A thousand flowers bloom: Small firms dominate Pakistan’s IT skyline

Low barriers to entry encourage entrepreneurship, but universities stifle it.

KARACHI:

Unlike its neighbour India – whose information technology industry is dominated by large, world-renowned firms – Pakistan’s IT sector consists of a web of small firms, many of which are started by entrepreneurs encouraged by the low barriers to entry in the business.

“You no longer need family money or a bank loan to create a business opportunity for yourself. Apart from a computer, you need creativity, innovation and problem-solving skills,” said Umair Aziz, Chief Technology Officer at Creative Chaos, a software house that develops online trading tools and has clients such as Standard Chartered Bank, Telenor, Habib Bank, and British Petroleum.

Yet despite the low barriers to entry, Aziz believes that Pakistani educational institutions stifle the entrepreneurial drive in their students.

“We’ve some very good IT institutions. FAST-NU, LUMS, GIK and IBA have consistently produced some of the best resources,” Aziz said. “But our universities create good employees instead of entrepreneurs. They don’t empower them.”

Yet despite the supposed lack of entrepreneurial drive, Pakistan’s IT market is littered with small firms that have collectively begun making Pakistan’s presence felt in the global technology business.

For example, Mixit Technologies sold its international affiliate, Mixit Inc, last month to another IT company in a deal worth up to £17.6m.

The industry now has revenues exceeding $2 billion a year, according to Pakistan Software Houses Association (P@SHA), an industry group, and are projected to reach $11 billion by 2016. Many firms are seeing their sales grow at an annual rate of over 30%.

Pakistan has been able to achieve these growth rates despite ranking 120th on the infrastructure and logistics components of the World Bank’s Logistics Performance Index. Yet some entrepreneurs believe that the investments made by the mobile communications companies are finally beginning to pay dividends for the technology business.

Yusuf Jan, EVP of Global Financial Systems, said fibre-optic cable and cellular networks had enabled several companies to grow rapidly with mature products for global markets. “What we see today is a result of the investment we made years ago,” Jan said.

Another reason for the growth in Pakistan’s IT sector, according to Jan, is the income tax exemption on the export of computer software and related services, which is due to expire on June 30, 2016.

“The government should extend the tax holiday to sustain the present level of growth,” said Jan.

Despite the government’s favourable policies, however, most IT professionals want the government to not intervene in their industry.

“Honestly, I don’t expect the government to do anything. I just want it to stay out of my business,” Aziz said. “Don’t try to regulate it. You don’t understand it.”

The IT business is human-resource-intensive. The location-independent nature, internet-based delivery mechanism and global business opportunities bring hundreds of young men and women every year to the IT business.

Both Aziz and Jan said they were frequently invited to job fairs by universities.

“I participate in workshops and business plan competitions with young graduates on a frequent basis. The aim is that they should know what to expect before they graduate,” Jan said.

The technology sector also gives business and employment opportunities to people who don’t have any formal IT education.

Pakistan is one of the top five countries from where people offer their IT-related services on elance.com, a freelance, online employment website.

Even big Pakistani IT companies, like Creative Chaos, have hired IT professionals who didn’t hold any formal degree.

“You’ll be surprised to know how many people I’ve hired who didn’t have a formal IT education,” Aziz said. “You’ll be more surprised to know the number of recent graduates I hired and paid them more than I’d pay people with five to seven years of experience. I value skills, not experience.”

Published in The Express Tribune, August 1^st, 2011.