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Cover Story

An interview with Salim Ghauri, CEO, Netsol

  1. Netsol Leads The Way
  2. An interview with Salim Ghauri, CEO, Netsol

The following is the excerpt of PAGE’s talk with Salim Ghauri.

Feb 21 - 27, 2000

PAGE: Why did you choose to go to the NASDAQ?

Salim: Getting listed on the NASDAQ meant getting the kind of international exposure we always wanted. Besides, getting listed on the NASDAQ meant a far better return and more funds for the exponential growth to help us grow globally. It also meant the global presence, and acceptance, in addition to the big status symbol and the reputation that goes with it. The best names of the IT industry are all listed on the NASDAQ. It meant getting recognised globally, not only for our company but also for Pakistan.

It also meant exposure for Pakistan. We have become the first Pakistani company to get listed on the NASDAQ and it certainly has given more IT exposure to the country. Many international IT professionals and enthusiasts who thus far remained oblivious to the Pakistani IT prowess now realise the potential that Pakistan offers. We have come of age as a nation which can offer competitive software systems and consultancy at par with the companies in the developed West. The best thing is that while all our input costs are in Rupees our revenue is totally dollar-based which allows us to buy in rupees and sell in dollars. By he end this year we expect to earn revenues in the range of $ 7-10 million. Our commitment to invest in our people is evident from the fact that each employee of Netsol is a shareholder.

We have undertaken world-class projects but its our listing on the NASDAQ which has given us the real international exposure. The country has also benefitted— the name of Pakistan did not typically come to a foreigner’s mind with reference to the IT till the recent past. All that has changed for now. Being a fully owned Pakistan company, Netsol has put Pakistan on the world IT map.

Since our listing we are receiving an increasing number of requests for our software programmes and at present we are in the process of negotiating deals with three foreign companies. We plan to grow acquisition, we have already took over a company in Australia, and we will keep looking out for more acquisitions in the years to come.

PAGE: How do you find the current state of the IT industry in Pakistan?

Salim: The IT industry of Pakistan definitely enjoy an edge over many of its competitors in South Asia. We have an intelligent and dedicated workforce which can deliver quality. Though at present our one person-one computer revenue of $ 50,000 per year is much lower compared to such giants as Microsoft whose one person-one computer revenue is $ 500,000, we expect it to grow over the years with deeper penetration of the global market, not unlike the situation faced by the MicroSoft in the initial years.

However, our primary problem is the lack of resources to run bigger operations on the lines of say Microsoft which has a huge 22,000 plus professional workforce. It is imperative to take the following measures to rectify the situation.

The shortage of qualified IT faculty for the hundreds of IT institutions across the countryis one of the major problem. As for us, we prefer to train our own people— we have retrained electronics engineers. Measures should also be taken by the government to retrain MBAs and even diploma holders to develop a professional IT force to meet the increasing demand at present and in the years to come.

PAGE: How can we compete with India?

Salim: Thus far Pakistani IT industry has been unable to get outside from under from the shadow of its Indian counterpart. India’s prolific software output and exports. India has some one million IT professionals while it is producing another 70,000 every year including at least 1,500 world class professionals. In next 5-7 years it would be producing some two million IT graduates every year.

At present it is exporting $ 5 billion worth of software. The IT industry of India is growing at a high growth rate of 50-60 per cent each year while its software exports are growing at 55 per cent per annum. About 25 per cent of Indian IT related expors are software related. Growing at this speed India is expected to earn $ 85-87 billion from its IT exports alone in next eight years.

Despite the huge gap between the IT industries of the two countries and the fact that Ireland, Israel alongwith India have become the top software developing nations of the world besides the US, Pakistan still enjoys an edge primarily as English, the language of IT, is its official language. For instance, though China is fast emerging as the biggest IT market in Asia it has to overcome the problem posed by this language barrier.

PAGE: What has been your experience being quoted on an overseas exchange and would you recommend it to other local companies?

Salim: It’s been overwhelming. Even we did not realise how big it could has been. The impact is that we are now much more visible around the world. However, we have concerns that despite being recognised as a world class software developer and consultant our services are not being given a chance to be used locally. The rampant practise of giving the job to the foreign companies is detrimental for the local IT industry in general.

For instance, the state owned Pakistan Iniernational Airline chose to appoint Sabre Group, a US consultant, instead of giving the job to a local IT company. How can the local IT industry develop if the government chose not to promote it itself. If the contract had been given to a local company, and there are many including us who have clinched international orders across the globe, it would help the national economy for the benefit of the locals. I suggest that such software application contracts should not be given to the foreign companies as many local companies can easily handle such jobs right here in the country. The proposals for the computerisation of the various government departments such as national identity card, passport, immigration should be given to the local companies to help the local IT industry grow. How can the local industry is expected to grow if such big, and sensitive, projects are given to the foreign companies. We feel that our listing on the NASDAQ will encourage the local software companies to get listed for the inherent benfits which it offers. It has certainly made all the difference for us.

We feel that our listing on the NASDAQ will encourage other local software companies to get listed for the inherent benefits which it offers. It has certainly made all the difference for us.

PAGE: What are your views on the IT based companies quoted on the NASDAQ? Do you think they are overvalued?

Salim: Yes. They are. However, you have to understand that the NASDAQ investors look at the future rather than at how a certain share is performing at current. The majority of the NASDAQ investors don’t buy for today.

PAGE: What problems did you face to get listed?

Salim: Being the first Pakistani company posed many problems for us. The worst of all it was about the image of Pakistan as there were many who not even aware that Pakistan has a software industry. We have to go through a stringent personal and professional scrutiny. No personal and professional aspects of the company’s directors and the company itself was left unprobed. Every single information about the management and the company is there in the open. We could hide nothing. My elder brother Najeeb who looks after our US office has been instrumental to have Netsol got listed on the NASDAQ. Without his personal efforts over a period of hectic five months this would not had been possible. We have to meet the stringent corporate requirements, particularly as we are an overseas company. However, we feel proud to pave the way for the other local IT companies as with our entrance Pakistan no more remains an unknown name in the global IT industry.

PAGE: What could be done to increase software exports? What’s the potential? What can be done? What are the problems and what are the solutions?

Salim: The Pakistani IT industry should work towards getting recognised as an industry instead of a group of individual companies. The government should also play a greater part to promote the local IT industry. It is imperative to improve the workings of the telecommunications structure of the country. The state-owned Pakistan Telecommunications Company should be de-regularised as soon as possible instead of waiting till June 2002, cut off date for the ending of PTC’s monopoly. The de-regularisation is necessary to offer better rates and services at competitive prices. It will also help more investment in the IT and telecommunications industry as the monopoly has been a source of conflict between the PTC and some 70 Internet Service Providers (ISPs) all of which are private.

For instance, unlike India where ISPs are allowed to have their own international connectivity which is a big incentive to overseas companies who can have free access to their head offices. With its monopoly and as the principal provider of telecommunications service in Pakistan the ISPs in Pakistan can not offer their customers a similar incentive at the overall detriment of the local IT industry.