Pakistan Partners

From Karachi to Lahore, the channel links between vendors operating out of the Middle East and Pakistan continue to grow

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By  Stuart Wilson Published  July 24, 2005

Channel structure|~|pakistanhafeez200.jpg|~|Hafeez Khawaja, Western Digital’s senior regional director for the Middle East, Africa and South Asia|~|With 140 million people, burgeoning telecoms and banking sectors and a government that firmly believes embracing IT in all its forms is one of the best ways to promote the development of the economy, it is little wonder that Pakistan’s star is rising. Pakistan is attracting significant attention from major IT vendors and increasingly — due to its close economic and cultural ties to the Middle East — channel expansion and sales strategies are being handled out of this region. More and more vendors are on the lookout for quality partners in Pakistan. Vendors from the networking, IT infrastructure, software and components sector are united on one simple fact: Pakistan represents a massive growth market with significant untapped potential for those that implement the right channel strategies. The Pakistani IT market is developing fast and the move one year ago to scrap import duty on IT components coupled with the government’s clear enthusiasm to drive the development of a vibrant IT economy have acted as a catalyst for inward vendor investment and the rollout of structured channels. “The channel is now getting organised in Pakistan,” explained Hafeez Khawaja, hard drive vendor Western Digital’s senior regional director for the Middle East, Africa and South Asia. “It had been scattered in the past when those importing products tried to avoid customs duties. There could never be accurate market sizing when that was the case.” Removing duty on components scuppers one of the main advantages that grey traders rely on to sell at a cheaper price and allows vendors to accurately estimate the size of the national market. According to Khawaja, the current market for hard drives, which provides a solid insight into the scale of local assembly in Pakistan, currently stands at approximately 500,000 units per annum. The actual total addressable market for PCs is much higher with A-brand vendors importing finished units in significant numbers for both enterprise and government tenders. As the market opens up and matures, vendors are increasingly looking to implement structured channels in Pakistan. UPS vendor APC, which currently works through two primary partners in Pakistan, is already examining closely the best way to evolve its existing in-country channel structure. “APC works through two partners in Pakistan and we drop ship product to them directly,” said Erik Vossebelt, account manager at APC Middle East. “These partners sell to end-users but we are pushing them to build up a reseller channel. At the moment there is a trust issue in terms of pricing between the resellers and the first tier partners. This is because the distributors also sell to end-users. Many Pakistani resellers still prefer to purchase their product in Dubai.” “The second tier channel is not properly structured yet and it is something that we are addressing,” he added. “There is a requirement for a genuine distributor on the ground in Pakistan and resellers would really value a truly independent supplier.” ||**||Partner programmes|~|pakistanmarashi200.jpg|~|Saeid Marashi, Pakistan country manager at business software behemoth Computer Associates|~|Networking giant Cisco has already dedicated time and resources to launch a structured channel in Pakistan. The vendor already has strong relationships with both global and national systems integrators operating in Pakistan, allowing it to penetrate the fast-growing service provider sector. Cisco has also appointed Marsons as its authorised distributor for Pakistan and is driving the development of a two-tier channel. At present, Marsons purchases from Cisco’s two Middle East stocking and logistics distributors: Tech Data and Logicom. “Pakistan is a very complex market from a two-tier channel perspective,” admitted Tarek Ghoul, regional channel manager at Cisco. “There is still the battle against the grey market and there is the battle in terms of building reseller coverage in all the major cities. Logistics is also a challenge in Pakistan and it is in these areas that the local knowledge of Marsons is a real benefit.” What is clear is that the Pakistani channel community is showing a strong appetite for the partner programmes put on the table by vendors. While there remains some way to go, the distinction between those players that want to focus on the distribution space and those that want to serve end users is starting to occur. “The market has definitely matured,” said Saeid Marashi, Pakistan country manager at business software behemoth Computer Associates. “The distinction between resellers and distributors has been clearly defined in the market. Another noticeable development is the increasing levels of certification and training by resellers, which has given rise to increased efficiency and quality.” The drive to develop a trained and certified channel in Pakistan is a priority for many vendors now working overtime to introduce partner programmes in the country and raise awareness of their product offering. Western Digital already has Petrosin and Roma Infotech on board as in-country distributors for Pakistan and has