Perfect Pakistan

The distribution channel in Pakistan is maturing fast as more vendors look to build in-country channels and develop comprehensive reseller networks.

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By  Stuart Wilson Published  June 5, 2006

Sizing up|~|pkcisco200.jpg|~|Dr. Aamir Matin, the newly appointed general manager of Cisco Pakistan|~|Vendors, distributors and resellers are waking up to the huge potential that exists in the Pakistani market. With a population in excess of 150 million people, a buoyant enterprise IT spending environment and strong cultural and economic ties to the Middle East, Pakistan is a market on the up. It is easy to underestimate the size and potential of the Pakistani IT market. IDC estimated that full year PC unit sales during 2005 hit the 500,000 mark, but many players operating on the ground inside Pakistan believe this figure falls well short of the actual market size. The analysts and the local channel do agree on one point: the conditions are perfect for rapid market expansion in the next few years as local assemblers and A-brand vendors tap into the wave of demand expected to materialise. IDC predicts that total PC unit sales per annum in Pakistan will exceed one million units by 2010. “In Pakistan, encouraging government-led policies and structural liberalisation in the financial and telecommunications sector helped to lift the PC market,” explained Andrew Wong, personal systems research manager for emerging Asia countries at IDC. Local assemblers are staking a claim to the growing PC market inside Pakistan. Brands such as In-Box, Raffles and Softwise are building significant brand equity and grabbing significant market share. With many A-brand vendors yet to deploy full-scale operations within Pakistan, local assemblers realise that the next few years will be critical in cementing their long-term future in the market. At present, the local assembly market remains highly fragmented with Pakistan’s number one brand, In-Box, taking just 5.8% market share in 2005, according to IDC, driven in part by success in the government and education space. The market is ripe for local assembly consolidation and the emergence of a top-tier. ||**||Local heroes|~|PkOnline200.jpg|~|Venu Menon, divisional director at Online Distribution|~|Hafeez Khawaja, senior regional director Middle East, Africa and South Asia at storage giant WD, believes that the local assemblers are more than capable of giving the A-brands a run for their money. “There are some very professional local assemblers in Pakistan,” he said. “I was amazed by the quality of the facilities that players such as In-Box and Raffles now have. They have employed Pakistanis that used to work for global vendors such as HP and Dell in the US who decided that they wanted to come back. Their technology is state of the art and their product marketing is top class.” Estimating the size of the total IT market in Pakistan remains a tricky task. One person well placed to assess the data is Dr. Aamir Matin, the newly appointed general manager of Cisco Pakistan. Prior to his appointment, Matin worked at the Pakistani Ministry of IT where he led various successful initiatives to boost exports of IT and IT-enabled services. “The overall IT market is growing at 50% year-on-year,” said Matin. “You talk to the major hardware and software vendors and this is the growth in numbers that they are seeing. The actual size of the market — excluding the telecommunications sector — is around the US$1 billion mark and this includes hardware, software and services.” Matin estimates that at least 50% of this total is currently derived from hardware sales with software and services accounting for approximately 25% each. As the market grows and matures, the channel also has to evolve and develop in order to keep pace. Specialisation and focus is the name of the game as the Pakistani market reaches a critical mass. For Cisco, making sure that its channel has the breadth and depth of skills and reach to take on all the opportunities that exist in the market is an ongoing challenge. “There is still a challenge inasmuch as the channel remains very fragmented,” conceded Matin. “There are not that many large partners capable of handling some of the bigger projects that are coming up in the country. The situation is changing but it will take time. What we are now doing is looking to work with some of Cisco’s large global partners to address these opportunities in the market.”||**||Skill sets|~|PkMobeen200.jpg|~|Mobeen Ul Haq, manager at Pakistani networking and storage distributor Silicon Technologies|~|In the enterprise IT segment, the telecommunications sector has played a pivotal role in driving the growth of IT spending. For value-added distributor Tech Access, which represents Sun Microsystems, Symantec and Mercury in Pakistan, building a highly focused partner base capable of dealing with the largest companies has been the secret of its success. “You have to be very focused to develop an effective enterprise channel in Pakistan,” explained Dimuth Wijeratne, partner sales manager for Pakistan at Tech Access. “The telecoms sector still accounts for 70% of spending and we have built a strong partner network to address this opportunity. We are now looking to replicate this in the financial services vertical.” “The market in Pakistan has matured a great deal over the past couple of years and this has allowed systems integrators and solution providers to start