INTERVIEW: YUSUF HUSSAIN MD. PSEB

PAKISTAN OFFERS COMPETITIVE ADVANTAGE IN IT SECTOR

SHAMIM AHMED RIZVI, ISLAMABAD
Dec 10 - 16, 2007

Mr. Yusaf Hussain, Managing Director of the Pakistan software Export Board (PSEB) and one of the oustarging name in Pakistan's IT sector was kind enough to spare sometime from his busy schedule for a detailed dissension on the development of this sector its past, present and future prospects. Before joining as chief of PSEB, the Government agency mandated to promote the IT industry, Mr. Yusaf was the Chief Executive Officer of eresoft, me USA which at that time was Pakistan's leading IT Company with several global 2000 and fortune 500 clients in USA and Europe. What PSEB chief told page about IT industry in Pakistan is briefly reproduced below.

The IT Industry of Pakistan has developed into a formidable force in the last five years. With one of the fastest growing economies, Pakistan is emerging as the rising powerhouses of economic expansion in the region. This has resulted in motivating both the local and the foreign businesses to secure their place in the economy that is on the verge of explosive growth.

The IT industry of Pakistan presents tremendous growth and investment opportunities. The competitive advantage in Pakistan is the most compelling of any country and includes a large pool of English speaking technical talent, quality certified technology companies, and a highly supportive government.

Over 400,000 personnel graduate in Pakistan annually, which include 20,000 with IT related degrees. Over 110,000 IT graduates are employed in the country. With a 15% annual increase in enrolment, several fold increase in higher education spending, and planned establishment of nine world class international universities, the supply of quality manpower is projected to grow rapidly in the future. A number of government training and internship programs add to the higher education regime. A major source of quality manpower and enterprise is several thousands of expatriate Pakistanis who have returned to the country after successful careers in USA and Europe.

Of 1,082 active IT companies in Pakistan, some 110 are certified International Standards Organization (ISO) - one of the highest numbers in the world. Scores of companies are also undergoing CMMi appraisal with the assistance of government programs.

The Government of Pakistan has allowed 100% equity ownership and 100% repatriation of profits to foreign investors. Major tax incentives such as tax exemption for companies have been allowed till 2016. Annual growth of IT exports has averaged 50% over the last four years, displaying a five fold increase. IT exports totaled $1.4 billion in fiscal 2006-07, including sales to multi-national companies, earnings of overseas offices of Pakistani companies, and salaries of non-immigrant IT workers abroad. Total IT industry size was $2.8 billion including software services, products, IT enabled services and hardware. At current rates of growth, it is expected that industry size will surpass $ 11 billion by 2011.

Pakistan is emerging as a location of choice for the outsourced software development and IT enabled services such as call centres and medical transcription. Several multi-nationals have located development and support centres here while others outsource work to Pakistani companies. Services companies in Pakistan have acquired business from leading corporations of the world such as GE, Citi Corp, Bank of America, and Google due to the high quality coupled with lower attrition rates. Companies such as IBM, Bearing point and NCR have established their own development centres. TRG, an IT-enabled services company has acquired companies with revenue of over $175 million in the United States. Touchstone BPO has certified USA mortgage loan officers that handle customers directly from the US. Post Amazers, Pakistan's largest animation and post production studio, has animated major Hollywood movies. Two Pakistani services companies, NetSol and Averox are now listed on NASDAQ.

The other major aspect of the IT industry in Pakistan is Intellectual Property creation. Over a hundred universities, over five hundred Government R&D institutions, and perhaps most important, thousands of expatriates who have returned home, are undertaking world class innovation. About ten Pakistani product companies are world leaders in their product niche.

Ultimus is a local business process management company with 1,600 customers worldwide including Microsoft and the White House. NetSol's car leasing product has one of the fastest growing customer base that includes leading European and Asian car manufacturers. System's Mortgage Lien Processing product has twelve percent of the US market. Pakistani companies have acquired financing from Silicon Valley Venture Capital (VC) Funds and now the Ministry of IT and Pakistan Software Export Board (PSEB) are also facilitating Venture Capital areas in Pakistan.

