CHANNEL OUTLOOK 2019
In spite of the uncertainty about the Middle East business climate in some parts in the region, channel stakeholders remain optimistic about what the next 12 months will bring to their businesses.
While the overall business climate in the Middle East and North Africa (MENA) channel remained sluggish for most of last 12 months, industry experts are optimistic that 2019 will see business improve despite lingering uncertainty especially in the mobile and PC segment, where sales of handheld devices, and desktops have continued to dip.
Analyst IDC, has said vendor revenue in the worldwide server market increased 37.7%, year over year to $23.4bn during the third quarter of 2018.
Citing the Worldwide Quarterly Server Tracker, IDC said global server shipments increased 18.3% year over year to 3.2 million units in Q3, 2018.
According to IDC, the overall server market continues to experience robust demand with Q3, 2018 marking the fifth consecutive quarter of double-digit revenue growth and its highest total revenue in a single quarter ever.
The analyst firm said volume server revenue increased by 40.2% to $20.0bn, while midrange server revenue grew 39.4% to $2.0bn. High-end systems grew 6.9% to $1.3bn.
“The worldwide server market once again generated strong revenue and unit shipment growth due to an ongoing enterprise refresh cycle and continued demand from cloud service providers,” said Sebastian Lagana, research manager, Infrastructure Platforms and Technologies at IDC. “Enterprise infrastructure requirements from resource intensive next-generation applications support increasingly rich configurations, ensuring average selling prices (ASPs) remain elevated against the year ago quarter. At the same time, hyper scalers continue to upgrade and expand their data centre capabilities.”
Among the original equipment manufacturers (OEMs) Dell Inc achieved the number one position in the worldwide server market in Q3, 2018 with 17.5% revenue share and 33.3% growth. HPE/New H3C Group was the second largest supplier with 16.3% share of total vendor revenue, growing 14.8%. Inspur/Inspur Power Systems took third position in the market with a
share of 7.3% while the new joint venture contributed to 156.5% growth year over year. Lenovo was fourth with a share of 6.2% on 67.0% growth. IBM, Huawei, and Cisco rounded out the top five, all statistically tied with vendor revenue shares of 5.1%, 4.5%, and 4.5% respectively.
IDC noted that the ODM Direct group of vendors increased its collective revenue by 51.9% year over year to nearly $6.3bn. Dell Inc led the worldwide server market in terms of unit shipments, accounting for 17.6% of all units shipped during the quarter.
Despite this, the spread of new emerging technologies and the momentum around artificial intelligence (AI), industry pundits still have mixed feelings about what 2019 will bring to the regional channel.
In fact, most commentators are forecasting an unpredictable IT future where business will be lean and not every channel player will gain from the business opportunities that will emerge this year.
Partners that will benefit are those that are already playing in the IT services, cloud services, managed services and solutions space.
Karim Refas, regional channel manager, Eaton Middle East, said: “One key challenge for channel partners in 2019 in the MENA market will be maintaining their focus on organisational goals without being distracted by major macro-economic trends or events, such as tariffs, political instability and crude oil prices.
Refas added that this is especially important as uncertainty and a lack of vision are quick routes to immobilising an organisation. “In a year when many companies are hoping to do business early given a potentially tough second half to the year once the UK has left the EU, those paralysed by doubt will struggle,” he said. “Organisational capabilities and supplier-customer relationships may be tested during the implementations of tariffs and fluctuation in crude oil prices.” He said channel partners will be required to manage tariff fluctuations as well as navigate around tighter borders. “Channel organisations must proactively prepare for these eventualities to avoid being paralysed by uncertainty in a year of major change,” he said.
Dave Russell, vice president, Product Strategy at Veeam, said in early 2019 the IT industry in the region will witness the first 5G-enabled handsets hitting the market at CES in the USA and Mobile World Congress in Barcelona. “I believe 5G will likely be most quickly adopted by businesses for machine-to-machine communication
Channel organisations will need to consider different incentives to attract millennials, from training and revenue generation rewards to implementing new technologies and clear processes that can be agile to change. In this way, they can make their companies more appealing to millennial talent and set themselves up for a successful 2019 and beyond.
