Software Industry of Pakistan

The It and IT-enabled Services (ITeS) marketplace ofers lucrative opportunities for developing countries to join the ranks of the developed world. The scale and pace of growth in this sector is faster than in any other industry, and a number of developing countries are attempting to emulate the success enjoyed by countries such as China, Thailand and India. The Government of Pakistan has been proactively developing the IT sector in Pakistan since the last few years. A few of the incentives offered include tax exemption till 2016, establishment of IT Parks with low rent, foreign ownership of equity invested in IT and 100% repatriation(returning to the country of origin) of profit allowed to IT companies. Pakistan’s IT industry has been rising steadily since the last three years. A marked increase in software export figeres are an indication of this booming industry’s potential.
STATISTICS OF THE PAKISTANI IT/ITES INDUSTRY (Source: PSEB)

Total number of IT companies registered with PSEB(pak software export board)

1082

384 Karachi Number of substantial IT companies city- 276 Islamabad wise breakup 353 Lahore 69 others Total number of foreign IT and telecommunication companies working in 60 Pakistan One CMM Level 5 company, one CMMI Level Number of CMM-assessed companies 5 company, three CMMI Level 3 companies and four CMMI Level 2 companies Total industry size US$ 2.8 billion IT and IT-enabled services exports US$ 1.4 billion Percent growth in exports over the last one 61.18% year Number of IT graduates produced per year Approximately 20,000 Export targets for the current fiscal year US$ 108 million 2006-2007 Number of universities offering IT/CS 110 programs Number of IT professionals engaged in export-oriented activities (software More than 15,000 development/call centers etc.) Total number of IT professionals employed 110,000 in Pakistan Total IT spending in the fiscal year 2005- US$ 1.4 billion

2006 Total space utilized in IT & Software Technology Parks

Eleven IT Parks covering an area of 750,000 sq ft

A recent Bearing Point study places Pakistan’s global IT export revenue in the Financial Year 2004-2005 at around US$ 400 million. The basis of the figure was the State Bank of Pakistan’s IT export revenue figures of just under US$ 50 million. Bearing Point multiplied this figure by two to account for the IT export revenue brought into the country, but not registered as such with the State Bank. BP further estimated that for each dollar brought into the country, three dollars are retained by Pakistani IT companies overseas. The global IT revenue of Pakistani IT companies therefore added up last year to US$ 400 million. Therefore, for official IT export figures of just under US$ 75 million reported by the SBP for FY 2005, the actual global receipts of Pakistani IT firms should be around US$ 600 million. State Bank Reporting Earnings US$ 116m Estimated Total IT Industry Export Revenue US$ 1.4b Estimated Total IT Industry Size US$ 2.8b

The total IT services export from Pakistan in FY 2005 amounts to US$ 1.050 billion, or conservatively US$ 1 billion. Pakistan offers various competitive advantages over other outsourcing destinations, such as high quality software development, swift and easy establishment of business, lowest cost basis and emerging and state-of-the-art telecommunication and IT infrastructure. Experts estimate an average annual growth of 33% in the sector. This will result in thetotal IT export revenue crossing US$ 10 billion in the next five years.
EMERGING OPPORTUNITIES

Animation One of the truly emerging areas in the context of software i.e. gaming has only begun to gain significance in Pakistan over the last few years. Animation is not just about making interesting clips using software such as Macromedia Flash and 3D Studio Max; rather, its complexities can involve the improvement of viewing capabilities of a website, utilization in games where movie clips are concerned, or even in advertisements. A number of Pakistani IT companies are successfully and making use of animation in a variety of possible dimensions. An example of such is the advertisement campaign for 7UP based on the Fido Dido character, which makes major use of animation. In 2004, the Government of Pakistan acknowledged the animation sector as a core and profitable component of software development, initiating a project in which 40 graduates were selected for placement through an apprenticeship scheme in some of Pakistan’s

premier animation companies. Most of these graduates went on to find permanent places in those very firms. The project ended in the last quarter of fiscal year 2005, with some of leading animation firms of Pakistan. BPO Business process outsourcing is an emerging concept that gives numerous cost advantages over the conventional in-house development. Already, many of the fortune 500 companies have established their offshore development centers in Asia to reduce their cost and sky-rocket the profit. The BPO industry is growing rapidly in Pakistan, with exports up by 45 percent in the fiscal year 2003-4 alone. Pakistan has a large untapped labor pool of English-proficient graduates willing to work at wages 60% below their US counterparts. Furthermore, consolidated operating costs are estimated roughly 30% lower in Pakistan as compared to India or Philippines, two of Asia’s major BPO contenders. The Government has provided numerous incentives and is willing to invest heavily in the infrastructure required to jumpstart growth in the BPO sector. Pakistan has one of the fastest growing cellular industries in the world. This, along with the fast-growing Karachi Stock Exchange, has put the country in the spotlight of corporate managers worldwide. This positive tone has been seconded by a Harvard Business School analysis, entitled "Business Process Outsourcing (BPO) opportunities in Pakistan". The report touts 30 percent savings in costs in Pakistan as opposed to India, along with infrastructure advantages such as high-speed connectivity in all the major cities at competitive rates. ERP Enterprise Resource Planning (ERP) is perhaps one of the toughest and most demanding software solutions to provide to any client, involving the complete automation of the customer’s company processes. ERP comes in two basic forms: customized ERP (software made as per the demands and needs of the client) or standard ERP (a solution such as SAP that can be bought ‘off the shelf’ to be implemented). Pakistan's Small and Medium Enterprises (SMEs) sector is currently operating at a disadvantage. This is primarily because a majority of the manufacturing and planning processes are either not automated, or, if automated, are not being utilized to their fullest potential. In order to close this gap, PSEB's ‘Automation of Domestic Industry on Open Source Systems’ project is underway for developing complete ERP solutions to automate the processes and procedures for the SMEs in HR & Payroll, Finance, Inventory, Production and Sales in those sectors of the economy which have the highest export potential. The ERP solutions are being developed using open source software code, allowing for further enhancements to be made to the applications as per the needs of the units. The project has collaborated with software consulting companies with expertise in developing/implementing ERP solutions for the industry.

