The listing of Systems Limited — the country’s first information technology company that provides business solutions, business procedures and outsourcing services — last December wasn't much different from other initial public offerings.

Nonetheless, it afforded a unique opportunity to the company’s 25 ‘employee-owners,’ who saw their wealth multiply manifold overnight.

As many as 11 of them suddenly found themselves become millionaires the morning the company went public. It had offered 13pc of its stock (13m shares) to institutional investors and the general public for Rs40 a share — a premium of Rs30 per share.

“From its inception, Systems Limited (SL) was meant to be an employee-owned enterprise. Some 37 years later, its ‘leaders’ — or top performing employees, past and present — own 84pc of its stock. The remaining shares are held by investment banks that had financed our global expansion seven years ago,” Aezaz Hussain, the company’s chairman, told Dawn in an interview.

He said the purpose of the IPO was “to discover the firm’s true worth and raise funds to finance the expansion of its global operations” to the UK and Saudi Arabia this year.

Many years ago, Systems had become the first local company to introduce a ‘stock option plan’ as part of its remuneration package for employees it wanted to retain.

“The stock option plan ensures that the employees remain the majority owners of the company. This strategy has helped the firm grow to become a truly globalised, state-of-the-art software house over time,” noted the former IBM executive, who was the head of planning at the National Fertiliser Corporation when Syed Babar Ali approached him to help set up the company in 1977.

Aezaz Hussain, chairman of Systems Limited, said “the attitude of the employees towards the company changes dramatically when they also own it”.

“The most satisfying thing for me is that the company’s chief executive, who is also its second largest shareholder, had joined it as a programmer in 1996. The attitude of the employees towards the company changes dramatically when they also own it,” Aezaz underlined.

SL started its business by offering turnkey solutions to its clients and later expanded to implementing major IT solutions for key public organisations and private companies. From 1980 onwards, it has worked on projects to automate the federal budget-making process, computerise district accounts offices and the Pakistan Customs, and developed software to operate the Central Depository Company (CDC).

Systems has also survived several difficulties and crises. “When we launched the company, the import of computers into Pakistan was banned [on the pretext that it would eliminate jobs in the country] and, as the first Pakistani IT firm, we had to start our operations with [a used] IBM mainframe systems acquired from Wapda,” Aezaz reminisced.

When the ban on computer imports was lifted in the early 1980s, the company found that it was next to impossible to import the machines owing to US-led restrictions on transfer of computer technology to Pakistan because of its nuclear programme.

“We have survived difficult times because we believe in constantly reinventing ourselves and innovating; our stock option plan encourages our employees to be innovative in their work and engaging with the clients.”

Realising that the firm’s growth was ‘stunted’ by the small size of the domestic IT services market, the management decided to launch its first overseas operations in the US by acquiring Visionet Systems Inc (VSI) in 1997. The decision paid off and revenues from the US operations grew fast.

In the early 2000s, Systems’ revenues were adversely hit because of the dot-com crash and terrorist raids on US soil. “After the 9/11 attacks, the job of selling Pakistan as a source of IT-enabled services to American corporations became very difficult because of the perceived risks,” Aezaz said.

To mitigate this risk, SL launched its operations in Bangalore, India, in 2007, by creating Visionet Systems Private Ltd as a subsidiary of VSI. “This provided comfort to our US clients who perceived Pakistan as a high-risk country to work with, and proved to be a major trigger for growth in revenues.”

In 2011, the company again reinvented itself to put the concerns of its clients to rest and spun off VSI as an independent firm by giving its shares to SL shareholders as a ‘specie dividend’. So while the American and Indian operations of SL may be independent, they are still owned by its shareholders and the entire profit from all its global operations is repatriated to Pakistan.

As public and private use of IT services increased in Pakistan, SL’s management decided in 2010 to refocus on the domestic market, along with its international business. Currently, around 80pc of the company’s revenues come from the US, 5pc from the Middle East (Dubai and Qatar) and 16pc from the domestic market.

“Our strength to lead and engage clients and innovate has been the key reason for our global success. Our revenues have been growing by 25pc annually for the last 6-7 years and turned over $50m in 2014; we have 1,500 people working for us in Pakistan, 1,000 in India and 200 in the US. We would have been 10 times our size if Pakistan wasn’t seen as a risky destination for outsourcing business by our international clients and if they could freely travel here,” Aezaz said.

He believes that the advantages for an IT firm operating out of Pakistan are huge. “Our IT firms have failed to grow in size mainly because of the country’s poor perception. The IT business can skyrocket if terrorism — which prevents companies from establishing a long-term relationship with their clients and go for bigger engagements — is eliminated.”

Published in Dawn, Economic & Business, March 16th, 2015

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