INFORMATION TECHNOLOGY
WHAT NEXT?

By Syed M. Aslam
June 18 - 24, 2001

This write-up is not about the mass IT awareness making rounds across Pakistan. It is rather an attempt to qualify and categorise this unparalleled awareness and to use it as a springboard to catapult us, as a nation, into the cyberspace age in practise instead of theory.

By now Pakistanis are seem to be bitten by the IT bug. They seem to be running high IT fever obvious from its being the first, and in most cases the only, academic choice for the majority of high school students and the most preferred career option for their counterparts in colleges, universities and vocational institutes. Even the housewives, elementary school students, doctors, engineers, office workers, and lay men on the street no more remain immune to the all-engulfing IT passion.

Like elsewhere, IT has also found millions of willing converts in Pakistan. E-mail, URL, website addresses no more remain a symbol of status but rather a necessity of the cyber age. Parents are willing to invest huge sums of monies to send their children to IT institutes, the most costly of which charge as much as Rs 125,000 per semester, in a country where per capita income is less than Rs 25,000. Their lowly counterparts only cheaper comparatively inexpensive. This willingness on the part of the parents is fueled by the belief that no other professional education or training offers better and more lucrative career prospect.

As is, much mass awareness has already been created about the IT thanks mainly to the priority accorded to it by the sitting government and in part by the latest global trends. In last four years the value of software exports has increased from a mere $ 5 million to over $ 40 million at present, the universal internet access has been expanded to over 400 cities, towns and villages across the country compared to just 29 less than ten months ago. A fifteen year tax holiday till June 30, 2015 has been announced for the software exporters and computer hardware, accessories and equipments are exempted from import duty. There has been a drastic reduction in the bandwidth rates by the PTCL irrespective of the fact that the ISPs have chosen to pass only a fraction of it to the end users.

Much has happened during last one year and yet much remains to be done to make the best use of the mass IT awareness for practical purposes. It's time, as already mentioned above, to take stock of the situation to qualify and categorise the awareness. Nay, its time to understand and collate this information to draw a comprehensive feasibility to give a distinct direction to the national IT industry. While the importance of creating awareness can hardly be over-emphasised, the fact is that awareness alone is not enough to make Pakistan an IT power. Much has been done but much more remains to be done before the stagnation sets in and becomes a norm.

Talking to PAGE, IBM's Marketing Executive for Pakistan, M. Shoaib Khan, said that the incentives such as the ones mentioned above are good and should be seen in the broader context of the emerging It scenario in Pakistan. They have helped put IT on the pedestal. Despite limited resources these policy decisions have created widespread awareness. However, they have also created high level of expectation among the masses.

Awareness is the beginning which is well accomplished. However, he said, that one should be able to understand the various levels of awareness achieved and have the ability to separate perceptions about awareness from the reality. One should also be able to understand the levels of awareness and what is the best way to apply it to achieve the desired benefits. For instance, today even a traditional Pakistani housewife uses few IT related words but the level of her awareness is considerably low from that of a student taking an IT course, particularly those pursuing professional degrees.

A secondary question is : Awareness about what? Is it about the software, hardware, applications, manufacturing, web designing, medical or legal transcriptions, call centres, software programming, etc.? Or is it about such unproductive and rather time wasting practices as chatting and net surfing (mainly for pleasure seeking)? Is the awareness population- or profession-based? Shoaib added that there are few institutions in Pakistan which are providing education related awareness on advanced subjects like HW designing, systems analysis and systems designing, etc. This, he said, are some of the skill areas which can help earn big money for Pakistan and yet fails to attract the attention that rightfully deserves. A general perception is that a six-month diploma in IT would land one a lucrative job. This perception is incorrect as such a qualification can only ensure one an entry level position at best.

Shoaib feels that our focus should now shift to answer the above questions without which things would remain stagnant at the awareness stage resulting in offering least possible benefit for the growth and development of an integrated IT culture in the country.