Gaming Computer games are now a huge market with firms such as Electronic Arts and Capcom investing billions of dollars into the industry, and earning similar amounts through the widespread fame and sales of hits such as FIFA 2005, the Prince of Persia trilogies, Halo and Counter Strike etc. Game development is emerging in Pakistan’s IT Industry as well with some serious work being done in the field indicating progress. One such example is Commando 4, Pakistan’s first ever 3D animation game. Anther such popular character is Commander Safe Guard launched for leading international chain P&G. With the IT leaders of the country realizing the potential of the game development market, Pakistan’s IT industry is making more investments to develop country’s own gaming industry. Convergence Pakistan is fast heading towards the convergence of IT, telecom and other services, and IT & Telecom have great importance for the country. The country is responding rapidly to the era of convergence and coming up with the appropriate policy and regulatory frameworks to go hand in hand with the converged networks. Technology convergence in the telecom and the IT sectors has led to service and company convergence. During the last decade, liberalization of the telecom sector in countries where it was a State monopoly has spawned intense competition within and across borders. The rise of consumerism and the need to anticipate consumer demand have been a catalyst to convergence of services. This has in turn inspired innovation in communication technologies. The trend is clearly evident; traditional telecom operators have started offering audiovisual programming and Internet access. Cable TV operators are rolling out a variety of telecom services including voice telephony. Cable modems are deployed to provide highspeed Internet access. Broadcasters are switching over to program bouquets, pay per view and experimenting with digital transmission in more advanced countries. Technological changes are leading towards growing demand and innovations are significantly modifying the structural features of the telecom industry with emerging convergence across fixed, mobile, Information Technology (IT) and media sectors. Web The name Web 2.0 refers to a combination of improved communication between people via social-networking technologies, improved communication between separate software applications via open Web standards for describing and accessing data, and improved Web interfaces that mimic the real-time responsiveness of desktop applications within a browser window. In general, Web 2.0 refers to a supposed second generation of Internet-based services such as social networking sites, wikis, communication tools, and folksonomies - that emphasize online collaboration and sharing among users.

Significant progress has been made by Pakistan in this arena as well with a number of featured examples of web 2.0 technology utilization. Pakistan leads the offshore in their technology expertise and experience with keeping up with the trends. There are fewer firms working on cutting-edge Internet portals at this time but in terms of quality and value-for-money, Pakistani firms are far ahead than others in the region. Policies and related issues For most of the 1990s, Pakistan invested heavily in information technology (IT) and an industry began to emerge. Thousands of people there are now online, but developing quality software that sells in the international market is a different matter — and one that needs a radical rethink. During the initial flush of enthusiasm, IT training institutes opened across Pakistan, and the government funded increased Internet access in villages, towns and cities. The assumption was that Pakistan would somehow become a big software exporter, and reap a projected US$1 billion by 2000. Today, things have changed considerably. On the plus side, there are signs that the industry has become more sophisticated. Many entrepreneurs who formed companies in the early 1990s — believing in the mantra 'I will make it, they will buy it' — have learnt the value of specialization (e.g. cybernet is not more into software development now), good marketing, and quality software development. Software companies have developed an increasingly strategic vision, and the 'reverse brain drain' has also helped by bringing in fresh ideas, capital and contacts. On the downside however, the industry faces serious organisational and managerial challenges. These include a lack of human resources, venture capital and — most importantly — an inspiring, world-class success story. The problem with policy today, as opposed to the 1990s, is that while policymakers generally recognize that the IT sector is going to be important to Pakistan's long-term growth, there is considerable ambiguity on how big that role can be. The policymakers have, therefore, failed to tackle the biggest challenges directly. They need to decide whether their objective is to build an industry that challenges those in some emerging countries (whether big players such as India or smaller ones such as Malaysia, the Philippines and Ukraine) or merely one that remains a user of IT. If you just want to be a user then don’t invest much on IT institutes, which is never a right choice for developing countries.

If Pakistan is serious about emerging as a global IT leader (or even a second-tier follower) it needs to take drastic policy measures. Although the industry continues to grow at a healthy rate of 20-30 per cent, it is stuck in a low-level equilibrium: there are no imminent technological leaps, such as those that transformed India's IT industry in the 1990s. The roots of the problem lie at many levels — from individual companies through to policymakers in government, and the industry as a whole.

Infrastructure, investment, image

Pakistan's IT industry suffers from a lack not just of physical infrastructure, but of carefully distributed telecommunications capacity — i.e. multiple access points and extra capacity to link with the international telecommunication network. For instance, until recently, the country's Internet access was through a submarine cable that was cut off twice in 2004. While this was an eye-opener for policymakers and forced them into launching a standby undersea cable, Pakistan's telecommunications capacity and access remain too restricted to support a fast growing industry providing constant support to serve the Western market. This clearly shows the government's failure to provide a public facility that is critical to the growth of the IT industry. A clear, consistent and uniform investment policy is the second key element in elevating Pakistan's IT sector. Attracting investment not only boosts image, but also exposes the local market to foreign ideas, management practices and capital. The government must develop policies for attracting foreign investment in IT. Providing tax-free status to the industry has clearly not worked as well as expected, primarily because too many other countries do the same(this is not a sustainable thing to do). Unconventional approaches are needed. One might be to develop a package of incentives specifically designed to ease bottlenecks such as a lack of real estate and manpower training. This might level the playing field for foreign companies looking to invest abroad. Such a package would not have to be an outright subsidy (shouldn’t miss the economic engine), but could be a scheme that recovers its value quickly — through job creation and tax revenues. It should also be openly communicated and implemented fairly (which is again a major issue wherever Govt. of Pakistan is involved), transparently and consistently.

