PROJECT PROPOSALSoftware House

Sector Outlook

Information technology (IT) with its revolutionary power as a critical enabler of growth, development, and modernization is increasingly moving to the core of national competitiveness strategies worldwide. Recent economic history has shown that, as developed countries approach the technological frontier, IT is crucial for them to continue innovating in their processes and products and to maintain their competitive advantage. Equally importantly, IT has proven instrumental for enabling developing and middle-income economies to leapfrog to higher stages of development and fostering economic and social transformation.

From its nascent beginnings in the late 1980s, the industry has successfully arrived to a point where its value proposition has been validated over and over again. The largest members are grossing 15-25 million dollars in revenues, and receiving 100 million dollar valuations. Most tech companies are growing in excess of 30% a year annually. The industry as a whole is doing over 2 billion dollars a year in revenue, up from less than a billion dollars a few years ago. Current growth rates indicate that the industry will exceed the 11 Billion USD mark within the next 5 years. What other sectors and countries have achieved in 15-20 years, Pakistans technology scene is poised to achieve in less than a decade.

Competing in a worldwide scale, Pakistans IT industry has experienced massive growth in IT exports. With the fast paced industry growth rate and governments investor friendly policies, Pakistan has become a major player in the IT industry, not just on the South Asian but on a global scale as well. One of the biggest reasons to invest in IT is the fact that the Government of Pakistan has allowed 100% ownership of equity and 100% repatriation of profits for foreign investors. Major tax incentives for companies have been allowed till 2016. Also, the Government has given tax exemption on the income from export of computer software and related services.

Statistics of Pakistans IT Industry

IT companies registered with PSEB

1306

Substantial IT companies

Region-wise breakup

445 Karachi351 Islamabad/Rawalpindi426 Lahore84 Others

Foreign IT and Telecommunication

companies working in Pakistan

60

Total industry size

US$ 2.8 billion (WTO-prescribed formula)

IT and IT-enabled services exports

US$ 1.4 billion (WTO-prescribed formula)

Percent growth in exports

(over last year)

61%

Number of IT graduates produced per year

Approximately 20,000

Export targets for fiscal year 2007-2008

US$ 162 million

IT professionals engaged in export-oriented activities (software development/call centers etc.)

More than 15,000

IT professionals employed in Pakistan

110,000

Total IT spending in the fiscal year 2005-2006

US$ 1.4 billion

Project Overview

Foreign-based companies have entered a recovery phase and started outsourcing their multiple services to the IT and IT-enabled companies of various countries. Pakistan has potential to grab its share in IT-enabled services market as well as contribute towards providing software applications to various developed countries. The demand is expected to flourish in the upcoming years. Many countries prefer outsourcing from Pakistan because of the lower cost of manpower and advanced technological infrastructure. This enables the IT sector to bring in good investment opportunities in the country. This will also be helpful in making more job opportunities in Pakistan.

United States of America is the largest buyer of Pakistan IT-enabled services with the share of 58 percent in the overall countrys exports. It is followed by UK, where the exports are hovering around 10 percent. The pie of total exports shows 16 percent share to the other countries including Australia, Canada, Thailand, UAE and others.

Companies such as IBM, Microsoft, Cisco Systems, Hewlett Packard, and Novell choose to get services from sub-contractors in low cost countries with strong IT capability, HR capital and infrastructure and low risk. These companies are also moving many development and support jobs to such locations.

This project entails opening up a Software House that will cater to both local and export markets in the Middle East, USA and UK. The companys corporate office will be opened in Lahore, Pakistan. The Software House will provide automated and Information Technology (IT) enabled solutions catering to businesses across various verticals in Pakistan, Middle East, UK and USA.

The Software House will have IT specialists with vast industry experience and knowledge. The company will offer a wide range of consulting services and cost-effective development of customized application software. In addition to this, the focus of the firm will be to become a multi-dimensional technology company deriving revenue and customer satisfaction from a variety of Information Technology services and custom software offerings including Technology Outsourcing, Systems Integration, Application Development, Processes Consulting, Business Intelligence Consulting, and Information Security Consulting among others.

Process Flow of Services

The process flow of software house services mainly entails the following sequence of activities:

Market Demand

Pakistans market demand can be viewed by last years growth at around 37% in revenue and 27% in terms of technical and professional employment. Another encouraging sign is the reverse brain drain caused by returning Pakistani entrepreneurs who see the relatively less competitive and virgin market at home as a tremendous opportunity for setting up a Pakistan based company.

There are quite a few hundreds of software houses in Pakistan and the count is increasing rapidly. These software houses are working to make Pakistan a bright mark in the world of IT. They are producing many useful products which have modernized the processes of traditional industries and also increased their productivity. As we see, computer has become a significant part of every walk of our lives and many processes have become automatic now. All the big shopping malls have computerized billing system now. Almost every organization keeps its data in computerized form. Computer and internet awareness is also increasing and the trend of e-commerce is emerging fast. People, whatever field they belong to, consult internet for any queries which come into mind.

Most of the Pakistani companies are working for financial institution, automobile, call centre and miscellaneous services sectors in different countries. The demand in the market exists for the following solutions and services:

Financial and Leasing Solutions

Banking, ATM Solutions

Inventory, Payroll and Marketing

Retail Store Systems

Mortgages, Portfolio Management

Call Center Automations

Health Care Solutions

VOIP Billing

Manufacturing and ERP Solutions

Traveling & Hotel Management

Project Management & Business

Human Resource Solutions

CRITICAL FACTORS

Following are the factors critical for the success of this business venture;

Background knowledge and technical qualification of the entrepreneur and key staff.

Thorough understanding of international regulations related to piracy and copyright protection.

Hiring and retention of competent and trained manpower

Higher return on investment and a steady growth of business is closely associated with regular training and capacity building of the entrepreneur and key staff.

Stringent supervision of the development process at every level.

Continuous flow of exports orders through aggressive marketing (website & social media) and international networking.

Formulation and implementation of customer follow up and feedback systems

Make effective use of facilitation agencies like P@SHA, PITB and PESB etc.

Design of Program by Software Architect

Design Demonstration to Developers

Developers write the Program

Test and Run of Program by Analyst

Program Handingover and Installation

Support Services to Customer

6