KARIM REFAS, REGIONAL CHANNEL MANAGER, EATON MIDDLE EAST
and Internet of Things (IoT) technology,” he remarked.
According to Russell, 2019 will be more about the technology becoming fully standardised and tested, and future-proofing devices to ensure they can work with the technology when it becomes more widely available, and EMEA becomes a truly Gigabit society.
He explained that for resellers and cloud service providers, excitement will centre on the arrival of new revenue opportunities leveraging 5G or infrastructure to support it. “Processing these higher volumes of data in real-time, at a faster speed, new hardware and device requirements, and new applications for managing data will all present opportunities
In early 2019 the IT industry in the region will witness the first 5G-enabled handsets hitting the market at CES in the USA and Mobile World Congress in Barcelona. I believe 5G will likely be most quickly adopted by businesses for machine-to-machine communication and Internet of Things (IoT) technology.
DAVE RUSSELL, VICE PRESIDENT, PRODUCT STRATEGY, VEEAM
and will help facilitate conversations around edge computing,” he pointed out.
As channel partners are being urged to evolve their businesses in the region to adapt to the ever changing IT landscape, where should they be focusing on?
“Large companies are growing through acquisition and exploring new geographies as a result of globalisation,” said Eaton’s Refas. He continued and explained that while the way in which organisations navigate this growth might change as global market borders shift in 2019, this trend will continue putting a squeeze on smaller partners. “Companies struggling to keep up in this market will need to find different technologies and strategies to remain relevant,” he said. “Resellers and distributors feeling the impact of
change will be forced to keep finding new, better and quicker ways of doing things in order to help customers do more with less – and in less time.”
He said at the same time, channel partners investing in relationships focused on personalised service and value add are seeing more success – and will continue to reap the rewards throughout 2019 and beyond.
Scott Gibson, group executive, Digital Business Solutions, Dimension Data, said one of the biggest growth areas in 2019 will be
B2B digital trading platforms. Gibson noted that Bill McDermott, CEO at SAP, predicts a world where customers connect directly into your supply chain, and it’s hard not to agree with him. “The advantages, both in terms of customer experience and operational efficiency, are too exciting to ignore,” he enthused. “If your channel partner business can show business clients not just current stock levels but the expected date of replenishment, they will be more confident about ordering from you. If they can give you better data on their future demand, you can optimise your inventory and production accordingly.”
Gibson said future integration will go even further beyond today’s supply chain collaboration linked to ERP, the regional IT channel will see integration with CRM systems featuring artificial intelligence and robotic process automation. “These will allow consumers to reach right back to your supplier’s inventory through their mobile apps. That’s true digital business,” he said.
He observed that many companies in MENA aren’t set up correctly for digital transformation. “Antiquated job functions and processes have resulted in a real lack of flexibility,” he added. “Encouragingly, we are now seeing more companies accepting that to transform successfully, they must first redesign their core business processes around the customer experience and then reorganise the enterprise to align with these digital processes and this is where channel partner can play a role.”
As the regional channel looks to the year ahead, what will be the big technology bets and game changers in 2019 and how should channel partners be preparing?
Eaton’s Refas noted that the current “always on”, digital way of working means that power is a significant requirement for every company – not just technology firms. He said in fact, the electrification of society is rapidly changing power requirements more broadly. “As a result, we have seen an increasing focus on how to store power and use it more efficiently. This year, this trend will continue with more emphasis on moving away from generator-type solutions and taking advantage of the benefits of energy storage and producing innovative products for the region,” he said.
According to Refas, this growing interest in energy sources and becoming more energy efficient provides a strong opportunity for channel partners to emphasise their position as a trusted partner. “They can focus on how they can help businesses navigate this power transformation process so customers can make the most of their energy – reducing costs, cutting down on emissions and future this proofing the business,” he said.
He pointed out that on the partner front, 2019 will see new challenges arise around recruitment in the channel. “In an environment of political uncertainty and low unemployment levels, channel partners will need to continue striking the balance between hiring skilled yet affordable staff. Working out how to access the millennial workforce will be key, but tapping into this talent source can be difficult to navigate,” he said.