The widespread perception of Pakistan as a backwater also needs to be tackled because this can affect the economic interactions needed to jumpstart its IT industry — such as 'selling' the country as an alternative to China, India or the Philippines. (As we saw in the case of textile industry; export marketing is crucial) Branding Pakistan is not a job for individual companies, but a collective task for the industry as a whole, and one in which the government must become an equal partner. Doing so would require a sustained and meaningful interaction with academics, business leaders, and policymakers in the West. The human factor — and beyond The quality and quantity of human resources is another critical issue facing Pakistan's IT sector. Cheap labour, often seen as a strategic advantage, is in reality a major weakness (people are now moving away from IT field). Not only does Pakistan produce too few software professionals (programmers, managers, entrepreneurs) for the proper development of an industry, but it also fails to provide the quality of training needed. Of the 5,000 or so IT professionals trained within Pakistan's various IT institutions, only 1,000 or so are immediately employable. A high-quality curriculum and efficient trainers are obviously needed, yet our policymakers have so far failed to grasp this. But while it is important for policymakers to take on these four challenges — infrastructure, investment, image and human resources — ensuring unrestricted growth in Pakistan's IT industry could depend on a number of other policy issues. One is the creation of a vibrant domestic IT market. Significant barriers stand in its way, however. Several IT leaders (according to an article in Spider magazine) complained of a lack of government contracts, the slow pace of the 'e-government' initiative and the award of major contracts to large public sector organizations and foreign entities. They argue that major IT clusters such as Silicon Valley in the United States and Boston Route 128 would not have met with success if major contracts for US defence research had not been awarded to the local industry. Policymakers, on the other hand, complain — with some justification — of the IT industry's 'lack of sophistication' and inability to deliver. Other issues that require careful analysis and comprehensive policy interventions include providing venture capital and protecting intellectual property rights. These policy measures, however, require reciprocation by the industry as well. The industry would need to commit to these goals — ideally through a public-private partnership designed at making, and realising the benefits of, contingent commitments by both public and private sectors.

INDUSTRY ASSOCIATIONS

Following are some of the renowned IT associations of Pakistan. PASHA CSP OPEN TIE ACCO PCA
PAKISTAN SOFTWARE HOUSES ASSOCIATION (PASHA)

Pakistan Software Houses Association (PASHA) was formed in the last quarter of 1992 by nine software houses. By 2003, PASHA had grown to over 200 members. Its main objective is to promote and develop the software and services industry in Pakistan and to protect the rights of its members. The software and services industry is growing at an enormous pace in Pakistan and PASHA, along with its members, is playing an important role in making their presence felt, both nationally and internationally.
COMPUTER SOCIETY OF PAKISTAN (CSP)

The Computer Society of Pakistan (CSP) is the national organization of Information Technology professionals in the country. It was established in 1973 to promote the use of computers, increase general awareness among the public and to look after the professional interests of the IT personnel in the country. The Society holds lectures, seminars and technology forums which provide an excellent platform for the interaction of professionals. It organizes annual computer exhibitions and software competitions all over the country with the objective of fostering a better future for IT in Pakistan. The Computer Society of Pakistan sponsors students to take part in the international software competitions in various countries as well as organizes various programs for the youth. The current membership of the Society is over 2000 professionals working in over 350 public and private sector organizations.

THE ORGANIZATION OF PAKISTANI ENTERPRENEUS OF NORTH AMERCIA (OPEN)

The Organization of Pakistani Entrepreneurs (OPEN) is a voluntary not-for-profit association dedicated to providing leadership opportunities for our members and community. The organization was formed in 1998 by a group of Pakistani-American entrepreneurs and corporate executives and registered in the Commonwealth of Massachusetts in the year 2000. The association's charter is to provide networking opportunities and enhanced business opportunities for entrepreneurs and professionals who work in high tech, finance and biotech fields in North America. OPEN meetings and events are open to the public. OPEN has chapters in New England, Silicon Valley, New York, and Washington DC. OPEN Chapters have boards comprising the most successful Pakistanis in the areas of finance, technology, telecommunications, biotech and consulting in North America. OPEN regularly organizes events pertaining to current issues in business and entrepreneurship. In addition to OPEN'S highly successful Board of Directors, OPEN is comprised of executive committees of seasoned entrepreneurs and professionals from a multitude of industries and professions that help plan, coordinate, and execute OPEN's mission.
THE INDUS ENTERPRENEURS (TiE)

A global not-for-profit network of entrepreneurs and professionals dedicated to the advancement of entrepreneurship. TiE's mission is to foster entrepreneurship globally through mentoring, networking, and education. TiE, The Indus Entrepreneurs, also known as Talent Ideas and Enterprise is a global, non-profit network dedicated to the advancement of entrepreneurship. Founded in 1992, in Silicon Valley by a group of successful entrepreneurs, corporate executives, and senior professionals with roots in the Indus region, the organization today has over 10,000 members across 44 chapters in 9 countries. Dedicated to the virtuous cycle of wealth creation and giving back to the community, TiE's focus is on generating and nurturing our next generation of entrepreneurs. In order to achieve this organization has built programs to energize and inspire its constituencies and the flagship event being TiEcon, the largest conference for entrepreneurs worldwide. The one constant guiding the evolution of TiE has been its philosophical framework. It has kept the vision and decisions of TiE's leadership true to its basic beliefs that wealth creation and giving back to society are invaluable human endeavors, and that an open, inclusive and forward-looking organization is the right vehicle in which to reach their objectives. A global not-for-profit network of entrepreneurs and professionals dedicated to the advancement of entrepreneurship. TiE's mission is to foster entrepreneurship globally through mentoring, networking, and education. TiE, The Indus Entrepreneurs, also

known as Talent Ideas and Enterprise is a global, non-profit network dedicated to the advancement of entrepreneurship. Founded in 1992, in Silicon Valley by a group of successful entrepreneurs, corporate executives, and senior professionals with roots in the Indus region, the organization today has over 10,000 members across 44 chapters in 9 countries. Dedicated to the virtuous cycle of wealth creation and giving back to the community, TiE's focus is on generating and nurturing our next generation of entrepreneurs. In order to achieve this organization has built programs to energize and inspire its constituencies and the flagship event being TiEcon, the largest conference for entrepreneurs worldwide. The one constant guiding the evolution of TiE has been its philosophical framework. It has kept the vision and decisions of TiE's leadership true to its basic beliefs that wealth creation and giving back to society are invaluable human endeavors, and that an open, inclusive and forward-looking organization is the right vehicle in which to reach their objectives.
ASSOCIATION OF CALL CENTERS & OUTSOURCSERS (ACCO)

ACCO is an organization rich in information and experience with a wealth of knowledge and wisdom in its members. The key to the continuing success is the sharing attitude among its members. The industry in Pakistan is now in a growing phase and many organizations require advice around realizing the investment in their contact centre in terms of enhanced customer service. ACCO is in a unique position to assist today's contact center market place in their quest for improved delivery. ACCO provides valued services, at both individual and organization level, encouraging the promotion of best practice and professional standards. ACCO is established as a pivot for building new memberships with other professional bodies, government departments, overseas organizations and other agencies who have an interest in the successful development of contact centers, organizing the said conference is a link to this commitment

PAKISTAN COMPUTER ASSOCIATION (PCA)

Pakistan Computer Association (PCA) was established in December 2000 as an autonomous, non political, non partisan, non-profitable and service oriented organization. The Computer Association has been formed with the involvement of professionals, specialists, manufacturers, institutions and the related organization of Computer and Information Technology within the country.

