Five Emerging Trends In Pakistan S Software Business Essay Example
Five Emerging Trends In Pakistan S Software Business Essay Example

Five Emerging Trends In Pakistan S Software Business Essay Example

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  • Pages: 11 (2918 words)
  • Published: October 5, 2017
  • Type: Case Study
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The industry has experienced the emergence of five trends that have yet to be fully established. These trends are expected to shape the industry and gain recognition from policy makers and venture capitalists in the near future, given the ongoing developments. The following listed tendencies provide brief explanations:

Trend #1: The Shift towards the Domestic Market

The most notable trend is the transformation of revenue distribution from primarily foreign to primarily domestic. In just three years, there has been a complete shift in software exports revenue to domestic market revenue ratio. Currently, about 60% of total revenue from the IT and BPO market comes from the domestic market. This shift can be attributed to various factors such as challenges faced in exporting software, limitations on foreigners traveling to Pakistan, and skepticism among foreigners due to a 12-day internet outage in 2006. Wit

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hin the local market, industries like banking and outsourcing have seen significant growth. This growth has led to automation efforts within the entire banking industry as well as re-engineering initiatives by banks. Additionally, major projects have been successfully implemented in Pakistan's public sector with organizations like Central Board of Revenue, NADRA, and Punjab Information Technology Board adopting IT solutions for their operations.International organizations like the Asian Development Bank and World Bank are interested in automating public sector organizations. However, if issues in the foreign market are not addressed, it could jeopardize the success of the domestic market which is currently limited to a few sectors. Both sectors need to develop and expand their offerings while effectively managing risks for sustainable growth. The foreign industry has high barriers and hazards, while the domestic market ha

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comparatively lower hazards with moderate barriers. In the current economic downturn, there is a focus on minimizing hazards while maintaining cash flow. The approach is shifting from solely focusing on the domestic market to prioritizing it. Despite anticipated challenges and hazards, there is an expectation of capacity building in the software industry in the future through determination and continuous addressing of key issues that hinder software export front. Systems Integration has recently gained strong dominance in this industry despite being around for years, which concerns both industry giants like IBM as well as small-scale software entrepreneurs. There are various factors contributing to this trend, including IT professionals tending to create their own solutions rather than buying or licensing pre-made ones.The integration of systems in Pakistan's economy is influenced by supply and demand dynamics. The government and public sector organizations like NADRA have introduced advanced computerized ID card and passport identification solutions, demonstrating this influence. The automation wave in the banking industry has also driven the need for integrated system solutions to remain competitive.

On the supply side, the industry has matured with technological solutions that can meet evolving IT demands. This maturity is evident from the scarcity of SAP consultants when Abacus introduced SAP consultancy services in the local market. However, now there is an abundance of capable SAP consultants due to high demand from large companies like PSO, PARCO, SHELL PAKISTAN, Unilever, and others seeking international project solutions.

As a result of these developments, significant effects have been observed within the industry following the emergence of system planimeters. Small software firms have become business partners for major players such as IBM, Siemens, Oracle, and Microsoft. Additionally,

there has been a shift from creating custom enterprise resource planning solutions to using pre-made options.

Another notable trend is the growth of idea-based entrepreneurial ventures within the industry. In the early 2000s, it was believed that a software company only required a desktop computer and internet connection to operate.The software market's rapid growth and constant change have highlighted the need for innovative entrepreneurs rather than mere imitators. This shift has introduced logical proprietary solutions, altering the criteria for success in the industry. Rather than relying on broad expertise, specialization in specific areas is now crucial for professionals to dominate niche markets. To succeed, entrepreneurs must be precise in their strategies instead of relying on trial and error methods. However, newcomers face challenges when competing with established specialists in their respective fields. Nonetheless, novel ideas and technologically advanced solutions are still highly valued by the industry. In today's world, financial backing is essential for entrepreneurs to develop their business ideas and contribute to the industry as a whole. Unfortunately, many exceptional ideas remain unnoticed and undeveloped due to insufficient funding, demoralizing entrepreneurs while also causing a loss of valuable expertise within the field.Insufficient finances leading to the failure of a promising idea not only discourages other innovative concepts and knowledge-based ventures from emerging, but also diverts the attention of entrepreneurs. In the packaging industry, businesses can be grouped into three categories: those with extensive industry knowledge offering unique products or services, those providing essential services for the industry, and those with difficult-to-replicate intellectual property. Regardless of their specific focus, entrepreneurs in this field have a competitive advantage and can add value. Nowadays, success for entrepreneurs with

