APPLICATIONXS - PIONEERS OF ONLINE TRADING SYSTEMS IN PAKISTAN

An interview with Mr Zafar Shaikh CEO, ApplicationXS Pvt. Ltd.

PAGE REPORT
Jan 29 - Feb 04, 2007

PAGE: Can you tell us a little about your background?

Yes, professionally, I specialise in techno commercial affairs focused at areas pertaining to telecom strategy & information technology. I did my BSc and MBA from London, U.K..

ZAFAR SHAIKH: I started my carreer with Alcatel Telecom, the largest French telecom multinational in the world, and held diverse portfolio responsible generally for nation -wide commercial and technical operations associated with the launches of new technology based telecom switches and hard box solutions etc. I was trained in Alcatel Training HQ in Brest, Paris, on new switch technology and worked at the Alcatel Telecom Head Quarters in Islamabad, Pakistan, on Alcatel E10B exchange technology, in close liaison with Alcatel Paris and PTCL Islamabad.

Later, I founded ApplicationXS Pvt. Ltd., or AppXS, which is an AKD Securities subsidiary company, pioneering in the groundbreaking online trading and fund systems.

PAGE: What does your company specialize in? What is the excellence that you bring through your product and services?

ZS: AppXS has led the way in introducing Online trading and Mutual Fund systems in Pakistan. Our scientists at R&D continue to do groundbreaking work in the areas of Trading and Mutual Funds, which have revolutionized stock trading. Clients include such prestigious brokerage firms like AKD Securities, Cliktrade, WEonline,biz, Mars Securities, Darson Securities, Javed Omar Vohra & Co. Ltd., Orix Investments, Ace Securities, MCB Asset, Faysal Asset Management, PICIC, Escorts Bank and many more.

The excellence that we brought forward has to be looked at in a background of recent events. A little over 6 years back, we saw the KSE -Index at 1100 points in Oct 99.

Retail Investor base was very low and the benefits of stock market boom were known only to brokers and institutions. All brokerage was done manually and the use of Internet-based financial applications for trading were an unknown phenomenon in Pakistan. In the KSE all entries of orders were done manually on KATS and as little as 3000 transactions were entered in a day by a single KATS operator, which was a very expensive bottleneck. Offline brokerage was very discouraging for retail investor and they were loosing almost 25% ROE plus the broker never took a small retail client seriously.

But through our products and services all this changed. History was made with the launch of Online Brokerage first time in Pakistan on Nov 1, 2002 with AKD Trade.com. Tremendous opportunity was created for retail base to invest in equity without the hassle of dependency on a broker. Availability of Online trading and branch network multiplying throughout the country was very attractive for retail investors in smaller towns and cities. Research showed that there were over 02 million retail investors in Pakistan who would benefit directly from the stock market boom. At the KSE level creation of bridging of orders into KATS through our systems saw the average number of daily transactions going up more than 4 times than before. Previously RISK management was not possible in KATS resulting in huge losses but now with AppXS technology Pre Trade Verification systems, risk was totally covered with direct confirmations of orders into KATS eliminating errors and delays completely. Now the retail base was reaping full benefit of equity investment. The international investor market found a reliable way to invest at the KSE. AKD trade with over 7000 retail clients trading 12m shares per day set new standards of excellence, contributing 6% in the total volume traded at KSE.

Our clients using the AppXS Online trading systems now trade approx 20 to 25 million shares per day. New standards of excellence were created and online trading became an inevitable necessity for progressive brokerages.

PAGE: Being involved in the local IT market, what potential do you see in the software industry in Pakistan?

ZS: The fact is that the IT industry in Pakistan is in its early years and is under pressure to pull alongside the regional and global business. The software industry makes use of around 10,000 professionals and is confronted with a grave scarcity of quality technical and marketing professionals basically due to the colossal brain drain of superior professionals required in the sought technologies.

The revenues and proceeds of the software segment of the industry is around US$ 25 million in the domestic sector and US$ 15 million worth of export. The software slice of the IT industry consists of around 500 companies. Nearly all are one-man shows, but albeit, there is a small number of medium to large size players doing a fair amount of local and international business.

As I said before that our country has critically delayed its presence in to main stream IT and positions itself way behind other regional countries in taking full advantage of Information Technology as a means or resource for economic stimulation and growth. Nevertheless, we sense that the volatile amplification of the Internet and the near-term surge of E-commerce nonetheless provide immense possibilities for Pakistan software industry to exploit their potential and use these for accelerating its economic revival.

Here I would like to mention Dr. Atta-ur-Rahman who did a lot of groundwork which has helped the software industry on the whole, by relentlessly working to make the internet more economically and broadly available in Pakistan. Costs have been pushed down, the availability of free Internet has been guaranteed for universities, telephone access has gone up from 29 to 300 cities, etc.

