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Ahmad Kiarostami

The next India?
Iranian software industry

February 29, 2000
The Iranian

This article was originally published in Iran Focus. Click on images to see larger photos.

As Iran seeks ways to diversify its export base and move away from over-reliance on oil exports, both the government and private sector seek high-value added industries where Iran could have a competitive advantage. In the following interview Ahmad Kiarostami, managing director of Negah, one of Iran's leading software companies, discussed Iran's potentials and shortcomings in this area. The interview also reveals the potential of a dangerous new development affecting Iranian Internet service providers.

Iran Focus: In recent times, India, which has a large supply of cheap, educated labor has managed to take a special place in the global software development market. As the manager of one of Iran's better computer programming companies, do you think that Iran has the potential to become another India in the field of software development or not?

Kiarostami: India enjoys a number of qualities that helped it become the India that we now talk about. It has a very cheap workforce and low-cost professional sources. Iran enjoys the same. We have cheap professional resources too, so we can compete on that front.

But India has two other traits, which Iran lacks. First is government support. The Indian government started to support software exporters by providing Indian computer companies with facilities they needed. For example, a part of the satellite facilities which linked India to the world, was handed over to the companies so that they could access foreign satellites easily and bolster their work in this field. The Indian companies enjoyed this benefit with a good discount price as well. Unfortunately, we do not have such a facility in Iran. This shortcoming is a matter of government policy.

The second shortcoming stems from us as Iranian professionals. We have not learned teamwork in our academic studies. As long as the project framework is based on an individual, we can do it extremely well. We have what it takes: intelligence, ability and knowledge. But when it comes to teamwork, it requires another set of skills, which we lack. In addition a working team needs a good experienced manager to direct the group. We have management problem in any field in Iran.

Another factor working against us is that we lack a stable environment in Iran. No one makes long-term investments. Regulations change all the time and cannot be counted on. For a time we used Internet services without any problem. But after a while there is talk about putting some restrictions. It is said that Internet utilization is going to be limited, but not completely prohibited. This would discourage investment.

In summary, lack of long-term investment, good management and teamwork are currently the main reasons why we remain behind India.

Iran Focus: Is there any hope that these obstacles holding down Iran's software industry can be overcome?

Kiarostami: Under current circumstances, we have several sources helping and pushing us to improve. The first is the current economic condition. Today oil price have rebounded, but after a period of low prices we, as a nation, learned that the issue of diversifying Iran's export income base is a serious one and that our over-reliance on petro dollars carries a big risk.

I am not able to do something at the governmental level, but if any individual can produce a good income, it helps. I am not talking about higher circles. I think we have become more serious and we cooperate with others more easily. This can be a solution for the teamwork case. I know that the government has realized the threat of over-dependence on oil income, but I do not know if it has found the solution and if it has, whether it can solve the problem.

The second issue is that of quality. When you talk about pistachio or machinery export, we face several problems, namely quality for foodstuffs and developing technology according to that of modern countries. Nevertheless, as far as software market is concerned, we enjoy a good position.

There is no copyright in Iran. Software packages are at our disposal at very cheap prices, which means we have learned to work with many different tools. In other word, if a graphics arts specialist in a Western country is usually familiar with only one or two software packages, our graphists may know seven or eight. This is sometimes an advantage, it empowers us.

There are external factors that are in our favor as well. As far as I am informed, Indian prices are getting higher and their foreign partners tend to cooperate with other countries. Increased prices in India provide us with a good opportunity to become second or third India. Once we succeed in getting the contracts, it will be easier to obtain a good position in the market.

Iran Focus: This brings up another question. Doesn't the fact that Iran lacks copyright scare off foreign companies from working with you?

Kiarostami: Many foreign companies who want to work with us have the copyright concern. But there is a solution for this. While Iran lacks adequate copyright regulations, a contract between two parties could take care of the problem. A contract is considered the rule between the two partners. It has nothing to do with the country's laws. Every point related to copyright can be mentioned in the contract.

Keep in mind that we have good reason to take these contracts very seriously as well. As a firm seeking foreign projects, I would never jeopardize my reputation by breaching a contract. If I do not respect the contract, no one else will do business with me.

Iran Focus: Do the guarantees you give convince them?

Kiarostami: Not absolutely satisfied, there is always a little concern. They are not familiar with the environment in Iran. Their vision of Iran differs with what it really is.

