Meagre Software Industry yet to take off

I discovered this myself, at considerable personal financial loss, when, even at the height of the dot com boom in the US, the company that I set up in Karachi to tap the software export potential of the country had to be closed down for lack of business.
Based on my own experience, and that of others in the industry, I believe that there are a few issues that need to be understood before there is any possibility of a dramatic turnaround in the software industry of Pakistan.
In the traditional “brick and mortar” industries, anything that is exported has to be physically transported, along with all the required documentation, across the country’s borders. This means that keeping track of the number of items exported, along with the software industry, where the “finished goods” are sent electronically over the Internet directly by the exporters.
There is literally neither any mechanism that allows this export to be regulated nor the authorities seem to even attempt to do so. As a result, export figures for the software industry are nearly impossible to be collected.
Depending on the sources that one obtains the information from, these figures range from the US $ 20 million that is reported by the State Bank (based on the remittances that software companies receive form abroad, typically to cover salary and other overhead costs) to the US $ 100 million based on anecdotal evidence from within the industry.
It might be instructive to place the sum total of the software exports from Pakistan in their proper perspective. Total exports from Pakistan for fiscal year 2002-2003 were about US $ 10 million. Live animals fetched over US $ 150 million, whereas export of sports goods was about US $ 200 million.
Even exporters of Kinoos managed to bring more foreign exchange into the country than all the highly qualified software professionals that are produced by the country’s elite universities put together! so why this obsession with IT?
Why this desire within government to spend enormous funds to promote this industry, more so when there are pressing demands from other social and industrial sectors? Why government do not invest in increasing the export of carpets, or cotton, or even fish?
The answer of course is that there is no other industry in the world that has been growing at such a staggering pace over such a sustained period of time. The global software Market in 1997 was about US $ 90 billion. This is expected to grow to about US $ 900 billion. The figures are expected to grow to about US $ 900 billion by the year 2008.
No other industry, even come close to such exponential growth figures! It is no wonder that in spite of not having much success in enhancing software exports, the government is still keen to invest in this sector. The other major reason for the attractiveness of the industry is the fact that there are hardly any barriers to enter in this industry. All it takes to set up shop is a few talented individuals, a connection to the Internet, and a customer, and you have yourself a software company.
Of course, market dynamics dictate whether the company can prosper, but there are sufficient examples of such companies thriving, even in the Pakistani context, for our young graduates to continue to flock to this profession.
On the flip side, success in the industry requires a close relationship between the buyer and the seller. Unlike cotton or carpets, where the relationship is over once the product has changed hands, the software business forces long term relationships to be forged between the two parties.
Software requires maintenance and support for many years after staying power. Unfortunately, the vast majority of companies in Pakistan fall into this category, with the result that only a handful of firms are capable of undertaking software development projects of any meaningful size.
So what should be done in this scenario? I believe that the first thing is to set realistic goals. There is nothing to be gained by making tall claims, such as the US $ 1 billion export target that was being bandied about in the past.
Such unrealistic targets are not only impossible to achieve, but in the process, they set expectations, which cannot be fulfilled.
The past few years have seen the Government focusing, and rightly so, on improving the underlying physical IT and data communication infrastructure. This critical task has to a very large extent been achieved. The time has now come to make effective use of this infrastructure by deploying software systems for enhancing productivity within government and improving the delivery of public services. This initiative would at the same time provide a boost to the software industry.
There are some who advocate that the domestic industry needs to be promoted by giving the local software houses regulatory protection against foreign companies.
The IT industry is one where the competition is indeed global, and hence the domestic industry should be encouraged to undertake large scale software development in collaboration with foreign companies, who bring tried and tested development processes and methodologies that the local companies can learn form.
This form of dissemination of managerial expertise is well documented internationally, and is also borne out by the experience of the multinational companies in various industries that have been operating in Pakistan since many years. The management and technical skills imbibed within these companies by the Pakistan workforce has resulted in substantial improvements in the management practices of even the most indigenous of companies.
The dynamics of the industry are such that there are paradigm shifts every few years, and companies need to be continually scanning the technology horizon to ride the next big wave. There is currently a global trend away from customized software development, instead, there is tremendous growth in the outsourcing of IT enabled services and Back Office Processing.
The Pakistani software industry needs to recognize this change in outsourcing patterns, and prepare itself appropriately. Offshore accounting services, with the large pool of qualified accountants accepted in the west as being of the same standing as their own professionals, are an untapped source of revenue. Similarly, the engineering industry within the country can provide offshore design and development services for die and tool makers of the highly industrialized nations, where such services are extremely expensive. To counter the “image” problem that the country is faced with, instead of targeting companies that have had no exposure to Pakistan in the past, it might be best to approach multinational companies who already have substantial investments in the country. Incentives could be provided to them to setup back office operations for their parent corporate entity. The task is made easier by the fact that this is no longer a luxury that some companies can indulge in, but a necessity dictated by the inexorable drive to bring down costs so as to compete globally.
Enhancing exports, whether it be in the IT or any other sector, is not rocket science. The ideas that have been enumerated above are not new, nor are they earth shattering. The challenge is in actually executing against what we have planned. With the right planning, careful execution, and having set achievable targets, there is no reason that we will not be able to bring about a substantial increase in the export of IT and IT enabled services from Pakistan.

—Awais Leghari (APP)