Aiming for a $10 Billion IT Market by 2010
Statistics for the value of Pakistan’s IT exports vary widely according to how they are calculated. What is clear, however, is that the trend is significantly up, and that over the last three years IT has become Pakistan’s fastest growing industry.
Foreign companies are realizing that Pakistan presents an attractive alternative destination to neighboring India for IT investment and are setting up operations there. Local IT firms are multiplying, with hundreds of small and medium-sized IT companies now operating, not just in Karachi, the country’s commercial and IT hub, but also in Lahore, Islamabad, and other major cities. The total size of the industry by volume is put in excess of $2 billion, and the workforce numbers more than 100,000.
Government incentives to encourage investment include tax exemption until 2016, the establishment of IT parks with low rent, foreign ownership of equity invested in IT, and 100 percent repatriation of profits for IT companies.
The state-owned Pakistan Software Export Board is pursuing a strategy to fast-track growth and achieve a $10 billion market by 2010. The Ministry of Information Technology has set an export target for IT-enabled services of $1 billion by that date, and close collaboration is being established with China over trade strategies, venture capital funds, and building IT parks across the country.
State Bank of Pakistan figures show a consistent annual rise in the value of software exports over the last three years of around 50 percent. For 2006-07, they registered an increase of 61 percent to a total value of $116 million.
Salim Ghauri, Chairman and CEO of NetSol Technologies Pakistan (NetSol PK), one of the largest software houses in the country, is among those who say the figures don’t accurately reflect the exponential growth of the industry.
He puts actual global receipts of Pakistani IT firms at around $600 million, taking into account revenue brought into the country but not registered with the State Bank, and revenue retained by Pakistani IT companies overseas. “I do not agree that we are growing at 50 percent; we are growing much more than that,” he states.
At the forefront of the IT industry’s development in Pakistan, NetSol PK (listed on KSE: NetSol) is a subsidiary of NetSol Technologies, Inc. USA, a NASDAQ-listed (NTWK) global provider of IT services and enterprise solutions, whose lengthy client list includes such blue-chip companies as Mercedes Benz, DaimlerChrysler, Toyota, JP Morgan Chase, Capital One Bank, VW Credit, Hyundai, Terex, Investec, BMW Financial, and Yamaha.
Najeeb Ghauri, NetSol Group’s US-based CEO & Chairman, says its largest market, both for financial solutions and IT services outsourcing, is the US, where its lease management system, LeasePak, is the solution of choice among leading banks, leasing companies, and financial institutions.
Mr. Ghauri says, “We envision NetSol becoming a $100 million revenue company in the short term, leading towards our long-term vision of becoming a billion-dollar IT company eventually. We are focused on growing our North American business. We have done very well in China, Europe and emerging markets. By contrast, the US is much more competitive and lucrative, but NetSol is strongly positioned to penetrate the market with our strong management team in California and many years of experience.”
The majority of NetSol’s software is developed by NetSol’s Pakistan subsidiary in Lahore. NetSol PK is also the largest component of NetSol’s Asia Pacific division, whose product reach extends to China, Japan, Australia, Korea, New Zealand, Singapore, Taiwan, and Thailand. In July, the company secured its fifth major contract in the Chinese market for its Lease Soft brand.
“China has become, in the short run, our biggest revenue generator,” says Mr. Ghauri. “While Lahore is our center of excellence for development, we do not depend 100 percent on Lahore. We do have about 25 percent of development of our products in the UK and US as well, providing great comfort and interfacing with our Western customers.”
NetSol PK was the first software firm in Pakistan to achieve ISO 9001 certification and, last year, SEI CMMI Level 5 assessment. Earlier this year, the Federation of Pakistan Chambers of Commerce and Industry presented the company with the Best Export Performance Award for the Information Technology Services Sector for the period July 2005-June 2006.
NetSol PK also plays a key role in Pakistan’s national drive towards e-governance and improved information services. In 2005, it signed a multi-million dollar contract to develop the core automation and digitally enabled infrastructure for the government and its key ministries – the single largest contract awarded by the government. This was the beginning of a strong foothold in the burgeoning domestic market for NetSol in particular.
Other projects include automation of the offices of the Prime Minister, the National Assembly and Senate of Pakistan, and the installation of a motor transport management and information system and automation of the land records system for the Province of Punjab. NetSol Technologies, Inc. has posted strong profitability and double-digit growth in the June 30 and September 30 quarters.