Local Scene: PRODUCTS For the local market, where the software houses begin from , major products that is in demand is mostly financial programs for banks and other financial institutions followed by range of other applications for the production and manufacturing industry, the power and energy, communication, human resources, quality control, general accounting, point of sales, education and skills development leasing as well as other finance related matters, there are other specialized software for pharmaceutical, textile, cement, insurance and transport industries for both local and international market. MAJOR PLAYERS Most of the software houses, though established in the 80s, came to limelight after the formation of Pakistan Software Export Board and prospective exporters were asked to register. During the first year of the board less than a hundred companies registered with the board while the number increased to 116 in 1996 and about 200 last year. Likewise, the Pakistan Software Houses Association which started with less than five members in the first year of its formation has more than 150 members by the end of last year , 18 out of which are presently working on various international contracts. Among the players, Systems Private Limited is regarded as the first software house to be established in the country. Established in Lahore in 1977, by a group of professionals led by Aezaz Hussain, the former president of PASHA. The company is regarded as the market leader in the country at present, its major specialty has been the ability to deliver complete turnkey and customized computer solutions ranging from project conception, system study and design. Sidat Hyder Morshed Associate Private Limited represents the worldwwide organisation, Arthur Anderson in Pakistan and the relationship has enable the local company to tap its principal's resources in over 72 countries. The company has been in computer related and financial as well as management consultancy since 1986, and has designed and developed various customised software and products both for local and foreign clients. Some of its services and clients include the World Bank, the development of accounting systems, general ledger and procedures for Sandoz, Merck Sharp & Dohme, Orix Leasing, Oxford University Press, design and development of a foreign exchange

application system for a LAB-based PC for the International Finance Investment and Commerce Bank, designing and development of Windows-based client server MIS application for the training region of the International Telecommunication Union for PTC. Established in 1983, Noble Computer Services offers full-scale system and development of solutions and specialises in customised software development on AS/400, NT, Windows platform, NCS software products, implementation services as well as training and education services for BPCS, NCS and Microsoft products. ACE-Advanced Information Management Services or ACE-AIMS belongs to a multidisciplinary firm of professional consulting engineers and is specialised among other services in designing and developing software for database management. Recently the company designed a system for maximum flexibility in human resource management. 'HR-2000' which is a locally developed, international level software for automizing the HR department is a comprehensive Human Resource Management system geared towards helping proactive HR managers achieve organizational goals with speed, accuracy and objectivity. The system is based on the translation of corporate culture, policies and methodologies for succession planning, carreer development, performance appraisal, competencies, and the overall tracking of each movement of employees. ACE-AIMS is among the few companies in the sector to have so far responded to the government's call to establish a computer education institute by establishing an education services department. The company is currently operating in Saudi Arabia, USA, U.K., Iran, Malaysia, Indonesia and Nigeria. Crescent Software Products Private Limited is a member of Crescent Group, is one of the largest software export companies in the country, developing software and related services in the domestic as well as in the international market KPMG Peat Marwick Informationa Technology is a member firm of the worldwide KPMG organisation with over 800 offices in 120 countries with annual turn over of over six billion. Paksoft, another major player in the local software market, is a joint-venture company set up by five well known software houses in the country which include Infosys, Noble Computer, Sidat Hyder Morshed Associates, Globalsoft and KPMG.

Metrosoft, another software exporter is a subsidiary of Expert Systems Private Limited which has been in the local software market since 1989. ZRG International is one of the foreign based software houses with office here in Pakistan, it opened its first foreign office in Pakistan in 1991 and offers a variety of ready-made products to the financial institutions. CompSoft International Private Limited is a subsidiary of Forbes Computer Technology, based in California, it provides a full line of hardware, software applications and specialized technical services to Fortune 500 to 2000 companies. XIBERCOM is the pioneer in introducing Web designing in Pakistan, a brainchhild of Dr. Altamash Kamal, the company is involved in a number of web related services which include providing and authoring web space, customised domain names, personalised electronic mail addresses and communication consultations. CroXx Linc International, a sister company of CroXx Linc Mines has been in the local software market since 1993 and is incolve is software designing, consultancy, development and networking, network project management, game design and support service. PSEB Realising the importance of exports in the industry, the Export Promotion Bureau presented a proposal to the federal government to form a board which will constitute among its members practitioners from the software industry with main objective of encouraging software exports from the country. Headed by a managing director, who is a software developer, the board has as its members federal secretaries of the ministries of commerce, communications, education, environment and urban affairs, finance, interior, science and technology, board of investment. The president of the Pakistan Software Houses Association (PASHA), the head of PTCL, the chairman of central board of revenue and the vice chairman of Export Promotion Bureau are all members of the board. The first task of the board was to approve a policy framework and incentives package for the industry which include both fiscal and corporate incentives. It is said that among the fiscal incentive recommended for the industry is the exemption of duties, tax, surcharges and leviable octroi on all computers and related hardware, peripherals including communication hardware and software, telemetric infrastructure and software development tools to be used excusively for software exports.

