Price volatility, bad debts and under development are just some of the characteristics defining the Pakistani market.
With increasing numbers of vendors addressing Pakistan from the Middle East, it is becoming abundantly clear that building a local channel in the country is fraught with challenges.
When assessing the IT market in Pakistan it is impossible to overlook the political issues plaguing the country over the last year.
The channel is following more of a focus on specific products rather than selling everything. But credit trends are unchanged. Late payments and bad debts are still a major issue in Pakistan.
At the time of writing, general elections are taking place and it is still uncertain as to whether these will lead to a fair and just result or, seemingly more likely, to further turmoil.
There are those in the channel who will play down the extent to which events such as the return of Benazir Bhutto, the scion of a Pakistani dynasty, and her subsequent assassination, have had on business.
"Unfortunately, the political climate is not good at the moment, but luckily it has not impacted the IT business as of now," insisted Qaiser Butt, Gulf distribution manager at China-based hardware vendor Lenovo.
"I do not know what is going to happen after the elections though," he added, reflecting the sort of uncertainty that channel players have had to adapt to over the last few years.
Others suggest the impact is already evident though.
"There has been a big effect on the IT industry," proclaimed Zahid Mahmood, country sales manager, for Pakistan and Afghanistan at Acer Middle East."
"What we had forecasted at the beginning of 2007, growth of between 30% and 40%, did not happen."
"We were only able to achieve our financial plan, otherwise our growth would have been 30% and 40% like it was in 2006."
Sultan Hamdani, COO and senior consultant at Microsoft and Oracle enterprise specialist Maison Consulting and Solutions, says such problems have cast an underlying shadow on Pakistan's IT industry and channel: "The wrong perspective can be created by the wrong geopolitical focus."
"Pakistan is a huge country and if a problem is prevalent in a hundred square kilometers, it does not mean the rest of the country is suffering a problem."
This is a particularly important point from a channel perspective when the country spans more than 800,000 square kilometers.
Indeed, it is only the work of the proximity resellers that allows vendors to reach end-users across this area.
"People perceive Pakistan as still very under-developed or unsafe or not stable. That is only partly true," said Hamdani.
Taj El-Khayat, enterprise channel group head for Middle East and Central Africa at Juniper, is certain that Pakistan is one of the most important markets in its overall business, but says the channel has not yet reached its full potential.
"From the partners' perspective, do we consider Pakistan to be the right country to drive our business?"
"Absolutely, because the partners are very skilled and their education towards the high-end perspective is very developed when you compare it to other Asia-Pacific countries," he commented.
"People in Pakistan have the right knowledge. But in terms of maturity, the channel has not yet reached the level of having the right focus."
"For us though, Pakistan is still right next to Saudi Arabia and the UAE as an important market."
If there is a negative impression of the Pakistani market then it is not reflected in the statistics that have been generated on the country's IT sector.
According to IDC, PC shipments to Pakistan are valued at over 110,000 units per quarter, with the market set to benefit from a predicted compound annual growth rate of 10% between 2006 and 2011.
"While the commercial segment has been key for Pakistan's PC market performance, the consumer segment has displayed a healthy growth," stated IDC's research and consulting director Linus Lai, when the company published data on the market last year.
IDC suggests that commercial projects from the government and banking institutions have driven the market.
It also points out that end-users have been benefiting from their growing knowledge of PCs, which in turn has led to the ramped adoption of consumer desktops.
Recent media reports also extol the strength of the relationship between the UAE and Pakistan, with trade between the two nations valued at US$5.2 billion in 2007.
This confidence and entwining of the two economies is relied on by many IT vendors which cover the North Asian country under the Middle Eastern banner.
"If we were to have established a full-blown office in Pakistan at the moment it would have been a premature move for us," revealed Juniper's El-Khayat.
In common with the general consensus, he feels it is right to cover Pakistan from the Middle East.
"Pakistan is an Islamic country and the way they deal with people in a business setting is very relevant to the Middle East culture."
"Also, because of the political turmoil in the country, it's very difficult for us to install the infrastructure that we would put in a more developed country like the UAE."
"There is so much in the way of facilities that we can offer our partners from Dubai - the pool of talent and technology."
Western Digital's senior sales manager for the Middle East, Khwaja Saifuddin, is also of the opinion that the cultural connection between Pakistan and the Middle East is important for business.
"Culturally, Pakistan is very close to the Middle East, the trade relations date way back and the Middle East has invested in Pakistan, further strengthening the ties," said Khwaja.
He also points out that, geographically, Pakistan is closer to the Middle East than other regional hubs, saving both time and money.
The proliferation of the re-export market out of Dubai to Pakistan does have its pitfalls that have been impacting the bottom lines of some channel players.
Hardware distributors working in Pakistan, such as OnLine Distribution, are tasked with facilitating the warranty and servicing of certain products.
To do so, James Saldanha, business unit manager at OnLine, says that any product that is faulty has to be returned to the regional hub, replaced or repaired and shipped back.
"By far the biggest challenge is that when the repair unit comes back into Pakistan, it attracts customs and accrues a fee," he said.
It is not that vendors don't acknowledge that it would be a great idea to have an office, a warehouse and even a full-blown service centre in Pakistan, it's just that many, such as Lenovo, haven't found it to be the right time.
"As part of our strategy, we do not have any in-country offices, whereas HP has a full branch operational office and Dell has had an office in Pakistan for a good many years now," admitted Lenovo's Butt.
"Lenovo will have to think along these lines."
"It will have to have an office available in Pakistan."
"Although it is not a very mature market like the UAE or some European markets, we will probably have to think along the lines of an office in Pakistan."
