Inside Iran

The prospect of reduced exposure from the global banking sector and an enduring lack of vendor-led channel development activity would send most markets into meltdown, but for Iranian IT dealers it's all part of life in the region's most testing channel.

When it comes to pure IT consumption, Iran unquestionably deserves to be placed in the same bracket as other large and all-encompassing regional markets such as Egypt and Saudi Arabia.

The country's population - which now stands at more than 70 million people - is just one reason why the local IT sector can look forward to strong double-digit growth during the years ahead.

It is perhaps inevitable that the scale of the market is reflected by the magnitude of the channel community as well. Unlike other countries in the Middle East region, Iran's IT market doesn't depend on one location to drive the bulk of its sales activity.

The capital, Tehran, undoubtedly retains a dominant position as the political, commercial and industrial hub, but with 30 provinces in total, cities such as Isfahan, Shiraz and Tabriz are all places where high numbers of IT dealers can be found plying their trade.

One hardware distribution source says the sales chain in Iran can often be quite extensive. "A master reseller will sell quantities into sub-distributors and they will sell to smaller dealers," explained the source. "There are several medium-to-large distributors in Iran that distribute to a further 6,000 or 7,000 dealers."

It is therefore something of an irony that while Iran is home to a burgeoning IT channel and regarded by many as the largest IT market in the region it remains a no-go area for many vendors - at least officially.

Ongoing trade embargoes prohibit US technology companies from conducting business in Iran, a directive that has prevented some notable industry heavyweights with in-country offices throughout the region from establishing any formal local presence. Household names such as AMD, Intel, Cisco, Dell and Microsoft are all affected by the ban.

This scenario has its constraints for the Iranian IT market although it's not necessarily as destructive as you'd perhaps expect due to the high level of re-export activity that takes place.

IT kit sold into the UAE channel remains the primary source of supply, with products often passing through several conduits prior to being absorbed by the Iranian market. Subsequently, Iranian buyers have access to most of the brands available elsewhere.

"90% of the Iranian IT market is provided by Dubai dealers or distributors," claimed a source at one trader, emphasising Iran's reliance on the re-export market.

"What has changed in the past two years is that the business has become more official and regular in terms of Iranian rules and regulations. That means smaller dealers are disappearing or merging, the smuggling is decreasing and the official way of importing goods into Iran is improving."

Still, onlookers predict more volatility ahead for Iranian IT traders, particularly as channel creditworthiness remains a topic that is ringing in everybody's ears.

European and global institutions, such as Deutsche Bank and Standard Chartered, have reduced financial support for companies with Iranian ties over the last year following US pressure and as a result Iran finds it difficult to obtain foreign currency, hold assets offshore and raise loans. That has created anxiety for an IT sector where 60-day credit terms are not unheard of.

Dubai-based suppliers are also said to have taken a conservative view on extending credit to Iranian clients given the lack of insurance cover and this is placing additional weight on the channel.

"Business is done in cash and if credit is extended then Iranian dealers will be given a very high price," confided one source. "That is why small and medium-sized companies that do not have enough cashflow or remain financially weak will suffer."

Indeed, while anecdotal evidence suggests the Iranian market is growing at a reasonable rate, there is disappointment from some quarters that the channel hasn't developed at the rapid pace expected of it a year or two ago.

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