Hidden gem

It is a country with a population of 65 million, annual ICT spending in excess of US$5.5bn and a growth rate of 30% a year. In the IT hardware sector alone there are 7,000 retail outlets contributing to the 1.2 million PCs sold every year. Which country am I talking about?

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By  Stuart Wilson Published  September 29, 2004

It is a country with a population of 65 million, annual ICT spending in excess of US$5.5bn and a growth rate of 30% a year. In the IT hardware sector alone there are 7,000 retail outlets contributing to the 1.2 million PCs sold every year. Which country am I talking about?

Iran: an ICT market that will be worth US$17bn per annum by 2007 according to local estimates. Putting that number in a regional context, Iran is poised to become the biggest ICT market in the Middle East in the next few years.

Yet in many ways it remains the ‘hidden gem’ of the Middle East IT markets, especially in terms of the Middle East IT hardware channel. Not many people from a vendor or channel perspective really want to talk about Iran. For some vendors and distributors — especially those selling products still under embargo — not speaking about Iran is priority number one, two and three.

That is understandable enough, but such an attitude does not take into account the realities of the situation. Think about it. The Iranian PC market is 1.2 million units a year according to local estimates, and whether anyone stands up and admits it or not, these machines are using CPUs that are not really supposed to be there.

There is very little that can be done on a practical level to stem this flow of product. Just like the global grey phenomenon, basic laws of supply and demand govern the IT channel. Product will inevitably flow where demand exists, especially if this flow creates a margin opportunity due to availability issues or pricing differentials. These facts are not in dispute.

The only way to get the true picture of the Iranian market is to make contact with those that know it best: those people working in the market itself. All the statistics in this article came from a presentation by Sanaray, Iran’s very own Software Export Research and Development Body. The software sector is already a thriving industry in Iran as companies make the most of the need for localisation.

The Iranian software sector is worth US$300m a year and covers all main segments including financials, enterprise applications, workflow and content management. The software market alone will be worth US$1.2bn by 2007 according to Sanaray’s statistics. The market for comms equipment is worth US$1.1bn a year in Iran with comms services pulling in a mighty US$2.3bn a year.

There are an estimated 700 companies active in the Iranian hardware sector and domestic production of basic kit such as monitors, cases, keyboards, mice and modems is growing fast.

Iran is a massive market in the Middle East and does not get the attention it deserves in terms of channel development and market dynamics. The reasons behind this are varied. Top of the list is the fact that those companies involved in the movement of software and hardware still under embargo do not really want to draw attention to their activities.

In some ways the Iranian IT channel is much more developed than many of the other markets in the wider Middle East region. The mega malls dedicated to IT in Tehran have to be seen to be believed. Contrary to some vendors’ belief, this is not a market with an appetite for dated technology. Iranian customers want the latest kit as soon as it hits the market and are willing to pay for the privilege.

One well-known components vendor even goes so far as to claim that taxi drivers in Tehran like nothing more than having an in-depth conversation about the pros and cons of various motherboard vendors’ products.

I still have some difficulty believing that this anecdote can be extrapolated to all taxi drivers in Iran, but it does make a compelling point. Iran is a massive market with strong growth rates, high levels of education and an appetite for the latest IT hardware and solutions.

Events like Gitex are a fantastic opportunity to get outside of the Dubai bubble and meet up with the in-country channel players really driving growth in the emerging countries across the wider region. If you are one such player, send me an e-mail to schedule a meeting with the Channel Middle East team during Gitex.

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