Currently the development of Packaged software, computerization of public and private sector organizations, e-commerce, reorganization of communications infrastructure, call center set-ups, globalization drive, lower development costs locally, etc., are some of the areas that hold promise for the local software industry.

PAGE: What is the secret of your success in this highly competitive market?

ZS: Success is hard work overall. There are no shortcuts. The will to win, the desire to succeed, and the urge to reach your full potential was the underlying motivational factors in our success. Strategically speaking in the IT arena, we took the road less traveled by, and that has made all the difference, by the grace of God. The stakes are very high when you are product focused, and so are the risks and rewards. But as they say that fortune befriends the bold and I am glad that it all paid off in the end.

PAGE: How do you see the impact of the current top-level changes in the government on the financial market in Pakistan?

ZS: The current uproar in the equity market has stemmed from the government initiatives to lower level of interest rates, the rise in foreign cash inflows and the general economic revival. While macroeconomic developments will remain vital, political factors too will determine the stock markets' movements. A surge in Islamist militancy, unease with India or decreased foreign support for Pakistan could harm the prospects to this effect.

Although interest rates are forecast to pick up, real interest rates are expected to remain low provided that the economy continues to grow, the financial sector should expand strongly during the forecast period.

The process of reforms in the Capital Market is based on the fortification of the role of equity as a vital resource of financing, defending the interest of the small investors, elevating the criterion of corporate governance, improving the requirements of information disclosure, curbing the use of insider information, enabling the national market to integrate with the global market, etc.

The Securities and Exchange Commission of Pakistan (SECP) is being strengthened to enable it to achieve the objectives of Capital Market reform and the infrastructure of the Stock Exchanges is being modernized to allow efficient trading.

PAGE: What are your plans for growth? Are you marketing your products internationally? If not yet, what is your vision in this regard?

ZS: As I said previously that AppXS is basically an R&D platform. We are relentlessly working on product optimisations and enhancements. There is enormous foreign exchange earning potential for our product line especially in Online Trading in the region.

The past 5 years were focussed at product itself, augmentation and deployment in Pakistan. Consumer awareness of our products has now grown tremendously. This year we plan to take our products to new levels. AppXS is backed by TMT-PKIC incubation fund which also help to propel and network our company at a regional level.

Our Online Trading product line links you directly with the KSE from any where in the world, unlike the competition. Hence the prospective for future expansion is immense provided that threats to the industry like continued political instability, high taxation on information technology, brain drain, lack of access to the international capital market, tariff barriers, economic downturn and unfavourable exchange rate parity etc., could be curbed.

PAGE: Do you see any IT multinationals in Pakistan as your competitor or partner?

ZS: If one is looking at a desired future state of IT/software growth and an Industry turnover of US$ 200 million with the industry focused on value-added products and services, a fully operational technology city in Pakistan, Pakistani companies registered on NASDAQ etc, one cannot ignore to create synergy with the MNCs. With effective promotion and presence/networking in key markets in collaboration with MNCs the IT companies can reap the advantages of cutting down time to market. Plus most of the MNC collaboration schemes with software houses carry benefits like support in Marketing budgets and Marketing dollars, not to mention the help at hand to provide needed referrals and guarantees to foreign buyers, etc. Collaborations also prove beneficial for company growth in terms of benchmarking of products and support for new technologies. Giants like NCR, Intel and Sun Microsystems continue to invest in partnerships with private and public organizations, and look at Pakistan as a potential market to invest in. Intel allocates US $2 billion annually for research and development from its US $12 billion turnover every year.

MNCs offer their Pakistani counterparts a platform to exhibit their talent and skills and then penetrate the international market along with their products produced locally in Pakistan.

PAGE: Do you feel that there is a dearth, or, otherwise of recognition initiatives aimed at promoting quality work/professional excellence in our country?

ZS: Yes, there is positively a gap here. Although Information technology is being offered as a way to catapult Pakistan's stagnant economy into motion, generate vast amounts of foreign exchange through software exports, transform education, cause revolutionary increases in industrial productivity, modernize governmental administrative structures, create an informed citizenry, and much more, yet nothing is being done to encourage and inspire the industry in terms of recognition at national level that can directly affect and promote quality work and professional excellence .

PAGE: What professional advice would you like to give to new entrants in the software development field?

ZS: My only advice would be that in the long run only hard work, consistency, clear cut goals and objectives and honesty take an individual or company to the top there was no, there is no and there will not be any short cut to success in any field you opt. This holds true for IT also. We as a nation will have to do everything in proper way to succeed. It is also becoming increasingly evident that the future belongs to IT, and countries that lag behind in putting their IT infrastructure into place are also going to continue to lag behind in economic growth.