the magazine.
So why have some distributors increased their revenues while others saw theirs sales drop?
Although business models vary, one thing that resonated for the
most part of 2016 is the continued credit squeeze and lack of insurance cover
on deals that are funded through credit schemes, with the knock on effects felt
throughout other sectors of the IT industry.
It's worth pointing out that distributors with franchises to sell fast moving finished goods from most tier brands unavoidably tend to be in the lead in reporting huge sales numbers due to the volumes associated with this kind of business. However, it's important not to draw too many conclusions from this because those distributors that have value-focused offerings appear to serve fewer accounts but don't necessarily have a weaker customer base.
They tend to work with VARs, systems integrators, managed service providers, ISPs and solution providers for repeat business or generate a high proportion of business from managed and professional services.
Surprisingly, all the distributors featured in this year's Power List have indicated that value-based selling is critical for their progression going forward. We would like to underscore that revenue is just one indicator of performance and certainly doesn't suggest that a distributor with a higher sales revenue figure than another is "better" in any way. After all, the Power List generally excludes many prominent value-focused distributors because the very nature of their business means they simply don't do the volumes that meet the benchmark needed to warrant a place in the survey.
All those that made the Power List 2017, did more than $100m in revenue in FY2016, so any possible participants need to make this threshold at least. We believe that it is imperative that all data published in these pages is substantiated to the best of our ability.
We hope the measures outlined above will contribute towards building a more accurate and transparent IT distribution picture in the Middle East and North Africa, and create a level playing field for each distributor included in the survey.