Dubai
The ICT provider landscape in the UAE is in the midst of a major transformation, driven by rapid shifts in customer needs, and characterised by intense competition in the marketplace. Local systems integrators, resellers, and IT service providers are finding it difficult to remain competitive as customers demand greater expertise and higher service quality at constantly declining price points. Global vendors and service providers, who have intensified their investments in the region over the past several years with a view to long-term market making, are now aggressively promoting new technologies and service models, and this often leads to conflict and competition with their local channel partners.
Growing demand for third platform technologies — cloud, mobile, big data analytics, and social — is spawning an ecosystem of non-traditional technology resellers and solution providers, some of them offering deep specialisation and expertise.
The convergence of communications and information technologies has been gaining great momentum over the past few years, and this trend is spurring telecommunications operators to develop and offer IT services, and as a result, compete more directly with traditional IT providers. In this environment, local systems integrators and resellers are facing increasing pressure to transform themselves in order to compete in a crowded technology marketplace.
The portfolios of most local IT providers still primarily comprise second platform technologies (or those based on client server and three-tier architectures) and related services, and are not adequately furnished to address the emerging third platform needs of their customers. Their businesses are often heavily dependent on the resale and support of specific vendor products, without much focus on offering their own value-add in terms of services or intellectual property.
There has been a lack of investment in new skills, ongoing verticalisation and localisation of products, and the development of innovative frameworks and tools to accelerate or facilitate customer solutions. This lack of significant value-add makes them highly vulnerable to disintermediation and margin deprivation.
Most local systems integrators and resellers are struggling to identify and articulate their value proposition and effectively communicate it to their customers. Often, there isn’t sufficient understanding of what their profitable customer segments are and what value they are able to offer to the client, particularly in the context of rapid technology changes. Brand positioning and marketing communications are still not given sufficient attention and are often not anchored within the organisation’s core values.
Sales teams are often not well aligned with the overall organisational strategy, and follow structures and practices that are more suited to product resale models rather than value-added service models. The orchestration between sales and operations (delivery teams in particular), which is so critical to developing effective customer ‘solutioning’ and servicing, is often not smooth enough.
Local IT providers and systems integrators need to fundamentally transform themselves from being product-oriented organisations to being market-oriented entities. Product-oriented organisations tend to focus on the quality, functional features, and breadth of their portfolio. These companies believe that customers will automatically like the product or service and underestimate the delivery of real value to the customers.
Such organisations fail to understand that investments in features or new product types alone do not translate into customer value. They tend to mostly focus on marketing, selling, and delivering features of the specific vendor product that they are reselling, while most of the time, their customers are looking for a technology or business solution.
On the other hand, market-oriented organisations have all products, services, and processes built around different customer segments. These organisations strive to understand their customers’ needs before designing their portfolios, implementing their marketing strategies, and delivering solutions. They use market research to gather insights, adapt quickly to customer needs, and possess a greater ability to attract and retain customers.
In order to achieve this transformation, organisations need to focus on developing a market-oriented approach to several internal processes. Market-oriented organisations also tend to execute the following functions:
• Innovation Management: Most local IT service providers don’t take this function seriously or have not aligned it with market needs. This function needs to be driven by marketing or strategy, rather than by operations or delivery teams.
• Business Planning: Business planning needs to be based on an analysis of market trends, not just on historical company data. Most providers do not have an outlook of the markets they are operating in, and often miss important trends.
• Pricing Models: Most providers tend to base their pricing on cost-plus calculations. There is often no clear understanding of customer expectations and value-based pricing.
• Portfolio Development: Providers need to shift from horizontal, product resale portfolios to segmented, solution portfolios. The segmentation needs to be grounded in market analysis and could be based on a combination of various parameters such as industry vertical, company-size, revenue size, and so on. The development of such portfolios requires a deep understanding of not only customer needs but also global technology trends and vendor offerings.
• Business Growth: Providers often tend to equate business expansion to portfolio expansion rather than customer expansion. As a result, they often focus too much on adding new products from principal vendors instead of addressing new customer needs. Account management practices need to be strengthened by having ears close to the customer and then being able work backwards to develop solutions from the current portfolio or expand the portfolio in order to address those needs.
ICT customers in the UAE (and the wider GCC) are increasingly developing an appetite for third platform technologies such as cloud, mobility, big data analytics, and social, and they are demanding improved delivery times, higher quality of service, and greater technology expertise from their providers. They are quite willing to explore new products and services, as well as new solution partners.
In this environment, the local ICT marketplace is seeing a ‘shakeout’, and the traditional leaders are being forced to review their strategies. In this new reality, systems integrators and IT service providers that are able to transform will have a better chance of competing.
_ The columnist is Group VP and Regional MD for the Middle East, Turkey & Africa at global ICT market intelligence and advisory firm, IDC.