Refas reiterated that channel organisations will need to consider different incentives to attract millennials, from training and revenue
If your channel partner business can show business clients not just current stock levels but the expected date of replenishment, they will be more confident about ordering from you. If they can give you better data on their future demand, you can optimise your inventory and production accordingly.
SCOTT GIBSON, GROUP EXECUTIVE, DIGITAL
BUSINESS SOLUTIONS, DIMENSION DATA
2018 was a challenging year and we don’t expect it to get any easier in 2019. Further, Iranian attackers will continue to improve capabilities, even as we see new, less capable groups emerge. Earlier in 2018, Dubai launched the Dubai Cyber Security Strategy, an initiative that aims to help businesses and individuals to create a safe cyber space, making the city’s cyber security experience a global model.
MOHAMMED ABUKHATER, VICE PRESIDENT, FIREEYE MIDDLE EAST & AFRICA
generation rewards to implementing new technologies and clear processes that can be agile to change. “With a key focus in the UAE and Saudi Arabia on Emiritisation and Saudisation respectively, the channel needs to focus on providing training and knowledge to make sure they have an easy transition into the industry,” he said. “In this way, they can make themselves more appealing to millennial talent and set themselves up for a successful 2019 and beyond.”
With companies operating across borders and the reliance on technology growing more prominent than ever, an expansion in multi-cloud usage is almost inevitable. Research firm IDC estimates that customers will spend $554bn on cloud computing and related services in 2021, more than double the level of 2016. IDC stated that on-premises data and applications will not become obsolete, but that the deployment models for data will expand with an increasing mix of on-prem, SaaS, IaaS, managed clouds and private clouds.
Over time, said IDC, the regional IT industry should expect more of the workload to shift offpremises, but this transition will take place over years, and it is important for channel partners to be ready to meet this new reality today.
Russell agreed with the view for partners to be ready and explained that the “versatility” (or generalist) role will increasingly become the new operating model for the majority of IT organisations.
He said while the first two trends were technology-focused, the future of digital is still analogue: it’s people. “Talent shortages combined with new, collapsing on-premises infrastructure, public cloud and SaaS, are leading to broader technicians with background in a wide variety of disciplines, and increasingly a greater business awareness as well,” he said. “Standardisation, orchestration and automation are contributing factors that will accelerate this, as more capable systems allow for administrators to take a more horizontal view rather than a deep specialisation.”
Russel said specialisation for channel partners will of course remain important, but as IT becomes more and more fundamental to business outcomes, it stands to reason that IT talent will likewise need to understand the wider business and add value across many IT domains.
Enterprises and governments are facing a hyper-converged world where connected systems put not only critical data and intellectual property but also physical safety at risk.
“The cybersecurity industry and attackers expend efforts in a never-ending cycle of breach, react, and circumvent—a true cat-and-mouse game,” said Raffael Marty, vice president of research and intelligence, Forcepoint. “We need to escape this game. Researching these predictions forces us to step back and see the overall forest among the millions of trees. Cybersecurity professionals and business leaders need to adapt to changes based on the risk they represent, allowing them to free the good while still stopping the bad.”
“The ‘as-a-service’ trend will continue to be explored in the channel next year as it provides customers with different ways to finance projects and solutions to get maximum benefit.
Many businesses are considering routes to cut costs on operating expenditure to release money while negating the need for so much capital expenditure,” Refas said. In addition to cost savings, this approach allows businesses to remain agile. Our new software at Eaton offers Intelligent Power Manager that will give better choices to customers to select between CAPEX and an OPEX investment model.
Refas said with technology evolving so quickly, many organisations are aware that buying a solution today to use for the next 5 to 10 years could put them behind their competition within a few years. “Constant evolution is required and the ‘as-a-service’ makes this possible – driving customer, and therefore channel, appetite for this delivery model into 2019,” he said.
Looking ahead, Refas said despite reports of doom and gloom about the political uncertainty in MENA in 2019, the company is expecting to see plenty of opportunities in the channel this year emerging from increasing appetite to strengthen cybersecurity to companies growing their smart technology stable through AI-powered technology. “The market may be relatively flat, but by combining deeper levels of engagement, further development of new customers aligned to a clear strategy and strong commitment levels, Eaton is looking forward to another year of growth,” he said.