now turned its attention to reaching out to local assemblers and second tier resellers. “It is now all about creating pull for Western Digital products,” said Khawaja. “We are looking at loyalty programmes and have already launched the Select WD partner programme. Partners in Pakistan will receive exactly the same tools and benefits that we give here in the Middle East.” ||**||Local presence|~|pakistaneric200.jpg|~|Erik Vossebelt, account manager at APC Middle East|~|For APC, creating the right balance between developing the market for its high-end solutions and its volume products is a channel priority in Pakistan. At present, APC estimates that 30% of its sales in Pakistan are derived from enterprise-focused solutions suitable for corporate datacentre environments with the remaining 70% from product-focused sales. Vossebelt explains the strategy: “The demand exists at the low-end so we do dedicate resources to pushing the high-end. For APC it is all about pushing solution selling even further in Pakistan and simultaneously creating a healthy distribution channel to maintain our growth rates. It is a massive growth opportunity and the end is not in sight. There are five GSM operators in Pakistan and the largest has a subscriber base of just two million. Remember, this is a country with a population of 140 million.” APC’s focus on high-end solutions in Pakistan is testament to the strength of enterprise IT demand driven by major vertical sectors including telecoms, banking and the public sector. It is a view echoed by Cisco, which has committed human resources to exploring these opportunities and is building strong delivery ecosystems with its partners. “We are in the process of opening a dedicated Cisco office in Pakistan at the moment,” added Ghoul. “Cisco has probably got more people in Pakistan than we have in Bahrain, Kuwait, Qatar and Oman combined and we are committed to even more investment moving forward.” Cisco plans to grow its revenues 88% in Pakistan next year, reflecting the rapid acceleration in IT spending that is being witnessed in the market. Ghoul firmly believes that if the current growth curve is maintained, the importance of the Pakistani IT market in a regional context will continue to soar. “When we were planning last year we placed big bets on specific countries,” he continued. “Pakistan was one of them. The government understands that the economy has to be transformed and IT is a strategic asset when it comes to achieving this. Cisco is prepared to invest up front in that opportunity and this is something that other companies do not do. They win the deal and then think about the people they need. Our view was to work in a non-traditional sense, think outside the box and put people on the ground straight away.” Computer Associates has also taken the plunge and allocated dedicated resources to Pakistan, setting up its operation in-country in September 2004. Recent estimates by research houses suggest that the value of Pakistan’s software and IT services market is already hovering around the US$300m mark per annum. “My role as country manager is to ensure that our customers in Pakistan are getting the right solutions from CA and are able to effectively manage their IT environments,” said Marashi. “Things are moving very quickly for CA in Pakistan and we are receiving an increasing number of inquiries from leading Pakistani organisations that want to find out how CA can help them.” ||**||Logical logistics|~|pakistanghoul200.jpg|~|Tarek Ghoul, regional channel manager at Cisco|~|While the enterprise IT sector already appears to be in cruise control, the Pakistani government still has its work cut out to get the SMB sector firing on all cylinders. “I believe it will take another three to six months to start tapping into this sector,” admitted Ghoul. “We will focus, position Cisco well and sell business values. By building intimate client relationships we will be in a better position to understand the true nature of the SMB opportunity, but we believe it is huge. Like other governments around the world, the Pakistan government realises that the SMB sector will play a crucial role in fuelling economic growth.” It is not just the opportunities that exist within Pakistan that are grabbing the attention of ambitious vendors. From a product perspective, some vendors now claim that Pakistan is rapidly becoming a gateway for the flow of IT kit into Afghanistan. While Pakistan is undoubtedly a rising star, not all vendors have realised that it is best served out of the Middle East. Some vendors still prefer to manage Pakistan from Singapore or even India, despite the increased flow of product into the market from Dubai. “The cost of freight is very high from Singapore,” said Khawaja. “Products can move from Dubai to Karachi by sea within a day or one hour by air. Dubai will be the hub that serves Pakistan. The cultural ties are there and there is strong investment ties between the UAE and Pakistan.” The market in Pakistan is booming but some vendors still need to open their eyes a little bit wider to appreciate the true scale of the opportunity. With 140 million people, five GSM operators and a pro-IT government the potential is clear. To date, mobile phone, PC and internet penetration remains limited in Pakistan, but if the trends of the past year are an indicator of developments to come, vendors and distributors should get ready now. ||**||

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