Is Pakistan still a Popular Outsourcing Destination – The Real Story!

The recent ranking of Pakistan by Businessweek whether it continues to be a popular Outsourcing Destination has portrayed an improvement from last year but is this something to celebrate or is it a wake-up call from the global markets to the Pakistani IT Industry?

Businessweek reviews Pakistan as an Outsourcing hub.

Pakistan’s standing in the list is definitely an appreciative improvement but when observes the top 10 takers then the question arises that what do these 10 Outsourcing Destinations offer that our region lacks and causes us to stay near the tail of the top 30? There are many social and economic factors that contribute to such issues including the energy crisis, the ongoing environment of Violence and political uncertainty, the internally displaced people and finally the young generation of Pakistan becoming a national burden.

Another key issue pertains to how we treat the issues of Information Technology and Telecom. These are two different dynamics of the ICT Industry and have to be observed and dealt with separately. As far as the Telecom Sector is concerned, it is the backbone of all IT enabled services activity. Without the Internet and Telephones, correspondence and service delivery would not be possible at all. It has been witnessed in the past that all the Telecom companies that brought FDI into the country have also taken enormous amounts of revenues and income back to their home countries that are already pretty much developed. On the other hand, they leave a very small meager fund in the form of the Universal Service Fund that contains only a billion Rupees or two at the most against the billions operators derive out from the region.

The income of the Telecom Sector and its investments do not have any direct relation with the IT enabled services sector however the accumulative calculation of revenues and incomes is mutually assessed by the system. The ITeS sector is dealt separately and receives investments separate from the Telecom Sectors. The dynamics of business within the ITeS sectors is very different from the usual business setup, operation and management of Telecom Sector companies and thus have to treated as a separate industry segment for which policy development and investment in its infrastructure is also separate.

The world today is rethinking the current state of affairs and it is time for Pakistan to knock some sense into its IT and supporting industries. From observing what goes on outside the country, the internet remains to be the most open and massive medium for wealth generation whereas the Mobile sector continues to fill a few pockets through its closed nature. Open Innovation continues to help developed countries like Canada, Australia, Europe, Japan, Korea, China, Malaysia and India grow where as others are suffering the mess of closed innovation orthodox-ism that continues to prevail in our country.

You also see that one aspect that has continued to be overlooked in the past decade after 9/11 has been that a significant portion of the outsourced work en route to our region has been coming from overseas Pakistanis and ex-contacts or affiliations developed by the returning technology gurus that had studied or lived abroad. Most of the companies making progress locally and abroad are the ones with offshore offices and very good offshore settings. These opportunities are not available to the larger population in the IT Industry and the emblem of national growth cannot be awarded to a handful that are facing tough times themselves due to the global recession.

Within the chunk of the global outsourcing pie, our region gets the smallest portions despite our region’s efforts to promote various initiatives and taking companies on foreign marketing tours. If Malaysia entered the economic and technology race after Pakistan but positioned itself well ahead of Pakistan, it must be realized that something has unexpectedly gone wrong in our policy directions. Despite the fact industry gurus and associations tend to act like blind cats and beat the drums of great success, the current ITeS situation in the region isn’t really improving and Businessweek’s reviews cannot revoke our declining industry.

If we revert back to Businessweek’s rating, Malaysia stands glorious amongst the top rankers, why is this so? The answer for this lies in Malaysian Government’s strategies to boost its technology and innovation industries. Malaysia made a clear differentiation between the standard business and industry and knowledge based workers thus terming the latter as Knowledge-SMEs (knowledge based Small and Medium Enterprise). The Malaysian Government created the Malaysian Multimedia Development Corporation and the MSC Malaysia Technology Commercialization Centre to promote Knowledge Work. The country brought in a new regime of economic benefits to the K-SMEs and incubated them in a new cities created for K-Workers called Cyber Jaya and the Penang Cybercity established for the purpose of fueling and stimulating the knowledge and innovation based industries of the region.

Pakistan also did something similar with Technology Parks etc but fell short of the Malaysia’s actual strategy. Malaysia brings three segments under its MSC strategy by funding R&D, Technopreneur Pre-Seed Fund Programme (Funds upto US$ 50,000 to local companies) and Local IPR Acquisition.  Malaysia’s approach has been to catalyze a highly competitive cluster of Malaysian ICT / Multimedia and other strategic high technology companies which can become world-class over time. The K-SMEs have been seen as substantial contributors to economic growth of the region as they created new national wealth and job opportunities in the knowledge-based economy for the country. As a result of MSC Malaysia initiatives, as of 31 July 2005, there were 3,413 Malaysian ICT SMEs compared to fewer than 300 in 1996.