distinctive propositions relies on receiving investment support and having a flexible policy environment. Venture capitalists and policymakers play a significant role in anticipating industry trends and providing optimal support for innovative entrepreneurs. One noticeable trend is the decline of voice-based outsourcing businesses, which now face competition from both domestic and international firms. This raises concerns about the sustainability of voice-based outsourcing as experts identify contributing factors such as a shortage of skilled workers, inadequate infrastructure, expensive real estate, among other issues.The IT field, particularly software development, in human resources has become unpredictable due to a lack of individuals with the necessary English language skills for voice-based services. These services often prioritize call center work. According to a study by The Resource Group, call center jobs are seen as temporary positions that attract individuals with limited opportunities in their desired career paths, such as recent college graduates waiting for further education or early career prospects. However, finding and retaining these employees is challenging and has had a negative impact on the business sector. This decline in voice-based services is one of the main reasons for this negative impact. Another significant trend shaping the industry's future is innovation in export-oriented business models. In our rapidly evolving IT/Software industry, tomorrow's landscape will be drastically different from today's. Vision from investors, insight from business managers, and bravery from entrepreneurs will be required to seize this moment and build the next generation of niche players and industry leaders in the "New Pakistan". Those who are willing to break rules and pursue unimaginable ideas will certainly reap profits. One insider summarized the fifth trend by stating that Pakistan's software/BPO industry is

no longer attempting to imitate India's software industry.Instead, they are thinking independently and creating strategies aligned with their own circumstances, resources, and uniqueness. Last year, Net colloidal suspension implemented a unique outsourcing arrangement where they started with a small team dedicated to insurance claims processing for a client in the financial industry. Net colloidal suspension proposed a joint-venture company where they held a 51% controlling interest. Both parties invested $0.5 million in this new company, while Net colloidal suspension provided training and necessary certifications. The client had full visibility into the operation including costs and profits, allowing them to see how the new company generated revenue and provided value.As joint owners of the company, they also received 50% of the total profit.
Currently, this operation has expanded to include 125 employees.The client benefits from profit sharing,receiving 30% of the payment for the company's services and resulting in significant savings.This arrangement creates a dedicated client base and contributes tothe business' growth.
In 2005,LGMR becamea subsidiaryof Halliburton afterselling60%of its equitywhich injectednew capitalintothebusinessandfacilitateddiversification.This infusionof equityledto substantialgrowth throughouttheyear.However,in December2006,LGMRrepurchasedits equityfromHalliburtonat ahigher valuation.Recently,theActinsGroupacquired49%of LGMR'sequityActins not only provided additional funds, but also valuable networks and connections to the European market, along with more resources. The CEO emphasized the importance of international partners for expanding the company and adding value, regardless of ownership percentage. The goal is to become a publicly traded company within a year while expanding globally and raising more funds. This strategy is seen as crucial by the CEO in order to achieve global recognition in the IT industry. LMKR has a different approach than Silicon Valley, distributing ownership instead of concentrating it, going against the belief that owning a small

percentage of a valuable company is better than having full ownership over nothing.

Techlogix, a prominent IT consulting and software development firm based in Pakistan, specializes in various areas such as BPM, MDM, BI, application integration, project portfolio management, enterprise applications, and software product engineering. As Techlogix aims to expand and diversify, they face the challenge of establishing these seven practice areas as independent profitable enterprises. The CEO recognizes that scaling the company ten times its current size requires formalizing and implementing these practices while also building an international brand for their methodological analysis and exploring new markets.Techlogix demonstrates a strong commitment to addressing the challenge of Voxel Communications' internet outage problem in Pakistan. Voxel faced a difficult decision between closing their purpose-built facility or finding a solution to survive. Due to financial constraints, purchasing another company or being acquired seemed challenging for Voxel. After careful consideration, Voxel discovered that lending their extra capacity and equipment in Islamabad to their largest client could provide the necessary capital for them to become a paying customer. In exchange for outsourcing seats to Voxel, the client agreed. It took seven months to gain approval from SBP (State Bank of Pakistan) for this agreement, but once approved, the program was implemented successfully by the client. This approach not only found an innovative solution for a desperate situation but also helped regain a lost client. TRG is known in the industry for its international acquisition strategy aimed at improving the country's image problem. To acquire struggling call centers in the United States and integrate them into their larger company, TRG raised funds from domestic markets.
TRG successfully resolved image issues by transferring

call centers to their facilities in Pakistan. It is uncertain if their acquisition scheme will be successful, as it appears to be naive. They may have faced difficulties and made adjustments to their original plan. TRG is considering expanding call-center operations in the Philippines while keeping back-office operations in Pakistan. Regardless of the outcome, TRG deserves recognition for innovative thinking and business model innovation.

This study has uncovered interesting findings that highlight a need for further research. There is no conclusive evidence supporting a trend towards specialization and focus at either the industry or company level. Are there indications of improvements in creating more focused companies within the industry? Can we identify differences among software development organizations suggesting greater specialization or optimality? The organizational procedures of a company focusing on package outsourcing should significantly differ from those operating in the merchandise market. These differences should be reflected in their organizational-level information.The text suggests that companies performing well often have employee-friendly policies and strong management talent. This trend is observed across different groups, including top-10 companies, fastest-growing companies, and global top-quartile companies. Additionally, it is noted that all sub-specializations within the industry prefer high-contact marketing approaches like word of mouth and direct contacts. Policymakers and entrepreneurs in the Pakistani software industry can learn from these findings to improve networking and customer acquisition abilities. The research also includes qualitative insights on strategic challenges and managerial best practices. It highlights the variation in proficiency and process quality within the Pakistani package industry, which may impede its growth. Some companies obtain quality certifications for reasons unrelated to actual process quality. The study concludes by indicating that different types of package

operations have varying tendencies to seek quality certifications.Hybrids are more likely to pursue certifications compared to export-focused or domestic-focused operations. Additionally, different types of entrepreneurial ventures encounter generic strategic challenges that require attention. In response to these challenges, companies have implemented various innovative approaches with differing levels of success. We delve into strategies for each of the 13 identified challenges and highlight 20 managerial best practices that successful companies have adopted.