Other incentives include the exemption of corporate tax for a period of seven years during the company's ten years of operations on export earnings from software related services. Financial assistance has been promised to the Software houses both in the forms of loan through nationalized banks and other financial institutions as well as equity support from government funds for the purchase of computers, communications and the equipment. International high speed data circuits have also been promised to the Software houses at the rates that will be highly competitive to rates offered by other telecom companies in the region, this is important if the rates of these software houses are to competitive in the international market. And most importantly is the permission to the software houses to re-export their capital goods without any levies. It is said that support from the Board has not only brought these companies together, it has also provide an opportunity for a smaller firms in smaller cities to introduce themselves to the international market by participating in international exhibitions. By encouraging the members to participate in international shows, PSEB has focused the attention of the sector on the vast potential offered by the international market Efforts: In collaboration with the University Grants Commission (UGC), PSEB launched what it called the 'Action Learning Centers of Excellence (ALCoE) two years ago by inviting proposals from the private sector. The programme is a frame work which allows a private sector party to join hands with existing universities of repute to create high quality institutions. Following the invitation, more than 200 institutions were reported to have showed an interest in setting up this institute which includes international giants like IBM, Microsoft, Oracle and other industrial groups like TCS, Jaffer Brothers and Shaheen Foudation. Some of the universities which were selected for the programme at that time include the Institute of Business Administration, IBA Karachi, Sir Syed University and Technology, Karachi, NED University of Engineering and Technology, Karachi, Mehran University of Engineering and Technology, Jamshoro. Others include National University of Science and Technology, Rawalpindi, University of Engineering and Technology, Taxila and Arid Agriculture University, Rawalpindi.

The program which include a one-year curriculum, which was developed by the PSEB and was approved the UGC, emphasis more on hand-on-training is yet to pick up at the speed it was conceived. Another objective of PSEB is to develop and execute marketing plan to help local software houses, as the companies dealing in software are known, reach out to potential clients abroad, at the same time PSEB will attract and facilitate foreign software firms to establish their software development facilities in the country and facilitating international trade fair participation. The board will also plan, develop and execute the software technology park scheme to provide office space, communications and electric power facilities to companies and firms willing to establish in the park. Issues of Local Market: First and foremost among the problems facing the local industry is the level of awareness among the local populace, and according to experts, unless something is done in this aspect, the gap will continue to widen due to the fact that most of the experts in the field at present are concentrating outside the country while the country is not producing enough substitutions. According to one of the systems analysts in the city, all PASHA and PSEB who claimed to be struggling for the cause of IT in the country could do is to trade accusations among each other and not paying attention to the problems facing the nation. It has been observed that the two always avoid sitting together and does not attend each other's functions talk less of meetings. By the way of subsidizing the government spends more than 200,000 dollars on each COMDEX exhibition that software developers from the country attended, which causes the main tussle between the two as PASHA members accuse the other members of using the platform for their own self interest. There is a need to encourage the smaller companies too to participate in the international exhibitions, to reach the projected figure we will certainly need more than five large companies that seem to dominate the scenario at present. And most importantly, we will need more than six-monthly programmers to serve as professionals in the field, if we are to address the issue effectively today, by establishing proper departments in the universities, it wwill take another four years to produce professionals.

Some of the Success Stories: Company: CresSoft www.cressoft.com CresSoft has a splendid track record of delivering technologically challenging software & e-business solutions for fortune 500 clients and large businesses in the US. From its earlier ventures in object technology, communications and security related products to its present focus in business-to-business e-commerce and web related technologies; CresSoft has been the pioneer software exporter in the country. Project overview Developed object oriented customer care system for local telephony that included functionality for ordering, trouble ticketing, revenue management, product catalog, campaigns, inventories and workforce scheduling. Front end was based on small talk and Sybase. The system is in production in Time Warner divisions. Also developed an ordering system for dedicated telephony using small talk and Sybase. The system reduced order-processing time considerably and can be easily extended through a rule-based editor to support fast evolving standard. Company: Xavor Pakistan (Pvt) Ltd Project overview Xavor partnered with Cable and Wireless, a major global telecommunications business, to create a trade banking exchange for one of C&W's biggest enterprise customers. Xavor led the program and carried out development, systems integration and deployment. Powered by TIBCO, the exchange offers a comprehensive and integrated portfolio of trade-related products and services spanning sourcing/procurement, banking and logistics delivered direct to their customer's desktop. The result is a scalable, highly reliable, fully managed trade-banking offering with 24x7 support - the first of its kind in the industry. Company: NetSol NetSol is a global information technology (IT) solutions and consulting services company. The company offers a broad range of capabilities ranging from consulting and application development to systems integration and outsourcing. Their current client list includes some blue chip corporations like DaimlerChrysler, ICI, Volvo Finance, GMAC Finance and Citibank. The services offered by NetSol are delivered by our global team of

over 270 people from offices located in Pakistan, USA, and Australia. Staring from Lahore, Pakistan in 1995, the company now is listed on NASDAQ (ticker: NTWK). The software development facility in Lahore is ISO-9001 certified and is currently on its way to achieve CMM Level 3 accreditation. Project overview NetSol has developed a complete suite of products for the lease and finance industry. The entire suite is the first end-to-end solution, which encapsulates the core business requirements of any type of lease and finance company. These business critical products are successfully implemented at DaimlerChrysler operations across Asia including countries like Singapore, Australia, Taiwan and Thailand. NetSol is also the preferred software solution partner for DaimlerChrysler Services in Asia Pacific. The following are the key software products that are currently being used by DaimlerChrysler: Dealer front-end (ePOS) - online quotes, credit application submission and monitoring Proposal Management System (PMS) - back-end workflow and credit evaluation system Contract Management System (CMS) - management and maintenance of lease/finance contract throughout the life cycle. Wholesale Finance System (WFS) - complete solution for floorplan business covering credit limits, loan management, billing and settlement, stock auditing, dealer information and pay-off functions.

Global Scenario

IT Rivalry and collaboration Giving a boost to the feel good created by the ongoing Confidence Building Measures (CBMs) between India and Pakistan, the IT firms of both the sides have also signed several business deals. "Arwen Tech signed up with Hewitt India for HR skills assessment and strategy for training of call centre personnel. Another Karachi based company Emmaculate Solutions, signed up with IFlex Solutions of Bangalore. Compare, Delhi has gone into a joint venture with Creative Chaos, Karachi to develop 6 web portals," Azeem Premji, Chairman of India's largest IT company Wipro has shown interest in establishing a development centre in Pakistan. The agreements were inked during a nine-day visit of a 15-member delegation of the IT and IT Enabled Service (ITeS) companies from Pakistan to Mumbai, Hyderabad and Bangalore on the invitation of NASSCOM (National Association of Software and Service Companies). According to news NASSCOM and PASHA would be lobbying for the governments to allow countrywide visas for business people from IT industry as visa issue is proving to be a major hurdle in the way of co-operation and collaboration. These agreements have generated hopes that software and service companies in India and Pakistan would work together to generate more business for the region. Confidence Building Measures should be implemented on business front also. If we analyze, we will find that reason behind these collaborations is China that is emerging as a major threat to both India and Pakistan in the global software industry.

