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“I do not believe a regional broad line distributor can become a true VAD”

 

Dr Ali Baghdadi, CEO and President of Aptec Group

In 1980, Baghdadi formed Aptec Distribution to bring appropriate technologies to the region and made it the reason for the name of his company. Now thirty years later, after having adopted the value added model of distribution, Baghdadi is faced with the challenge of consolidating Aptec’s position as the leading value added distributor in the region. With an MSc and PhD in computer sciences from London, Baghdadi is no stranger to the mix of technology and business dynamics in the region. A fact recognised by Microsoft when it invited Baghdadi to its recent partner Advisory Council in November 2011. He shares his opinions on what lies ahead as Aptec progresses down the value added route.

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Now that much of the IT industry and the channel partners have got used to the idea of the VAD business model being the mainstay of 2012 and the years ahead, what are the next steps that need to be addressed by both vendors and the channel industry in 2012 to complete the transformation?

Baghdadi: A vendor has to realise that delivering solutions through a VAD requires investment and preparation by both VAD and vendor. Therefore, a vendor trying to introduce a product to the market using the same channel strategies used for broad line distribution will ultimately fail in getting its rightful market share. I do not believe that a broad line distributor can successfully combine traditional distribution business with value added distribution. A channel reseller must decide on its areas of speciality, must select the menu of products for its solution and get its staff skilled up. This is neither a retail business nor the business of selling printers and laptops. At Aptec we have invested in skilling up consultants and opening training centres to help new entrants and channel partners who do not wish to fully invest in such resources.

How do you see the adoption of the VAD business model in the short term under the complex and multiple influences of new technologies like mobile and remote computing, uphill movement of transaction resellers towards becoming value added resellers, budget limitations at the end user and increasing shake out across the regional channels?

Baghdadi: VADs sell solutions to VARs. VARs have to invest in building knowhow and in selecting their niche areas. New technologies or new devices may or may not play a part in the solution, be it a security system, a virtualised data centre, an in-house cloud system or other integrated solutions. The right device and technology will fit in and would make the solution more efficient or attractive. However, every solution has a core infrastructure or engine, usually driven by a software system that needs to be understood and mastered by the VAR and of course the VAD. End user budgets should not be a limitation if we know how to show the end user the economies and cost savings generated from the given solution. We found that SMBs in particular form the largest segment purchasing solutions for the improvement of efficiency and protection. 

From another point of view, does the VAD business model provide a future for those regional channel players used to high top line revenue figures and how would they manage the short term impact of moving towards a VAD type channel engagement, while facing reduced demand from their traditional transaction resellers?

Baghdadi: I do not believe a regional broad line distributor can become a true VAD. The culture, knowledge, cost models are very different. If we look at global players you will find that global VADs are different from the global broad liners like Ingram Micro. Techdata for example set up its VAD business in Azlan and this is a hybrid model that may work to a certain extent.

Are there any additional technology segments that you feel can be brought into Aptec’s portfolio and leveraged through the VAD model?

Baghdadi: As I said, we first look at the solutions, then look for the best technologies that may fit. Today we offer a multitude of solutions with components supplied by more than 30 of the world’s leading IT vendors.  Such solutions may be security, data centre, storage, virtualisation, private and public clouds, networking and others. Or they may be application solutions, such as database engines, telepresence, data analytics, CRM, smart dashboards and unified communications. This year we plan to expand our solutions to cover enterprise solutions for SMBs in cooperation with SAP, Microsoft and Oracle.

We are also investing in training centres that will contribute to the skilling up and training on technical competencies. I also believe that people skill development is an essential aspect that cannot be ignored by a VAR for his own teams or his SMB customers, therefore we have just signed up as an authorised training partner for the Cisco Entrepreneur Institute across the region.

Are you satisfied with Aptec’s current leverage in the area of specialised security and storage solutions?  

Baghdadi: Storage solution is one of the fastest growth areas in the IT industry. Combining storage with data security creates a multitude of opportunities and potential innovations. We are developing some unique solutions jointly with our key vendors, which we hope to roll-out during 2012.