Iran Focus: You noted earlier that there is a capable work force in Iran when it comes to software development. How difficult would it be for a foreign software company interested in setting up shop in Iran to find, say, 50 top-notch developers?

Kiarostami: If you have a short-term vision and, for example, you want to have your team in place within three months, it would be fairly difficult. Unfortunately, emigration to Canada is getting easier for computer experts. Canada recently decided to accept them without the usual interviews, or so I hear. Hence, the number of Iranian experts available here has dropped considerably.

However, with a longer-term vision, and by offering some training, a foreign company could do quite well with its recruitment here. Iranian universities enjoy very favorable potentials. It is a matter of patience, but the rewards could be great.

Iran Focus: So if a foreign company wants to have software developed in a year, the only realistic option is to refer to an existing Iranian company.

Kiarostami: It cannot immediately start activities. It should first train the workforce and then commence operations in the second year. So, yes,the best option would be to contract one of the better Iranian companies or enter a joint-venture. Incidentally, this is the way most foreign firms have operated thus far.

Iran Focus: You have mentioned that Iran offers cheap, specialized labor. Can you give us an idea of the range of wages of Iranian computer experts?

Kiarostami: If it is only the matter of a programer, he or she gets from Rials 1,000,000 to Rials 4,500,000 a month. I know somebody which earns up to Rials 7,000,000, however, he is an exception. If you want a director, the income ranges from Rials 4,000,000 to Rials 5,000,000. But this is not the only labor cost. About 23% of the wage should be paid to the government as tax and insurance.

Iran Focus: Internet has removed borders as we see. How has it helped introduce Iran's software industry to the world?

Kiarostami: The Internet has played a great role in this regard. It has helped everybody who deals with software. In fact, software today means Internet-related software. To supply non-Intranet applications does not make sense anymore. The Internet is the place we apply software.

The Internet was an unknown phenomenon when it was introduced in Iran some five years ago. Its usage and users were limited. First, it was only the Telecommunication Company of Iran (TCI) that used it. Then, Neda Rayaneh started to give Internet services. Today, we are witnessing many Internet service providers (ISPs) in Iran, but they have still a long way to go in offering good services. Their main shortcoming is that they are mainly concerned with short-term interests. In proportion with incomes here, their prices are extremely high. Overall, however, I believe that things are getting better. Besides, foreign companies are making investments in this area.

There is something important to point out here. Recently, a rumor has been spread about limitations on providing Internet services. It is said that only the TCI will possess the right to supply Internet services, and all other ISPs would have to provide their services through the TCI. Mind you, this is not an uncommon system. In fact, Dubai has a similar system in place. However, this will stop all competition and foreign investment will be reduced or stop completely. The third problem is that if TCI continues working the way it has, we can expect to see high charges persist.

TCI's policy has been geared towards generating income, instead of providing quality services. Therefore, should it keep up with this policy, many ISPs will have to quit because of limited financial sources. On the other hand, many companies will seek alternatives to using our ISPs.

Presently, many foreign companies like Nokia already report problems. They take part in telecom tenders, and if the communication channel between their head office and their local branch is through the TCI, they will face security problems. They will not accept such a system. However, they will not have such concerns when working with a private company. If every connection is set up through a single channel, the process of communication will become more difficult. This will make the investment situation for foreign companies uneasy. I hope Iranian officials read my words and take it into consideration.

Now, I want to refer to the positive points of the Internet. In the past, when I developed software, nobody outside Iran would know about it. But today, Iranians abroad can see it through the Internet. Fath newspaper site - which originally started out as Khordad -- is a good example. Very comprehensive work has been done on this site. It is the first time that one can search archives using Arabic or Persian text. We developed a Persian-language search engine.

Another example is our work on the arts gallery. Non-Iranian artists get familiar with our works. It has helped us introduce our market to the world.

Iran Focus: In your expert opinion, where do you see as the best market for the sale of software developed in Iran?

Kiarostami: Software export relates to two areas. One is the availability of a market and I would suggest looking at the market of Iranians outside the country, which is not a small one. I have no precise statistics, but it is said that 1,000,000 of Iranians live only in Los Angeles, so it cannot be a small market. When we think about Iranians all over the world, there are possibilities to export our products.

We have already made CDs about Iranian football and cinema. Two other CDs are under development as well. The problem is that we, as Iranian companies, do not know how to market our products. That is another area where a foreign firm could play a big role. Second is the ability to develop a high-quality product at low prices. We have the capabilities needed for the production of software. Development is not expensive in Iran, so we can be very competitive.

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