One of the reasons why some manufacturers are reluctant to fully commit more manpower to Pakistan is the price sensitivity of the market.
Channel players serving the country cite this as one of the most common dynamics of the IT market in Pakistan.
Iyad Madanat, country manager GCC and Pakistan at APC-MGE, is one principal to voice such concerns.
"Distributors face a lot of challenges in Pakistan and one of the main issues is the price. Pakistan is a very price sensitive market," he said.
The pressure that is put on the market from end-users that are heavily focused on the price tag of a purchase reverberates around the channel and, as Madanat has suggested, is most felt on the distribution wrung of the ladder.
Components distributor eSys says it is feeling the turn of the screw in terms of the credit crunch in Pakistan.
"The channel is following more of a focus on specific products rather than selling everything," explained Saeed Sheikh, country manager for Pakistan at eSys.
"But credit trends are unchanged. Late payments and bad debts are still a major issue."
Sheikh also blames high taxes, poor policing of software pirates and inadequate law and order for exacerbating the situation."
Political movements in the short term may well have had a detrimental effect on Pakistan's IT market, but in the long term it could be said that the government is responsible in large part for any strength the sector may exhibit.
"I started working in Pakistan with Acer from 2004 onwards."
"That was the year when there were big changes as far as government policies were concerned," recalled Acer's Mahmood.
"It was when the government legalised the telecommunications sector and provided full access to all foreign investors."
"When they announced these regulation policies, players like Mobilink and Al Wared came and set up business here and since then the IT industry has also been taking advantage of this growth."
Perhaps the main reason why the Pakistan channel is still tarred with the under-developed brush is the relatively low spending power of the population as a whole.
GDP per head stands at US$2,600 and 24% of the country's people officially live below the international poverty line.
This has led some channel skeptics to suggest that there is not the spending power among the Pakistan consumers to warrant a more sophisticated go-to-market chain.
However, that hasn't softened the resolve of vendors that believe they need to take a long-term approach to investing in local market development.
"We are always there on their back to support them and to give them the tools that they need," asserted Acer's Mahmood.
"But the communication and face-to-face with the end-user and the invoicing is always done by the channel," he added.
Despite envisaging more vertical opportunities and predicting the Pakistani channel will record sales of more than one million PCs by 2010, Western Digital also admits it is still heavily indebted to its Pakistani partners.
"We are 100% relying on and supporting the local channel to develop our business in Pakistan," said Saifuddin.
"The channel is becoming more mature and consolidated now there is a clear demarcation between hardware, software and services."
When surveying the commercial landscape, the main gripe about the level of development slung at the IT market by pessimistic onlookers has to be the lack of enterprise outfits existing in the country.
Lenovo, which works with distributors including Marsons Corporation USA and Roma Business Machines, says its most prolific success comes from engaging corporate SMB and government leads.
"The channel addressing the corporate SMB and the government sector is mature enough, but we cannot apply the same definitions to the SMB, SOHO and enterprise in Pakistan," said Lenovo's Gulf distribution manager Qaiser Butt.
Despite defending the sophistication of the country's IT market, Mason's Hamdani concedes that there is still plenty of room to grow in the enterprise space.
"There are only limited enterprise companies in Pakistan compared to the SMB sector, which is the majority of the business sector," said Hamdani.
"The enterprise sector that does exist is quite developed, they have the infrastructure in place with the finance, the sales and the IT, and they are growing by the day," he added.
Opinion over the sophistication of the first-tier channel in Pakistan is remonstrative to say the least.
Distributors are confident that they have the means and the brains to tackle Pakistan's extensive small reseller network, which consists of many local connections and relationships.
But the voice from the vendor is not completely supportive of this claim.
"We don't see a mature distribution channel in the sense that you do not see large regional distributors like in the UAE or Saudi Arabia," complained APC-MGE's Madanat.
There are a number of medium-sized companies just like us and they work with a few small and medium distributors.
"I'm not sure that other vendors operate in the same way, but the distribution channel is not as mature as a lot of Middle East markets," he added.
The Pakistan market is vast in geographic size, which also depicts why vendors require a diverse reseller channel to answer their needs.
"Pakistan is a very unique market. There are four different provinces and each province has its own unique driver for the economy," explained Juniper's El-Khayat.
Countless small entities such as ABM Infotech, Mushko, Computer Supermarket, Compsi, and Micro Innovations and Technologies make sure that each of the four provinces of the country are fully covered.
Furthermore, they have the local knowledge and selling skills that are needed in a country that has almost no foreign workers.
The extensive network of small resellers in Pakistan is, however, facing the dreaded threat of increasing interest in the country from international retailers.
Metro has already established a store in Lahore and Carrefour has its sights set on the Pakistan market.
It has been suggested by commentators that resellers will need to diversify if they are to survive in the wake of increased competition.
OnLine Distribution, which deals with the high-end enterprise sector, claims that the channel would do well to head upmarket and increase its portfolio of skills.
"Though we have been trying to recruit fresh partners and engage with them to get into this business it has been a very long road and resellers have been more interested in the low lying fruit," lamented OnLine's Saldanha.
There is also an accusation in the upper tier of the Pakistan channel that resellers have to be more proactive in developing leads.
This is something that they will have to look at improving over the rest of 2008 and into the future.
Acer's Mahmood concludes that the Pakistani channel is about to enter a period of considerable change.
"The main criterion for success over the next year is that the channel has to be fast and adaptable in order to accept the changes that are coming," he explained. "The power retailers are approaching."
"There will be some consolidation as companies struggle to cope with the big change. Players that can consolidate fast enough, and be innovative and more proactive, will prosper."For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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