So what is needed to make the much needed transition above and beyond the mass awareness already created? Defining a three-pronged strategy Shoaib said that number one, there is a need for solid concrete plans and well-defined projects on core IT activities which he understands are being prepared by the government as well as the private sector. Secondly, a reasonable amount of funds should be allocated for the implementation of these projects and plans. And last but not least, it is imperative to choose the right people for the implementation of these plans, particularly as availability of such huge monies attract all sorts of people many of whom may not have the management and implementation skills to make these projects a success and are more interested to be associated with a project so that they can quoted it as a reference.

Global Scenario

Some 400 million or 6 per cent of the world's population today use the internet daily. Over 85 per cent of these users are in the developed countries. Pakistan today stands where India stood 14 years ago in 1987 in terms of software exports if nothing else. India exported $ 57 million of software exports then compared to over $ 5 billion currently.

However, the late entry should not discourage Pakistan to develop its IT industry on the most top priority basis. All is not lost and in fact there is much to be gained if the substantial growth during last four years in all disciplines of IT is any indication. The abundant availability of intelligent human resources, the growing consciousness to upgrade one's IT skills irrespective of professional and social status, the capability to learn an IT skill fast, and the top priority accorded to the IT by the present government could all be the catalysts for growth.

There has been a major shift in the attitude of the people. They expect the government to play a far greater role to meet the rising levels of expectations. What-have-you-done-for me lately has replaced what-have-you-done for the industry. This is a positive sign indeed as it shows the massive public support of the government policies related to the IT. This also answers the decision to import container loads of used PCs into the country to encourage IT literacy and PC penetration.

Pakistan no more remains a silent observer to the spiraling growth of the IT globally. A beginning has been made and a mass awareness has already been created. The time has come to understand the levels, categories and degrees of this awareness and how to translate it into action to move into the next phase. Pakistan's foray in the global IT markets should not be remain restricted to software which would not be possible without sifting the perceptions from the reality. And this would only be possible by qualifying and categorising the IT awareness.

Awareness does serve a purpose, and an important one at that. However, it should not be seen as an end in itself and has to be replaced by action and practise. Numerous minimum breathers have already been given to the IT industry and the policy decisions have all been IT-friendly. It is time to come up with the concrete plan to give a distinct direction to the IT industry by discussing issues which thus far have failed to attract the due attention.

As is, the software industry seems not to market itself in a proactive manner. The business and image of the local software industry can only be improved with the aid of a properly engineered marketing campaign. Pakistani software developers should be encouraged to participate in such prestigious international IT exhibitions as COMDEX, CeBIT, etc. Of the some 700 international IT exhibitions held in the world in 1999, Pakistan participated in only two while India participated in at least 417. The Indian software houses owed their presence in these exhibitions at least in part to their government which had allocated $ 18 million alone for the software industries of Bangalore and Hyderabad to ensure their presence.

And why is it that local ISPs, unlike their counterparts elsewhere, fail to offer value-added services such as e-commerce? Mainly because Pakistan is not a content producing country and partly because there is no economies of volume in a country reeling from acute shortage of internet users as percentage of total population. That also explains that why ISPs also charge fee to have access to such basic service as e-mail.

In addition, much remains to be done to enhance the IT productivity in Pakistan. For instance, Rs 100,000 per machine/person/ month revenue is an ideal productivity level in the software industry elsewhere, and Rs 60,000 an acceptable one, but only a handful of companies in Pakistan are able to achieve Rs 20,000-25,000/month/machine/revenue.

Then & Now of Pakistani IT Industry

.

Then

Now

Software exports

$5m (1995-96)

$40m (2000-2001 expected)

Number of ISPs

50 (1999)

175 plus (At present)

Bandwidth

80 megabits (The
time of writing)

235 megabits (By the time you are reading this)

PTCL's Internet Tariff
(For software companies, educational institutions and call centres)

$60,000/month/2mb
half circuit (September 2000)

$3,000/month/2mb
half circuit (Shortly)

Universal Internet Access

29 cities (August 2000)

Over 400 (Presently)

ISP tariff (Retail)

Rs 45/hr (Average, March 2000)

Rs 25/hr

'Hostile Takeover'

A group of dissatisfied shareholders barged on the corporate offices of the company early morning of June 11. They were assisted by armed security guards. No, the ugly incident did not take place here in Pakistan but at the headquarters of Netsol International, the Pakistan-origin IT consultant and software developer, in Calabasas, California.