How significant is the impact of the Cloud delivery model on the VAD model of channel engagement?

Baghdadi: Cloud delivery is a SAAS or IAAS model that presents an alternative to normal software licenses or in house infrastructures. We are offering public Cloud solutions including Microsoft Office 365 and other CRM and sales tracking tools developed by ISVs. I expect that SMBs will opt for some Cloud solutions and eventually graduate to private Clouds or solutions based on their own data centres. VARs will have to identify and offer complementary Cloud solutions to those built in house. The challenge and opportunity will be in developing services around Cloud applications. VARs have been used to traditional delivery of on premise system integration and system deployment or maintenance as a main service. New services for the Cloud will need to be adopted and the entire service model and revenue stream will change.

Does the Cloud sales, pricing and delivery model fit in well with the VAD business model or will there need to be significant changes leading us to a form of VAD 3.0?

Baghdadi: All vendors offering Cloud based solutions are learning or experimenting on how to present the best pricing models. They have adopted different methods, but I am sure a winning model will emerge in the next year or two. I expect Cloud revenues to be in the range of 20% to 30% of a VAR’s revenue in mature markets. In the Middle East region, I see this being around 10% of revenues in the near to medium term. As I said, Cloud offerings will complement enterprise and in house systems.

For distributors, VAD 3.0 and for resellers VAR 3.0 in my opinion will evolve with the development and increase of services as a major contributor to the income stream. I believe we shall see new tools developed to assist in such services including advanced remote monitoring, remote deployment, remote training and remote maintenance. Imagine the idea of a call centre or a BPO associated with the cloud offerings.

With multiple early adopter vendors pushing Cloud delivery services into the regional channel, what will be the impact on the VAD business model?  

Baghdadi: This will be complementary to a high extent. However, some vendors are offering relatively low margins on a finder’s fee basis and some distributors may find that the costs to cover such an operation exceed the income. I believe different models will emerge and this will depend on the type and complexity of the Cloud solution. ISPs and GSM operators will enter the game as they own large communities of end users. A cloud specialist may have to become the service provider for such entities. Solutions offered through such large operators will tend be consumer oriented and similar to Apple’s iCloud or email and communications related offerings.

What is the significance of your attending and being invited to attend the recent Microsoft Partner Advisory Council?

Baghdadi: It is great to participate in forming ideas on how Cloud solutions can be channelled in the future and to influence the thinking of some of the world’s leading innovators on how their products can reach the end user. The Council have some of the most experienced minds in the world of distribution and some of their or our ideas will be adopted in Microsoft’s future strategies.

What are the learning points that you came away with at the end of the partner engagements at this forum?

Baghdadi: Services, services, services are a key to survival! Distribution is here to stay and to grow. Innovate, adapt, build your skills or die!

What were the points you communicated from Aptec’s point of view and from a regional perspective at this forum?

Baghdadi: We covered many issues ranging from Cloud channel strategy, piracy, the future of OEM software and online tools used by distributors.

At the top management level, how do you feel about this vast array of changes that are taking place both in the vendor technology delivery area and in the channel partner transformation area?

Baghdadi: Most exciting! It is a great honour to be part of the changes happening in our region. Having studied computer technology for years and having studied business and practiced it for more than 30 years, I enjoy and feel privileged when I can make a small contribution to the advancement of IT in this region.

What are the best real world experiences that you are learning from and using internally to plan ahead?

Baghdadi: People are the greatest asset and a great source of knowledge, so I learn to listen and put my trust in people and their skills. I learnt to make calculated risks without which you cannot succeed. One can never stop learning, so I never stop studying. I also learnt that if you do not like what you do, then change and sometimes you have to follow your heart.

How do you visualise Aptec’s business two to three years from now?

Baghdadi: A great company with great people contributing to a real change and to the advancement of one of the most aspiring and exciting regions in the world.

 

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