Chinese American entrepreneurs from the Bay Area are going back to their homeland with Silicon Valley know-how, connections and capital to help build a burgeoning software industry. Blessed with cheap technical talent, Chinese firms have begun to undercut the bargain-rate companies in India. Among China's advantages: -- Cheap labor. In China, salaries of information technology professionals are roughly one-sixth (or even less) of those earned by their U. S. counterparts, according to an article. That's on a par with India, industry watchers say. But the final cost of any software outsourcing project may vary, experts say, depending on tax breaks and other incentives, the experience level of the staff and other factors. -- Market opportunity. China's entry into the World Trade Organization in 2002, its selection to host the Olympics in 2008 and double-digit economic growth are luring multinational corporations that need help localizing their products for the Chinese market. Foreign investment in China reached $53.5 billion in 2003, up from $3.41 billion in 1990. -- Domestic demand. China, too, will have domestic demand for software, as the country's booming home-grown companies require these services. -- China as gateway. Chinese programmers can also serve customers from Japan and Korea, whose language, culture and geography are closer to the mainland than India. India and Pakistan’s outsourcing firms have struggled to access these markets. -- Government incentives. China's government has fostered its software industry, offering tax breaks and space in high-tech parks to startups, expanding universities and providing funding to software vendors for international-standards certification. Shenzhen is a chief contender for the title held by Bangalore, India, competing with cities such as Hangzhou, Guangzhou and Shanghai. India and Pakistan: A Comparison

Some of the Success factors of Indian Industry: 1) The number one reason has to be the large well educated population in India. 2) The highest number of English speaking people. (one of the rare positives of Indian invasion by British) 3) Low wages in India as compared to West. Although this factor is slowly becoming a disadvantage, it was one of the main reasons for International Software companies to outsource IT work to India. 4) The Indian culture itself is a huge contributor. For e.g: Parent’s commitment to children’s education. The importance of education is ingrained by them on their children at a very young age. They see good education as the only means to have better standard of living. 5) As much as Indian IT Industry has grown due to offshoring, equal amount of credit should go to growth of domestic companies in Auto, retail, banking, telecommunication, manufacturing etc. They have equally contributed in its growth . 6) The young and dynamic working population. More than 60% of Indian people are below age 25 ! (study by Wipro,India)

7) The opening up of economy starting in early nineties. The outsourcing / offshoring started taking roots due to the change in policies back then. 8 ) Partial privatization and growth in Telecommunication, in late nineties. Telecommunication forms an integral part of Information technology Industry. 9) The rapid growth in IT parks in India in last 10 years. Government setup SEZs (specialized economic zones), where opening of software services companies would get certain tax subsidies. This attracted lot of companies to setup software shops. 10) The tax breaks and sops offered by Indian government for upcoming software firms. This made India one of the most attractive markets for setting up Software shop. 11) The commitment of Indians towards their work. It is a common knowledge that people in Software Industry normally put more than 10 hours a day in their work. I do not subscribe to the view that working long hours necessarily leads to higher productivity, but I think this “hard working Indians” definitely plays on people’s mind. 12) Rapid growth in Infrastructure and transportation facilities that started in mid nineties. 13) The entrepreneurial spirit and Innovative tilt of Indians. This may be controversial, however I think it is a factor that has made Infosys and Wipro such huge success stories ! 14) The time difference is one of the reasons for growth of Indian IT Industry. Western countries get advantage of having a 24 hour work cycle. 15) Basic business and marketing sense even in fresh engineers is one of the key success factor. Why choose Pakistan? 8 REASONS Pakistan offers various competitive advantages over other outsourcing destinations, such as high quality software development, swift and easy establishment of business, lowest cost basis and emerging and state-of-the-art telecommunication and IT infrastructure. Experts estimate an average annual growth of 33% in the sector. This will result in the total IT export revenue crossing US$ 10 billion in the next five years. Pakistan is emerging as the destination of choice for IT outsourcing in Pakistan for the following reasons: • • • An IT workforce of 90,000 with good English language and people skills growing at a phenomenal rate of almost 20,000 a year. A hundred ISO-certified IT companies, with over 25 undergoing CMMI rating. A reliable digital telecommunications infrastructure with backup and reliable energy and transport networks.

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An ambitious program of world-class IT Parks, with a rental rate of approx. US$1 per sq ft /month. A prosperous economy that offers lucrative domestic opportunities and is attracting increasing amounts of international investment. A steadily improving risk rating and a tightening environment for intellectual property protection. A streamlined government regulatory process of one of the most attractive incentive programs anywhere, which includes tax exemptions, 100% foreign equity and earnings repatriation. International leaders such as BearingPoint, NCR Teradata, Mentor Graphics and ZTE have chosen to locate their development and consultancy center in Pakistan.

Government incentives: • • • • • • • • • • Information Technology Parks with low rent, fiber optic connectivity, libraries and conference rooms Provision of funds for software companies to get ISO-9000 and CMM-level certifications Foreign investors allowed 100% ownership of equity in "IT/ITeS companies" Tax exemption for IT companies till 2016 100% repatriation of profits allowed to IT companies Seven years' tax holiday for Venture Capital funds The rate of depreciation on computer equipment is 30% The State Bank of Pakistan (SBP) has allowed the opening of Internet Merchant Accounts by banks Instant, reliable and high-speed connectivity available Over 85% of telecommunications infrastructure is on fiber optic cables

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Internet access is available in over 1862 cities/towns across Pakistan Pakistan is the first country in this region to establish DWDM telecommunications infrastructure Several cellular companies are using digital transmission (GSM and TDMA) The cost of 2 Mbps connection has been lowered to US$ 1000/month Redundant backup connectivity is available through PTCL for call centers.

