Pakistan: a choice for outsourced software development
By Alauddin Masood

Pakistan is emerging as one of the major players in the global IT industry as a result of policy initiatives taken by the government to position the country as an offshore location of choice for IT services.

In terms of suitability for offshore outsourcing, Pakistan now ranks among 20 top countries of the world, recognised by the global community as 'Market Leaders and Challengers' and placed in the first category countries. Last year, Pakistan ranked in the third category amongst "Potential Players," occupying 30th position among the top 50 IT potential countries of the world.

In a recent analytical report, the world's leading information technology research and advisory company, Gartner, has judged Pakistan to be a "competitive location in terms of cost, with salaries and infrastructure costing less than most offshore destinations." Based on a total of 10 criteria, viz. language, government support, labour pool, infrastructure, education system, cost, political and economic environment, cultural compatibility, global and legal maturity, data and intellectual property security and privacy, Gartner rated Pakistan 'very good' in cost, good in language and fair in all other areas, except assigning a poor rating in political and economic environment. But, the authorities maintain that the political risk of the country is often over-rated – bellying the experience on the ground. However, brand perceptions abroad negatively impact the cost of manpower, the single largest cost in IT, which is about 30 per cent cheaper than neighbouring India.

The government has spent over $ 67 million in promoting the country's software industry. "The Ministry of Information Technology has developed a comprehensive national IT policy, designed to make the government a facilitator in the encouragement of the private sector. To drive development, the government-owned PSEB (Pakistan Software Export Board) plans to construct new IT parks in major cities and approximately 750,000 square feet of space in PSEB-designated parks has already been leased to IT companies. The government is doing a good job of initiating activities in positioning Pakistan as an offshore location, however, it needs to take concrete steps to implement its plans and improve its brand image as an offshore destination."

With English as a widely spoken language in urban areas, Pakistan can also be leveraged for Arabic language support to Middle Eastern countries. Observing that IT revenue grew 59 per cent in 2006; Gartner report says that the country's annual growth is expected to reach 69 per cent between 2009 and 2010. As far as the World Bank is concerned, it "ranked Pakistan 76th out of 178 countries for ease of doing business."

Like some other countries in the region, Pakistan also constructs IT Parks, provides legislative support, industry financing and telecom bandwidth, however, it takes on many other activities, like marketing, company capability programme through international certifications, company specific and company requirements specific training programmes, strategy and research, which are done by the private sector in many other countries. PSEB, a Government agency mandated to promote IT industry (including software, services, hardware and call centres, locally and globally), regularly sponsors its member IT companies to participate in international Trade Shows and Exhibitions to help companies to showcase their capabilities and develop lucrative business contacts.

With an IT industry worth over US$ 2.8 billion, including annual exports exceeding US$ 1.4 billion, the government is now eyeing to increase the size of the country's IT sector to over US$ 11 billion by 2011. One of the main factors contributing to the IT sector's rapid growth is the government's policy of allowing foreign investors 100 per cent ownership of equity and 100 per cent profits as well as tax exemption for IT companies until 2016. The government also allows tax exemptions on export income from computer software and related services. Moreover, the regulatory regime for IT companies is one of the most efficient outside the developed world.

With four nationwide fibre backbones, three international cables, and fast expanding wireless broadband connectivity, serving over 30 million people, broadband connectivity is another strong point contributing to Pakistan IT industry's fast track development.

Presently, there are 1082 active IT companies in Pakistan. Out of these, 150 companies are ISO/CMMi certified, which ranks Pakistan amongst states having the highest percentage of ISO/CMMi certified companies. The country has 110,000 IT professionals, while its public R&D infrastructure employs over 15,000 IT professionals in the economy. Currently, there are some 20,000 IT graduates being produced annually, however, by 2011; it targets to have over 252,279 IT graduates in the economy.

These competitive advantages are contributing to Pakistan's emergence as a location of choice for outsourced software development and IT enabled services, such as call centres and Medical Transcription. Several multinational companies have located development and support centres in Pakistan, while others outsource work to local companies.

Owing to high quality coupled with lower attrition rates, local IT companies have been able to acquire business from leading corporations of the world, including GE, Citi Crop, Bank of America and Google, while IBM, Bearingpoint and NCR have established their own development centres in the country. TRG, an IT-enabled services company, has acquired companies with revenue of over 175 million dollars in USA. Touchstone-BPO has certified USA mortgage loan officers that handle customers directly from the USA. Post-Amazers have animated major Hollywood movies. Two Pakistani IT companies are public on NASDAQ and have acquired financing from the Silicon Valley.

The other major aspect of IT industry is intellectual property creation. Over 100 universities, over 500 government R&D institutions and thousands of expatriates, who have returned home, are undertaking world-class innovation. About 10 local product companies are world leaders in their product niche. Amongst these, Ultimus is a highly ranked business process management product company with 1600 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 12 per cent of the USA market.

In IT technology, a number of IT companies have built software that leads the world in areas like car leasing, enterprise application integration, mortgage lien processing, stock market order management, mobile convergence, or data and web content management for some of the leading corporations of the world.  In short, IT companies earn bulk of their revenues from exports, almost 60 per cent to the USA. Several IT companies have also succeeded in making inroads in the fast growing IT market of the Middle East and earn million of dollars in the export of software, hardware and services. Besides having a positive impact on the IT export related earnings, software export activities by Pakistani companies are also enhancing the country's image abroad.