Netsol International, the first and the only Pakistan-origin listed on the NASDAQ, which built its reputation on specialised leasing software custom designed for Daimler Benz finance companies across the world. The 'takeover' was led by Cary Burch, the self-appointed chairman of Netsol Shareholders Group, LLC, whose members claim to hold over 25 per cent of the outstanding shares of the company. LLC amended its preliminary proxy statement to propose an increase in the size of the Board of Directors to elect seven of its hand-picked nominees from seven to fifteen on May 17.

Netsol International has been under siege by a group of dissident shareholders for last six weeks due primarily to the alleged poor financial performance of the company. For the quarter ended March the company's revenues were $1.52 million down from $1.55 million in the comparative period last year. In addition, the General and Administrative expenses stood at $1.3 million restricting the gross profits to $200,000. The company suffered a total loss of $2.3 million for the quarter under discussion which translated in $0.21 per share.

The group of shareholders solicited enough proxies to expand the Board of Directors from seven to fifteen and on the evening of June 10, the 'newly elected board' held an emergency meeting 'voting to terminate the existing management team effective immediately at the open of next business day.' The stock was up early to $ 5, but sold off mid day to close in the range of $ 3.50 range.

Netsol International management announced that it obtained a temporary restraining order on June 11 entitling it to remove the group of insurgent shareholders from its headquarters. Under the Nevada court order, the insurgent shareholder group and the directors it claims to have elected are prohibited from taking any action whatsoever with respect to the company until the court hearing scheduled for Friday, June 15. The favourable decision by the Nevada Judge has been credited to the company's successfully proving that it has a reasonable probability of success on the merits of its claim, particularly that the defendants are not properly elected members of Netsol's Board and their purported election violates Nevada law.

The chief executive officer of Netsol, Najeeb Ghauri, condemn the LLC's claim of victory as irresponsible and at the very least premature since the votes cast to date were yet to be counted by an independent party.

Meanwhile the company filed its definitive proxy materials with the Securities and Exchange Commission in connection with the special meeting to be held on June 19 in response to LLC's request to expand the company's board of directors from eight to fifteen members and to fill the newly created vacancies with its hand picked nominees. Its Board of Directors also urged the shareholders to read the entire proxy statement because it contains important information.

So what all this means for Netsol? Talking to PAGE from Lahore, the chief executive of Netsol International Salim Ghauri said that 'Netsol like all other public companies can not remain immune to incidents such as above. Such incidents happen to all public companies and Netsol is not an exception. In addition, if and only if, the majority of shareholders decide to take a company it cannot be denied to them, he added.

Saleem informed PAGE that the dissident group of shareholders is backed by one of the eight company appointed directors. The LLC is demanding to expand the Board of Directors from eight to 15 and to fill the additional 7 seats with its hand picked directors.

Saleem said that Netsol's current model of business is based on offshore business and yet the LLC has not appointed a single director who understands this model. "However, we, naturally, are worried about the outcome of the case in the Nevada court as situations such as these are unpredictable and can go both ways. We, however, are keeping our fingers crossed for the best."

Talking about the hearing on June 15, he said the Court appointed a Receiver, the local equivalent of Official Assignee from Monday June 18. This shows that the court has yet not accepted the claim of majority by the dissident group. However, he said that it would take at least 6-8 weeks for the decision. The Court has also fixed June 26 as the next date of hearing.

While defending the right of the shareholders, if and only if they are in majority, a fact which yet remains to be proved by the dissident group, to manage a public company if they so desire, Salim said that the uncertainty is not good for the company and its shareholders including the dissident group. As is, the price of Netsol stock have registered a constant decline from $ 5 month-and-a-half ago to $ 3.20 on the close of the NASDAQ on June 15.