Sunday, July 30, 2006

Channel breadth

The enterprise customer segment is now a known entity in the Middle East for networking vendors. Always on the lookout for incremental sales, it was inevitable that vendors would start to look further down the customer pyramid. The SMB market is now a vendor battleground and channel strategy is playing a pivotal role.

Make no mistake about it, competition between networking vendors in the small and medium business (SMB) space in the Middle East is fierce. Consumer-focused vendors are looking up to the SMB opportunity and simultaneously enterprise vendors are developing stripped-down offerings to push into this growth market. Major names such as Buffalo, 3Com, Linksys, US Robotics, Netgear and Cisco are queuing up to stake their claim to the SMB throne and persuade Middle East partners that they have the solutions that SMBs want as they rush to develop connected organisations.

For Cisco, which has launched an innovative SMB select partner programme, the channel is an integral part of its regional go-to-market strategy. “We are addressing the needs of SMBs across the emerging markets theatre and the role of partners is critical,” explained Milo Schacher, senior director, commercial business, global emerging markets at Cisco. “Today, we see many SMB customers using the advanced infrastructure that large enterprises are also using.”

“Our go-to-market strategy in the SMB space is clearly through partners. We need that channel capacity and we want them to develop an understanding of the technology and also vertical expertise,” he added. Hand-in-hand with its channel development efforts, Cisco is also looking to ease the purchasing process for SMBs in the Middle East. The networking giant’s SMB leasing programme, which has already been deployed in more developed markets around the world, is now set for launch in Saudi Arabia — a market where Cisco has committed significant investment to develop its presence.

While Cisco pushes down into the SMB space, Linksys — a business unit within Cisco — pushes up, highlighting the strength of the vendor’s total product portfolio and laying down the gauntlet to rivals who seem more than happy to accept the challenge.

“The SMB sector is more than 50% of 3Com’s total business in the Middle East,” said Amanulla Khan, regional channel manager at 3Com. “We grew this side of the business 65% in the last year and that means we now have much bigger installed base in the region. At the same time we are increasing our SMB resources and will soon have a dedicated person in Saudi Arabia focused on this market.”

3Com already has some 700 resellers across the region pushing its SMB solutions to market and is constantly evaluating the potential to develop mew channels. In addition to its current value-added and volume resellers, 3Com is making a powerful play to develop its service provider (SP) channel in the region. Buoyed by its success with SPs in Egypt, Khan believes this will emerge as a major channel for the deployment of SMB networking solutions.

Sumit Kumar, regional sales manager at US Robotics
New routes-to-market
“We are putting a great deal of investment into the SP sector and I think every vendor is looking at this market,” added Khan. “We think this will change the SMB buying landscape. It has happened in the US, is happening in Europe and will inevitably happen in the Middle East as well.”

3Com is not the only vendor looking closely at the service provider channel. US Robotics is also working hard to develop relationships with telecoms companies that have the potential to also sell networking kit to their SMB customers.

Talking to major vendors in the networking arena, it is clear that their definition of what constitutes an SMB customer varies wildly. For some, it is based on the number of employees while for others it is a revenue call. At the same time some vendors refuse to enforce a strict classification, preferring instead to assess each customer’s individual needs on a case-by-case basis.

In terms of channel building, most vendors prefer not to adopt a scattergun approach based on the sheer number of resellers but instead concentrate on building coverage through a deliberate and well thought out business model.

“We focus on the quality rather than the quantity,” explained Sumit Kumar, regional sales manager at US Robotics. “I don’t believe that having more and more partners is a win-win situation in the long run as issues of price wars and price cutting can emerge.”

“We have approximately 70 authorised partners categorised into platinum, gold and silver status,” he added. “Apart from that we have VAR partners who concentrate more on the corporate and project business and provide complete solutions to the end-user.”

Networking vendors realise that the sheer number of SMB customers that exist in the Middle East means that the channel is the only viable route-to-market for them to embrace. Making their partner programmes stand out from the competition in order to create channel loyalty is an ongoing effort for many.

“Our programmes offer many benefits to the channel partners,” commented Claire Jones, SMB regional sales manager at Cisco. “I would say that the most unique benefits are the leads that the Cisco regional call centre can generate. Passing on qualified leads to the channel is considered to be a major benefit.”

“There are many vendors that are targeting the SMB space, making smart and effective vendor-led or vendor-supported partner programmes extremely important to the reseller,” she added. “Resellers tend to work closely and more devotedly with vendors that recognise the opportunity within the SMB segment if they feel secure that they will receive the vendor back-up.”

Milo Schacher, senior director, commercial business, global emerging markets at Cisco
Choose wisely
The number of channels that can be used to reach SMB customers means that many vendors are performing a balancing act as they try to open up new routes-to-market but keep channel conflict and overlap between partners at a reasonable level. For 3Com, even the retail channel is a viable route-to-market for the low end of the SMB space.

“We have made reasonable progress with the power retailers in the region in terms of our wireless products,” said Khan. “We are also in discussions with a couple of distributors that are retail-focused and hope to make an announcement soon. It is important that these partners are in-country and can really support the retailers on the ground.”

While the retail channel can be used to sell certain products to tech-savvy businesses at the lower end of the SMB customer pyramid, networking vendors are also starting to understand the importance of building channels that can deliver a complete solution and engage with end-users as trusted advisors as opposed to purely pursuing one-off transactions.

“Cisco has worked to develop the smart business communications architecture that allows users to scale up easily from 10 users without the need for a forklift upgrade,” added Schacher. “We are also looking at partnerships with vendors such as Microsoft to link network architecture into the applications.”

The potential for growth in the SMB networking channel is clear for all to see. “The small office home office segment is the fastest growing sector for the connectivity business in the Middle East,” said Kumar. “We are experiencing the growth all over the region, especially in the UAE, Kuwait, Saudi Arabia and Bahrain.”

Jones at Cisco continued: “Mobility, network security, broadband connectivity, remote access technology and IP telephony are all seen by SMBs across EMEA as key ‘must have’ technologies. These help address the key business challenges they face, which include competition, finance and new market identification and development.”

Resellers in the Middle East have a wide choice of vendors to work with in the SMB networking arena. While the brand equity of the vendor they choose is important, resellers also need to look at the levels of channel competition that exist and the margin potential of the products and solutions that they carry. Their main focus should always be on the needs of their customers. Having selected a vendor partner, they should make the most of the channel programmes on offer.



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