Business Model of a Leader: The NetSoL Case NetSol is an enterprise software products firm that develops and sells financial services software to banks, lease finance firms, leasing agencies and consumer financing firms. Information for this case study was gathered over the last 10 days at their new 270-seat development facility in Lahore, Pakistan. 'Bank in a Box' NetSol has extended its market reach into nine countries. China and the U.K. are the newest locations. Their newest product is a "bank in a box" suite called inBanking that is being launched in a phased manner. It is built with Microsoft's .NET technology and is designed to provide all software and transaction management tools needed to operate single and multi-location banks. NetSol's original product suite is LeaseSoft, a client-server software system built with the PowerBuilder, LeaseSoft is used by vehicle-leasing companies and wholesale lenders in that industry. Its baseline clients are Daimler Chrysler's lease-financing subsidiaries in East Asia. In Australia, NetSol's software is used to manage more than 1 billion Australian dollars in assets.

Three Business Models To Choose From One of the distinguishing characteristics of any software firm is the choice of business models.The three business models that software firms can choose from are: Software Product Firms. Software product firms earn at least 60 to 80 percent (depending on which definition you prefer) of their revenues from developing software, licensing it for sale and receiving maintenance fees for updating that software. Seventy-five percent of NetSol's revenue comes from product development and from customizing its own software products for users. Services Firms. Services firms provide customization, installation, integration and maintenance of other firms' products, along with consulting and other services. They might also develop customized software applications. Under the service firm business model, such customized software is owned by the clients. Twenty-five percent of NetSol's revenues come from customized development work where clients own the

software outright. This is a small percentage by industry standards, since most software companies are service firms. Service firms might experience dramatic revenue fluctuations. Revenue per employee and profit per employee are usually lower at service firms than at successful software product firms. Hybrid Firms. Hybrid firms develop products and perform some services work. This model is attractive because it enables hybrid firms to leverage their core technologies to distinguish themselves from their competitors. Almost all software product firms eventually provide some services and drift towards the hybrid business model. Business Models Compared The attraction of the business model used by software product firms stems from the fact that software is often easy and cheap to reproduce, once it has initially been developed. Profitability from each employee can be very high once sales begin to take off. The risk is that an economic downturn or other factors outside of the control of a product firm will cause clients to suddenly stop purchasing software. Software firms that are in the best position are often those that produce their own software and have a solid base of clients willing to provide it with a recurring revenue stream from maintenance fees, updates, customization and other services. Unless there are extreme price pressures within a product field, enterprise software product firms (those selling business software) can often charge high prices for each license. With NetSol's products, for example, software prices of US$1 million or more per client are their target. By producing multiple copies of the same software product at little more than it costs to produce a single copy, software product firms can gain an economy of scale that enables them to increase revenues without substantially increasing their costs, thereby becoming very profitable within a short period of time. Service firms, in comparison, find it harder to scale up rapidly because their revenues are based on the amount of personnel resources utilized to implement each service contract. Economies of scale are harder for service firms to achieve. The profit margin for each dollar of revenue received by services firms is much lower than the gross profit margin for product firms. In 2002, for example, PeopleSoft reportedly spent only 10 percent of its software revenues on developing and distributing that software. Maintenance Fees Recurring revenues are available to product firms from maintenance fees. The terms of maintenance fees differ, but they often allow customers access to newly developed features and patches for bugs.

Maintenance fees are largely profit, once the product is stable. A feature developed for one client (and paid for by that client) can be made available to all customers who pay the maintenance fee for that product. Since not everyone in the installed base might want or need a new feature, version controls and feature switches might be needed to enable users to opt in or out of new features. The ability of users to set parameters regarding new features is also important in the implementation of maintenance agreements. This is often the case when the installed base spans different countries and where different business processes are used from one location or client to the next. Back in the 1980s and early 1990s, maintenance fees of 10 to 15 percent were common. Maintenance fees today usually range from 15 to 22 percent of the original purchase price. PeopleSoft was charging 20 percent until January, when its new owner, Oracle, raised it to 22 percent to match the rate that Oracle charges for its own products. Some PeopleSoft customers were considering going off maintenance contracts after that fee hike. NetSol's sales contracts authorize it to charge up to 22 percent, but it is currently charging 18 percent. Over the life of each product sold, NetSol will earn more revenue from maintenance fees than revenues received from the initial product sale.

Software Licenses In common with other software product firms, there are four price components to NetSol's license agreements: • • • • Core software product. Customization. Implementation, which includes migration of data from legacy systems. Support and maintenance fees.

Market Strategies Once a software firm has chosen a business model that involves the development of a software product, it needs to decide whether to build products for mass markets or niche

markets. In the enterprise software field, the safest strategy is generally to target a niche market first. NetSol initially targeted the front end of automobile leasing software, where lease applications are completed and sent for approval by a finance company. Then it moved up that vertical until it had built up a complete suite of complementary products. Mastery of one market vertical served as a jumping off point for NetSol to enter the banking industry using the same verticalization strategy. Piracy Issues According to a Business Software Alliance study of global trends in software piracy, in 2005 the worldwide rate of personal computer software piracy stood at 35 percent, a onepercentage point decrease on the 2003 global rate. The rate of software piracy in each country was calculated by subtracting the units of legitimate packaged software paid for during the year from total units of packaged software put to use during that year. The resulting number was then divided by total units of packaged software to produce a percentage rate. In 2003, 2004 and 2005 the highest rates of software piracy were recorded in Vietnam, Zimbabwe, Indonesia, Ukraine and China. In these countries between 85 and 93 percent of the software put to use each year was thought to be pirated. Other countries with high rates of software piracy in 2005 included Pakistan (86%), Kazakhstan (85%), Russia (83%), and Venezuela (82%). Countries with low piracy rates in 2005 included the United States (21%), New Zealand (23%), the UK (27%), Japan (28%), Australia (31%) and Canada (33%). The highest estimated monetary losses (in $US) due to software piracy in 2005 were experienced by the United States ($6,895 million), China ($3,884million) and France ($3,191 million). Globally, it is estimated that $34,297 million was lost due to software piracy in 2005, up from $32,711 million in 2004 and $28,794 million in 2003.