In the industry, there are various challenges that exist, including organizational aspects such as acquiring competent human resources or managing relationships between parent and subsidiary entities. However, certain challenges go beyond individual firms' control and require collaborations between public and private sector organizations, such as establishing operations in Pakistan or expanding existing ones. One specific challenge faced by the industry is enlarging package development operations to undertake larger projects.

Despite advancements made in addressing environmental and policy constraints through public policies and infrastructure improvements, there are still remaining challenges that need attention.One major constraint on industry growth is the "image problem" it faces, which particularly affects many companies in the software and BPO industry in Pakistan. This industry also faces other important constraints such as the availability and quality of human resources, costs and availability of IT/Telecom infrastructure, and limited physical infrastructure options like office space, water supply, and power availability. To effectively address these challenges, a careful analysis of their extent and impact on the industry is necessary. Creative thinking is also required to develop innovative solutions. One potential solution could be establishing a public-private partnership model based on mutually agreed commitments between parties. This model should have transparent performance-based assessment measures. It's worth noting

that public-private partnerships may be needed by the industry to tackle its "image problem" as well as access high-quality human resources. Despite advancements in public policy and infrastructure, scaling up package development operations remains challenging due to factors like limited human resource quality and availability, high costs of IT/Telecom infrastructure, and lack of physical infrastructure. Understanding the extent of these challenges is crucial for finding effective solutions. It's worth mentioning that during the global recession from 2007 to 2010, disruptions were faced by the software and BPO industry in Pakistan but it emerged stronger from them.The Pakistani IT and IT-enabled services industry has undergone significant changes and growth in recent years. In FY2006, the industry generated $193.4 million in local revenues and spending, and $779.7 million globally. However, despite expectations of rapid growth in mid-2007, this did not materialize due to various factors.

Before the global recession in 2008, Pakistan was already experiencing a decline in domestic stability. The judicial crisis and constitutional conflict that began in 2007 negatively affected the demand for IT services domestically, while the global recession impacted export markets. As a result, gross revenues declined significantly during 2007-2008.

Despite these challenges, Pakistan's IT industry has shown resilience amidst political turmoil and economic downturns. While traditional package development services saw a decline in demand, new countries emerged as potential innovation hubs. Systems integration and embedded systems have become significant sub-sectors within Pakistan's IT industry recently.

Overall, while some sectors reinvented themselves or rebounded stronger during this time period, new successful sectors also emerged in the Pakistani IT industry.The IT industry has experienced limited growth in the past but is currently going through a revival. This

is due to increased domestic IT spending and export opportunities. Instead of creating their own platforms, the industry has focused on customizing established platforms like Microsoft, SAP, and Oracle for customized software development. The emerging areas of mobile applications, gaming, and animation are showing promise as key drivers for the industry because of strong demand, intense competition, and the need for innovation and cost-efficiency.

Pakistani start-ups have had great success in creating content and games that have become top hits on the Apple Store. One example is Cricket Revolution, a comprehensive cricket game developed in Pakistan. Demand for IT products and services within different sub-segments of the industry has significantly changed. While the financial and telecommunications industries remain primary users of IT services in the country, there has been a recent slowdown in demand from the former.

Multinational companies are also experiencing decreased demand for IT products and services as they centralize their budgets. However, emerging local demand presents numerous opportunities for IT companies.The future growth of the industry is expected to be driven by new areas of expenditure, such as Mobile Banking, which could result in explosive spending growth in the upcoming years. Furthermore, there is potential for increased revenue through value-added services (VAS) within the evolving IT and IT-enabled services industry in Pakistan. Despite facing unique challenges including geo-strategic, political, and socio-economic obstacles, Pakistan has demonstrated determination and resilience in this ambitious industry. The data presented in this report aims to raise awareness and objectively assess the current situation of the Pakistani software industry while also having implications for decision-makers at organizational and policy levels who can utilize this information to make better-informed decisions. Throughout

the analysis, tactical recommendations have been provided when necessary. In summary, key conclusions drawn from the text highlight the dynamic nature of Pakistan's software industry as a thriving hub for IT despite its establishment with Systems Ltd. in 1976 but gaining significant attention only recently due to growth fueled by the Dotcom Bubble explosion in the 1990s. It is impressive to witness an entire industry develop within just ten years. However, it is worth noting that despite indications pointing towards a promising future for Pakistan's software industry, significant growth has already been witnessed within one year with around a 37% increase in revenue and a 27% rise in technical and professional employment.In 2005, many CEOs express optimism in surpassing their accomplishments from the previous year.

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