AS Pakistan positions itself to carve out a place in the world of software exports and technology outsourcing, a particular set of problems, including violation of intellectual property rights, scarcity of trained IT professionals and a rising cost of doing business continue to hamper efforts at growth.
Technology entrepreneurs of Pakistani origin based in the U.S. say that while they aim to help develop the IT business in Pakistan by establishing software development offices in the country, alternatives in Latin American and Eastern European countries continue to prove competitively more attractive in terms of lower costs, easier-to-manage time zones and better compliance with intellectual property rights.
Another issue that haunts U.S.-based technology entrepreneurs is the inadequacy of infrastructure in Pakistan which despite an improving investment climate in the country, hurts prospects for investment.
“U.S. investors of Pakistani origin have lost faith in some ways,” says Dave Lakhani, a U.S.-based expert on entrepreneurship who runs a business consultancy specializing in advising Indian and Pakistani companies aiming to sell technology products and services to the U.S. “They have a hard time believing that there will be significant shift in the infrastructure or thinking that they can be a part of.”
However, he says he would rate the desire for entrepreneurship in Pakistan to be “very high” although the application is moderate to low. Even so, he says, outsourcing software development is likely to be a fairly large business going forward.
“In the U.S., though, the big challenge will be intellectually shipping business to Pakistan with Iraq and Afghanistan in turmoil,” he says. “They are very concerned about the stability of the country and the state of infrastructure and won’t ship data services there.”
He recommends a focus on infrastructure which creates centres that can provide investors with all the tools they need on one platform. Lakhani also says that while other expatriate communities have created strong networks within the U.S. which help promote entrepreneurs from their communities, the Pakistani business community in the U.S. remains isolated, poorly networked and unlinked.
As a result, the level of awareness about outsourcing opportunities in Pakistan remain poor in the U.S. compared to countries like India and the Philippines which have promoted their abilities as English speakers and providers of offshore data services efficiently.
But experts say the most critical area where progress remains slack is true product development rather than simply outsourcing services. Ultimus Inc, a technology company based in Raleigh, North Carolina in the U.S., is one exception. Its founder Rashid Khan started the company in 1994 with the aim to become “the SAP of business process management.”
Khan established a two-person development office in Rawalpindi at the time with a focus on product development rather than the conventional push towards outsourcing and contract work. “In Pakistan, the fortunes of technology companies go up and down based on the ability to get contracts,” Khan says. “And as a result, Pakistan never developed the skills in product management.”
Today, Khan says Ultimus has 330 employees, 120 of them in Pakistan and has 1,600 customers worldwide with their software sold in 18 languages. He adds “There are great benefits in Pakistan but great challenges. The supply of skilled developers is thin but the biggest challenge is middle management. So if I want to expand and hire 50 people I can’t get more than 10 and so my expansion is at a standstill.”
Like other entrepreneurs looking to expand, the high price of real estate is also a limiting factor. “Space is cheaper in Raleigh than in Pakistan,” Khan says. And while he says the cost of software developers is a single major benefit to operating in Pakistan, there are no other benefits that come to mind.
He points out, for example, that there are several negative cultural pressures such as the parental pressure to emigrate to the West which affect the ability to retain software developers for significant periods of time. Software piracy is another major concern. Ultimus has a piracy case that’s been languishing in Pakistan for the last three years.
Khan recommends that the government create a special cell to deal with intellectual property rights and piracy which allows complainants to bypass the normal bureaucracy and allow swift and fair judgment on cases. “If the response from the government is to tell us to go to the courts, then one refuses to do it,” Khan says. “If cost was not a driving consideration, the negatives of [operating in Pakistan] would win over the advantages.”
IT entrepreneurs in the U.S. admit that the Pakistan economy has staged a fairly dramatic turnaround. From a position of bankruptcy in 1998, the country has transitioned to stability and growth. However, they all share concerns that while strong economic growth is creating the opportunities for companies to invest, the core infrastructure is not producing enough talent. “There is such emphasis on producing a large quantity of IT graduates that the quality has gone down or is flat if at all,” Khan says. As a result, the inflation in IT salaries is also of growing concern.
The cost of doing business, on the whole, is also a matter of worry. With price inflation on the rise, other problems such as piracy make Pakistan less attractive as a destination to base software developers compared to countries in Eastern Europe and Latin America where intellectual property rights are better protected and trained IT professionals easier to find.
IT entrepreneurs say that while product development is the only sustainable way to take the IT business in Pakistan forward towards a solid place in the world technology trade, the focus on this area is scant compared to the mass hype being generated for outsourcing of technology services.
Moreover, the base needed to build a product-based IT industry—such as highly trained software developers, comparatively low cost of doing business (both manpower and physical infrastructure) and adequate protection of intellectual property rights—is far from available in Pakistan today.
And despite the government and the local industry’s focus on the growth of this sector, U.S. entrepreneurs say, the progress towards developing this base remains virtually non-existent.