focusing on specific verticals. It is important to remember that this is a market of more than 150 million people — that is the scale of the opportunity that exists in Pakistan. We have also found that IT managers are extremely knowledgeable when it comes to purchasing decisions. They are working on limited budgets and project failure is not an option,” he added. Tech Access is not the only distributor looking to serve Pakistan from a Dubai hub. Broadline distributors such as Tech Data and eSys have also invested in building up an in-country presence within the Pakistani market — a move that reflects both the size and the significance of the opportunity. From a networking perspective, Online Distribution is also working hard to tap into the Pakistani channel. Venu Menon, divisional director at Online Distribution, commented: “Pakistan is growing at a tremendous rate and it is now a market that we have a strategic focus on. More and more vendors want to serve Pakistan from their Middle East and Africa operations. The Pakistan channel community likes to purchase product from Dubai — and I think vendors are waking up to the fact.” Online represents both Zebra and Symbol in Pakistan and already has a database of 100 in-country resellers purchasing product. “There is a massive amount of IT spending happening in Pakistan and the country is also serving as a gateway for product that is eventually destined for Afghanistan. In terms of skill sets, the Pakistan channel is very well developed — there are significant software development skills within the country and the cost of labour remains relatively low,” Menon continued.||**||Top tier players|~|pkwd200.jpg|~|Hafeez Khawaja, senior regional director Middle East, Africa and South Asia at storage giant WD|~|Wijeratne at Tech Access agrees that the Pakistan channel is comfortable dealing with vendors and distributors operating out of Dubai. “Our sales in Pakistan are more than doubling year-on-year,” he added. “The market now accounts for 20% of Tech Access’ total sales. There has been a great deal of investment into Pakistan from the Middle East and the cultural ties are very strong. It makes more sense for vendors to handle Pakistan from the Middle East as opposed to handling the market from Singapore.” Vendors are starting to realise the importance of in-country channel coverage within Pakistan. “We are convinced that the long-term growth opportunities are massive.” Said Khawaja at WD, “That is why we have just appointed Pakistan Office Products (POP) as a second distributor alongside Roma. POP has offices in multiple cities and that is very important for the long-term development of our channel strategy.” “Pakistan is a vast country almost twice the size of France and the infrastructure for moving product around from one place to another is limited. Appointing a second distributor does not meant that they will fight each other — it means that we have broader channel coverage and reach.” A top tier of in-country distributors is starting to emerge within the Pakistan channel. POP, Marsons and Roma are becoming familiar names to the bevy of vendor channel managers attempting to work out the best way to develop in-country routes-to-market. Other local distributors such as Silicon Technologies are also carving out reputations as focused distributors working in specific product segments. Mobeen Ul Haq, manager at Pakistani networking and storage distributor Silicon Technologies, commented: “We have a distribution portfolio of products that now includes US Robotics, D-Link, 3Com, Adaptec, Tandberg Data and Moxa. Our main office is in Karachi with 40 people but we also have an operation of 12 people in Lahore and have just launched another office in Islamabad.”||**||Fake fears|~|pkscene200.jpg|~|Consumer demand for IT products is also starting to grow in Pakistan|~|Adding more vendors to the portfolio is not the top priority for Ul Haq. Instead, his energies are concentrated on expanding the company’s channel breadth. In the cities where Silicon has points of presence, the distributor has built an expansive reseller customer base. In other cities, the company has developed a network of select resellers that effectively take on the role of sub-distributor and actively help to develop the channel breadth in their specific area of geographic focus. Challenges do still remain in the Pakistani IT channel. “Three years ago, grey market product was the major threat,” continued Ul Haq. “Today grey is less of a problem but the amount of fake and counterfeit product in the market is growing. Most of it comes from China through a variety of routes. Pakistan has relatively soft borders and the fake product can come in by air, land or sea.” The surge in enterprise IT spending is filtering down to the consumer market. As the population becomes more tech-savvy, demand for IT products is soaring. As one of the fastest growing markets in the world for mobile phones, Pakistan’s future growth looks assured. The window of opportunity is now and vendors moving in-country first and deploying people on the ground have the opportunity to carve out a significant first-mover advantage. The conditions in Pakistan are perfect for growth. “Vendors are realising that the Pakistani market has been neglected and they are now investing more in the market,” said Matin. “It is important that this investment results in real benefits for the country as a whole.” ||**||

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