Pakistan has an edge over the neighbouring global giants in terms of its thriving Business Process Outsourcing (BPO) industry. The ready availability of skilled professionals, an appropriate IT infrastructure, and affordable rates for connectivity result in considerable time and cost savings for entrepreneurs. The costs in Pakistan are as much as 30 percent lower than India while the infrastructure advantages of high speed connectivity in all the major cities are available at competitive rates. There is a rapid movement of connectivity towards broadband services which are taking precedence in homes and businesses. Efforts to network the country continue, and so far over 1,800 towns and cities have been plugged into the Internet backbone.

The Pakistani ICT industry's major growth area is that of telecommunications, with an increase in cellular network operators over the last year, as well as the doubling of subscribers over the course of a single year. One of the most progressive policy changes came with the deregulation of fixed-line telecommunications body, PTCL, formally bringing the incumbent operator's monopoly to an end and setting the stage for the opening up of the sector to major investors. Encouragingly, the BPO industry is also beginning to see a shift towards growth, with numerous new firms emerging to capitalize on opportunities such as call centre operations providing back-office services to foreign-based companies.

While there are well-known synergies between the Information and Communication Technologies (ICT), there are also some key differences in market dynamics. Telecom operators and manufacturers overcome significant barriers to entry; are amenable to economies of scale; operate in regulated environments; and constitute oligopolistic markets. On the other hand, the IT industry in Pakistan is characterized by low barriers to entry, a preponderance of small companies, an essentially deregulated environment and a highly competitive marketplace.

Though the regulatory environment in Pakistan, the slicing of bandwidth, the setting of pricing and the opening up of competition was the key determinant in unleashing the potential of the telecom industry, the situation in IT is far more complex. To begin with, the impact of the public policy is relatively marginal. The industry growth curve in IT is relatively inelastic in relation to duties or subsidies, while the telecom industry growth curve is highly elastic in relation to the rate of incoming phone calls, for example. Human resources are important to Telecom, but they are absolutely critical to IT and maintaining an adequate supply of quality skilled manpower is a global issue.

The initiatives to develop local online content and to promote the use of local languages online are also gaining momentum. Local language news services are taking the lead in developing local language online content, and introducing innovative services such as online news delivery via cellular phones. Meanwhile, the Human Resource Development initiative has achieved positive results. Universities and other educational institutions have been upgraded and, importantly, standardized with a critical mass of students trained in various facets of ICT.

The employment rate in the IT sector has been massive with the industry requiring an additional workforce of about 3,000 every month. If growth is maintained at this rate, Pakistan expects around half a million jobs in the IT sector within the next three years. This growth has been through both local entrepreneurs such as TRG setting up software houses, and multinationals employing local IT graduates in their local offices.

With well-renowned companies setting up call centers and offering both part-time and full-time jobs at salaries ranging from Rs. 10,000 to Rs. 40,000, it is only a matter of time when Pakistan's call center personnel start to grab a much larger chunk of the $600 billion market from India, Sri Lanka and Jamaica. With the expansion of the call center industry in Pakistan, there is greater emphasis on career building in call centers. It should become a hallmark of the call/contact center industry to provide professionals to business media, immaculate sales staff, and extremely talented conversationalists.

The government body mandated to promote the IT industry is the Pakistan Software Export Board (PSEB), of the Ministry of IT which administers programs in the areas of human capital and company capability development, IT Park development, international marketing, Industry research, public policy, and facilitation. PSEB facilitates several Software Technology Parks (STPs) with high bandwidth connectivity, electricity backups, and relatively lower rents. It also has an ambitious program to build additional IT parks nationwide. PSEB also subsidizes attendance in international tradeshows and operates a high visibility website which serves as a portal for potential customers, investors and IT companies.

Competing on a worldwide scale, Pakistan's IT Industry has achieved phenomenal growth in IT exports in the last few years. With the fast-paced industry growth rate and the government's investor friendly policies, Pakistan has become a major player in the IT industry not just on the South Asian but on a global scale as well.