17 January 2005	Monday	06 Zilhaj 1425

The outsourcing in both India and Pakistan is linked with IT outsourcing. There is a difference between outsourcing and IT outsourcing in that the later is a sub-category of the former that is a much broader term.

Another important sub-category is the BPO or Business Process Outsourcing. There are also overlapping scenes in outsourcing where sometimes IT is the main vehicle for delivering the out sourced service. In other cases, IT itself is out sourced.

In Pakistan, the emphasis is on software exports and the increasing role of Pakistan Software Exports Board (PSEB) has led to a mushrooming of IT- related educational institutes in the urban areas.

But it is still to be realized that software export is different from IT outsourcing in terms of business specifics and operational nature. Software export is the sale of pre-made or custom written computer applications or software to customers abroad whereby ownership remains with the seller.

On the other hand, an IT outsourcing set up refers to working for the outsourcing company for delivering IT related services whereby ownership rests with the outsourcing company.

The biggest boost to Pakistan's efforts to break into the global IT marketplace came on September 28 last when India's finance ministry announced an income tax of more than 36 percent on foreign firms with software, R&D and customer service operations in India.

Now, the customers will look towards greener pastures for outsourcing. Pakistan is one of those greener areas because of a combination of favourable economic circumstances. Pakistan offers five main characteristics for delivering IT services:

* Many IT firms have working experiences with Western countries.

* Pakistani managers have personal integrity.

* There are fewer holidays.

* The official language is English with high number of talented unemployed that have good language skills and accents.

* There is a low cost talent pool with lesser turnover.

A careful consideration of the actual in-house costs versus the out sourced costs should be done. Various costs involved in in-house facilities include infrastructure costs, software, training and recruitment, salary, maintenance, and the opportunity costs of implementation.

On the other hand, there are certain benefits received by outsourcing in Pakistan. The costs are made in dollars by the US companies whereas the similar facilities are adopted by Pakistan in rupees.

The new era is that of out sourced Web-based shared resource business applications where computer applications have changed from payroll to enterprise resource planning (ERP), and the communications have changed from private-line SNA or TTY dial-in to IP-based Internet, intranet and extranet access.

Global boundaries have almost been eliminated and what counts is the skill set of humans. There are high levels of cost efficiencies due to resource allocations based on geographic boundaries. Some of the important considerations in choosing an OSP from Pakistan are:

* A vast majority of the educated labour is under utilized in the private sector due to lack of risk taking and entrepreneurial abilities,

* High costs involved in establishing OSPs in software, hardware and development,

* Lack of experience means high possibilities of sub-contracting by private sector (OSPs that may not be favourable to the outsourcing organization)

* Current favourable conditions in the IT sector.

The BPO industry is growing rapidly with exports up by 45 per cent in fiscal year 2003-4. An estimated number of about 2000-3000 individuals are employed in this industry with growth being fuelled by the intense pressure to reduce costs within companies located in the West.

In this background, there is a need to look at the possibility of encouraging Outsource Service Providers (OSPs) by the government in order to utilize the unemployed talent pool and thus contribute to reduction in unemployment.

A very favourable effort came from the government this year when the Federal Minister for Information Technology, Awais Ahmed Khan Leghari unveiled a draft version of the data protection act prepared by the Ministry of Information Technology.

Addressing a meeting of the ministry's officials, Mr Awais said: "With increasing competition in the global Business Process Outsourcing (BPO) marketplace, the lack of legal cover given to the protection of data within the country is an impediment to growth in this sector".

The draft act, titled the "Foreign Data Security and Protection Act 2004" aims to provide for protection and safety to foreign data with regard to the processing of such data in Pakistan.

As businesses become more comfortable with outsourcing IT work, many take the next step and hand over entire business processes, such as human-resources administration or transaction processing, to IT outsourcing companies.