SOFTWARE EXPORTS

ENTREPRENEURS SHOULD STOP LOOKING AT GOVERNMENT FOR ANY SUPPORT.

SHABBIR H. KAZMI
(feedback@pgeconomist.com)
Nov 22 - 28, 20
10

Recently, The New York Times published an interesting article on the state of IT innovation in India. The article reveals that while India continues to be a low-cost destination for outsourcing, Indian companies are not able to truly innovate and create compelling new products. Within India, there appears to be an overwhelming focus on being a low cost body shop for western businesses while the environment remains unfriendly to innovation and risk.

Years ago, as India made entry with a big bang, many analysts wondered whether India would eventually "learn the business" sufficiently to start producing innovative product focused companies that could scale. It appears that despite over 20 years of providing low-cost development services, the answer is still no.

May be the situation has emerged because the skills required for creating a low cost software are very different from those required to create compelling and innovative products. While implementing vision of another person developer needs not think about the product, its market acceptability, and even the utility. Instead all the attention is focused simply on preparing a product as fast as possible and as cheaply as possible. Software product development requires a lot of creativity and it appears from the Indian experience, that this creativity is hardly allowed to develop or flourish.

One needs to find if the scenario in Pakistan is also the same or there are some visible differences. It is also necessary to learn from the Indian experience. Without going into too many details, it may be said many Pakistani software developers and exporters are also tying to replicate the Indian model. One way or the other they have accepted their inadequacies or do not wish to take the risk of developing their own products.

According to an expert, "In recent times, I have hardly spoken to an IT entrepreneur in Pakistan whose goal is to build a services company. Everyone is talking products and interesting, innovative ones at that. Now that enterprise software is not as hot as it used to be back in the early 2000s, thanks to open source alternatives and a resistance amongst Fortune 500 companies to freely spend on multi-million dollar licenses, applications with a broader consumer appeal are back in the limelight. This is precisely where the Pakistani software industry appears to be focused."

These are all very promising and positive signs, but there is a long way to go. In the coming years, it will become clear if the Pakistani software industry's new focus on products and innovation is able to deliver dividends and create fast-growing, globally competitive software businesses. However, to achieve this target the developers will have to work hard at their own and depend the least on any government support.

Technology-savvy people cannot be produced overnight. It is similar to that Pakistani business schools churn out hundreds of MBAs every year, they become good executive but only a few entrepreneurs are developed, a person who is willing to invest his money, assume a calculated risk and then working hard to achieve his/her ultimate objectives. Ironically, when one talks about creating a manufacturing facility and a tangible product, many of the financiers are willing to invest or extend credit. However, when it comes to financing software, an intangible product, very few are willing to take any risk. In the absence of venture capital funds in Pakistan, mobilising funds for a software development company becomes the most serious problem.

Interestingly, Pakistani IT companies do not face much problem in creating the infrastructure. Thanks to availability of secondhand hardware now they can assemble their own servers, create efficient and fast working networks. Availability of DSL facility, though the cost is still high, has made transfer of data speedy as well as dependent. However, all the efforts are bogged down due to frequent electricity outages, high electricity tariff, and rampant piracy.

Though most of the critics hate piracy but are also of the consensus that unless cost of original software is brought down getting rid of piracy will be very difficult. Some of the critics say that cost of a tailor-made or proprietary program is high because it cannot be marketed to public. They also say that unless Pakistani developers and enterprises have confidence on each other, software development contracts would continue to go to offshore companies.

Software developers have a valid point they say, the technology uses 'building blocks' and often a software is being developed at many places and finally a product is assembled somewhere in another country. They believe that unless they get a full project their input is not more than a dignified data entry company. This is a point where India excels. Bulk of its export proceeds consist of data entry cost. However, as long as dollars are flowing in not too many people bother about how.

Though a few technology parks have been established particularly in Karachi; the buildings look haunted houses. Most of the buildings are still devoid of necessary infrastructure or the cost being charged is prohibitively excessive.

Some of the analysts are of the view that proceeds of software are hardly recorded as exports mainly because of no documentation are done. One of the reason stated for not locating office in technology parks is an attempt not to be noticed. Though such attempts are made to avoid paying tax, but the excuse seems very weak because all exports are zero rated.