This reference to the South East Asian region and Malaysia in particular is to understand that national culture that has been evolved. Malaysia even has a Malaysian Prime Minister’s Open Source Software Program that boosts the production and use of Free & Open Source Software in the government and industry. The country has a national open innovation strategy. This definitely identifies where we have gone wrong and where Malaysia has gone right to share the first top 3 rankers’ position. If we browse the Malaysian software industry, will see the burdening young population turned into heavily invested and sought after Human Capital. We will not see Venture Capital initiatives joking with the mass of young entrepreneurs but it will be seen they are making multiple and unaltered investments to boost the young companies.

This ranking is an eye opener for us. The world global knowledge markets are once again giving us a chance to improve our fate. We can still change our burdening population culture into a productive and human capitalism fuelled by entrepreneurism. Our government doesn’t need to pull out another buck to improve the ICT/IT industry, it just has to re-strategize and give the control of the industry into the hands of its young generation. From where we currently stand, we can see other governments and global industry players; Pakistan tends to be just two steps behind in creating its global ICT dominance.

We just need to set two things to be set right, continue to fuel an ICT culture and convert our massive and overly populous burden into entrepreneurs. We will burn the trash and build the palace everyone would want invest in and visit as well! But right now for Pakistan, stability in social and economic environments continue to be the most pressing needs despite our ongoing claims that we will tackle the uncertainty and energy crisis soon. The type of news that is portrayed by the international media about Pakistan and its situation is very different from what we see on national television and cable networks. Our ICT industry is also in turmoil as the region still lacks a concrete National IT Policy that enables a culture of entrepreneurship and innovation driven not by funds but by skills, encouragement, flexibility and hope.

There is an evident need to counter check the so called Venture Capital Competitions being carried out by the local industry where many entrepreneurs are invited to apply for a competition, face ridicule by so called successful ICT industry entrepreneurs and investors since the young lads cannot present them a viable technology prototype and business strategy. We have to change and improve the way we think about creating world-class Knowledge based Small and Medium Enterprise otherwise, we are going to fall back heavily in such Preferred Outsourcing Destination Rankings.

  • This is very nice article. But to be honest our government have zero intrest in these things. I want to draw following most important points. As you talked that Internet is main important for outsource, but except large cities where we have DSL, wimax and other stuff, in small cities internet is very very expensive. Bandwidth prices from PTCL are still rocking, they never been cheaper, and actually quality internet is from crc circuits.

    As for DSL, Wimax and other services, they lack quality sometime they go down and up, and no doubt they are cheap, but for outsourcing we need strong backbone of internet connectivity.

    Government should do following

    1. Provide cheap internet to software housese and outsourcing companies
    2. Education and institution should be established to put our skill in right demanding career path.
    3. License and work permit requirement of offshoure industry should be easy and at very rare cost.

  • Naureen, thank you for sharing your thoughts and you will appreciate the fact that in January 2006, South African Billionaire Mark Shuttleworth and founder of Ubuntu Linux ( Shuttleworth) visited Pakistan to launch the Ubuntu Linux Asia Tour and a big meeting was hosted in Lahore with PSEB and the IT Industry members. During the meeting he made three things clear for the region to grow out of its shell and participate productively in the knowledge economy: Technology, especially innovation and Free & Open Source Software spreads through the Internet, thus the Internet fuels Innovation and for Pakistan to progress in IT, high speed Internet at very low-cost (even free for students) will have to be provided. You are right, we didn’t listen then and we can’t be sure that if we have learnt our lesson or not yet!

  • Pakistan has shown a great progress in many Industries in recent years and IT is one of them. Pakistan is providing quality software development services to many countries, due to rapid increase in highly qualified professionals in IT Industry

  • As far as outsourcing Webdevelopment and IT related projects, i would like to suggest that the trend is on its decline, i have personally hired several local Pakistani devs and found them to be non punctual, expensive, unable to comprehend properly, bad at understanding and then delivering the required work.

  • Good luck everybody! – I will come back again. Are you on facebook or twitter? Will like to follow you.

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