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Global Picture

Piracy in Pakistan There are a few legal copies of Windows floating around in the market which have come in with laptops and branded computers, but it’s illegal to buy them according to the Microsoft license. Somewhere in the End-User License Agreement legalese it says you may not sell or rent your copy of Windows. While a Californian court ruled you can sell purchased software no matter what the License says, I doubt that applies outside California. Most geek lawyers in America/Europe think that most EULA’s cannot hold up in court, but this theory hasn’t been tested yet. It makes sense though, as current EULA’s basically make you sign away your first child and just about everything else too. So when it’s impossible to buy a legal copy, what is a computer user in this country to do? Regardless of the extreme price differential, there

are people in this country who want to own a licensed legal copy of the software they use. This is mostly due to a common misconception that the original version will somehow run better than the pirated version. In the case of small business, they don’t want to go through the hassle of fighting with the local Microsoft dogs about ‘pirated’ software, so they want to acquire legal versions. The problems of windows licenses are quite interesting. Many people in this country have second-hand machines which have been disposed of in the west. Most of these machines come with Windows already installed, along with a sticker of the original product key. They sometimes even have the cubicle number and the company they were in. So when the machine running a pirated version of a operating system already has a license, the piracy issue is no longer so clear cut. We have tons of licenses sitting there in the form of old computers rotting away in containers and dumps. Most of them should still be valid, as the operating system along with the computer was thrown away. Shoot, some of these computers haven’t even been formatted, and all sorts of interesting information can be pulled out from them. Legally, it’s an interesting issue. Maybe an enterprising shopkeeper can buy a thousand of these pc’s, and claim to have acquired valid licenses for Windows 98 (which most of these old pcs have). We recycle a whole lot of junk from the West, why not software also? Microsoft can claim that these licenses have ‘expired’, and cannot be transferred, again this would have to go though the courts. By the time a decision is reached in the Pakistani courts, this entire decision will be moot as by then (after a decade or so) we will all be running Linux. Sadly, no computer shop in Pakistan seems to comprehend that there is such a thing as free software which they can sell with impunity. On the other hand, I doubt that the Microsoft and the BSA representatives understand either. They are completely capable of hauling up someone on charges of selling ‘pirated’ versions of RedHat Linux and OpenOffice! Currently up-to-date Linux distros are harder to find than just about anything else in the world. And no, its almost impossible to download ISO’s over a modem connection which keeps disconnecting coupled with electricity which fluctuates and dies every so often. Broadband is slowly creeping into the country, so it would be nice if one of the broadband companies could mirror one of the linux ftp servers. Microsoft Windows and Office together are available for 40 dollars in Thailand. However, the Pakistan government shows no sign or

realization that they can bargain with Microsoft. So sooner or later, things are going to come to a head. Nobody here is going to buy software for a hundred dollars a pop here. As Pakistan cracks down on software piracy, free software is going to become more and more important. Excepting the larger corporations and multinationals, every single computer in Pakistan runs pirated software. It will be interesting to see whether people will end up buying software, or switching to free alternatives. Even if the government starts jailing people, my guess is that about 2-4 percent of home users will pay western prices for software. There are ongoing efforts to convert to Linux by the government. While techies/geeks are switching, the normal user is going to avoid it like the plague. See LinuxPakistan.net for more about Linux usage in Pakistan.

How to Reduce Software Piracy
Lowering piracy around the world will take work and investment — but it is work and investment that can pay off for the countries involved. As IDC has shown, a strong local software industry can be an incredible economic engine. In order to unlock the vast new jobs, business opportunities, revenues and economic growth that the IT sector can produce, tangible steps need to be taken to protect intellectual property and reduce software piracy. The key to stemming piracy comes from education and proactive, government-led efforts. Five Concrete Steps for Reducing Software Piracy • Implement the WIPO Copyright Treaty In 1996, in direct response to the growing threat of Internet piracy, the World Intellectual Property Organization (WIPO) adopted new copyright treaties to enable better and more effective enforcement against digital and online piracy. An estimated one billion people around the globe will have Internet access by the end of this year — increasing the power and potential of software but also opening new doors for pirates to distribute their wares. In order to ensure protection of copyrighted works in the digital age, countries need to update national copyright laws to implement the obligations of the WIPO copyright treaties. Among other things, these measures make sure that

copyrighted software cannot be pirated by ensuring that protected works are not made available online without the author’s permission, and that copy protection tools are not hacked or circumvented. Many countries have already taken steps to improve and enforce their laws. However, there is still more progress that can be made. • Create Strong and Workable Enforcement Mechanisms as Required by TRIPS Strong copyright laws are essential, but meaningless without effective mechanisms to enforce them. Governments must fulfill their obligations under the World Trade Organization’s (WTO) Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPs) by adopting and implementing laws that meet international norms for IP rights protection and enforcement. • Step Up Enforcement With Dedicated Resources Too often, software thieves are not treated as seriously as other criminals, and the punishment is too insignificant to be an effective deterrent. Countries can elevate their enforcement of intellectual property by: a) creating specialized intellectual property enforcement units at the national and local levels, and providing dedicated resources to investigate and prosecute intellectual property theft, b) increasing cross-border mutual cooperation among police and other enforcement agencies to improve coordination among law enforcement in various countries, and c) supporting training of law enforcement and judiciary officials and providing better technical assistance to ensure that the people on the front lines of piracy enforcement are equipped with the tools they need to deal with the changing nature of intellectual property theft. • Increase Public Education and Awareness Reducing software piracy often requires a fundamental shift in the public’s attitude toward software piracy. Public education is a critical component of any successful effort. Governments can increase public awareness of the importance of respecting creative works by informing the public about the consequences of disobeying the law, expressing their intent to strictly enforce those laws and encouraging the use of legitimate software. Some of the most successful efforts stem from comprehensive public education campaigns launched jointly by government and industry. • Lead by Example
Because governments are the largest users of software in the world, one of the most effective mechanisms for public persuasion stems from governments themselves sending a strong and clear message that the government will not tolerate piracy, and is actively managing its own software assets. This can be achieved by implementing software management policies to set an example the private sector should follow. For a government to demonstrate its commitment to enforcing intellectual property protections in the private sector, it must demonstrate that it is willing to do so in the public sector as well.