Pakistan's IT push

Is Pakistan’s IT-Push Paying off? Pakistan’s IT channel believes it would appear so, as the developing nation, makes its move into a second phase of IT acquisition

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By  Paul Barthram Published  August 24, 2003

I - Introduction|~||~||~|Is Pakistan’s IT-Push Paying off? Pakistan’s IT channel believes it would appear so, as the developing nation, makes its move into a second phase of IT acquisition

Pakistan has seen many changes in recent years; government initiatives under the drive of President Musharaff are attracting foreign investments by removing bureaucratic hurdles to businesses—such as zero percent import duty, while crucially the country is upgrading and modernising its telecommunication infrastructure.

It is with surprise then, that while conducting the first telephone interview for this feature, the sound down the line is reminiscent of the same crackly telephone exchange of twenty years ago. The country, as it turns out is experiencing some problems due to bad floods.

“Karachi is [flooded] at the moment according to our man up there. But that’s part of the infrastructure issue. The roads and everything in Pakistan are very good though, it’s not like someplace out in the middle of nowhere, where there’s one flight every three weeks,” said Andrew Calthorpe, vice president for sales at solutions provider STME.

“There are no problems. We have FedEx here, DHL here. We have good roads, a railroad network. We have our major international airline PIA running domestic flights. In addition to that we have a few domestic airlines. So infrastructure is available, and logistics are not a problem,” commented Aftab Ahmed, CIO for Chensoft, a Pakistan solutions provider.

Faced with a highly competitive global economy, and inspired by neighbouring India’s success in its drive towards an IT based economy Pakistan’s government has implemented several initiatives in order to develop the country’s human resources in IT.

The first step was to set up an IT Advisory Board —comprising mainly of IT professionals—the first meeting was held on April 1st 2000, where a ‘need driven’ IT Action Plan was initiated for the country’s IT sector.

The second step included the development of internal ministries for the advancement of IT business in the country and the creation of four regional boards to address IT penetration locally, through schemes such as a ‘PC for every student’.

“What is particularly attractive about Information Technology for countries such as Pakistan is the rapidity with which it can be adopted,” Professor Atta-ur-Rahman, Pakistan’s federal minister for science and technology said in a statement.
||**||II- Pakistan's IT development|~||~||~|
The country has certainly developed well in terms of IT provision. Big brand names such as IBM, Dell, Acer, and Fujitsu Seimens are there among others. Although, development is centred in the urban areas, growth is expected in the rural areas through the recent improvements made to the telecommunications infrastructure, which Calthorpe sees as a positive step.

“Pakistan is a typical model. The people that we’re dealing with, first of all, are people who have large amounts of data, who need to store it and protect it, and therefore need the types of solutions we have, so we’re talking the banks, and the airlines. Pakistan is slightly different from the Middle East in that it doesn’t have oil companies, but it does have Telcos,” said Calthorpe.

Following a lengthy, and costly implementation of fibre optics cable and wireless technology for rural areas without telephone exchanges, Pakistan’s telecommunications dream is now close to fruition. The government recently announced it plans to deregulate the utility, and with it offer commercial licenses, which will increase the need for data provision in the country. All of which sits rather well for the IT market to start moving ahead with larger implementations, including storage and solutions infrastructure.

Currently though the market is difficult to predict, with no official figures available from IDC until late September, most companies agree their estimates are exactly that. Unofficial sources suggesting the current PC market operates at a 70/30% split of anywhere between 200,000-500,000 PCs a year in the unbranded and branded sectors respectively.

On average the government and education sector is a large purchaser of PCs at 35%, but its purchases of software is only around 10% of total software expenditure. Large businesses such as the financial sector, Telcos and multinationals in the meantime are forging ahead with private enterprise purchases, with estimates placed between 40-60% on hardware, and 40% of the country’s software purchases, while the remaining spoils are bought up by a combination of medium sized enterprises, and individuals. The reason for the vagueness of the figures though, may come down to the country’s booming second hand market.

“You will hear figures from everywhere, 200,000, 300,000, but [estimated] figures in 2003 say it will reach to 500,000 PCs. Mind you here we’re also talking about the refurbished PCs, that’s a big market as well in Pakistan,” stated Atif Rasheed, regional manager of MTC Middle East.
||**||III- Second hand market|~||~||~|
“Very small companies, where there are only a few users, and home users are very interested in buying used PCs, which are coming in containers along with other materials direct from the USA. It is a very good market for such things,” said Ahmed. “People are hungry for these things. We’re talking Pentium II and Pentium III, we have servers, then network equipment, routers, everything is available in used. Cost is up to half of the original price, depending on the condition, but that is pretty cheap.”

Even enterprise level customers are showing an interest for second hand, as Calthorpe explained. “We actually sold a system to a customer that wasn’t a brand new system, and they were looking at places like eBay [to buy]. There’s an awful lot of kit up there. And it’s not a bad idea, but the key is can you get support for this stuff?”

“It wouldn’t surprise me,” said Roger Holbrook, sales director for emerging markets at Fujitsu Siemens Computers, “because the one thing about Pakistan is it’s a very price sensitive market. If they can make their rupees go further they will find an avenue to do that.”

A surprisingly buoyant market has grown out of the addition of the second hand market in Pakistan where individuals and small businesses have been able to lay their hands on cheap hardware and with it a lot of pirated software (80% according to BSA’s figures of the total software market).

Not everybody in the industry see this as a bad thing though. MTC’s Rasheed believes that as long as the people are allowed to get their hands on the products, it builds awareness and a potential future market.

“I think the second hand market is a good thing. Even the piracy is helping in Pakistan. Certainly Microsoft will crackdown. But the message I want to convey to them is the real benefit will come when there is an awareness in people. People in Pakistan today are more concerned about how they’re making both ends meet, rather than worried about how they’ll pay for Microsoft,” Rasheed added.

“It’s not affecting business in the region. I’m happy that the used and second hand products are being sold in the country,” commented Qaiser Butt, Acer’s country field’s manager. “The reason being, you know the people who could never have thought of owning a PC or a laptop, they’re using it now. And once they get educated to this equipment, they’ll feel it’s obsolete, and they’ll start thinking about buying a new one. So it’s creating the market for us.”

“It also helps the branded manufacturers,” said Holbrook. “People get used to using second hand branded products. And then when those companies or people have money to reinvest in new products they will then go back into branded products and use them because they’ve experienced these second hand versions.”
||**||IV- Education is the key|~||~||~|
Education is key to building the IT skills, and support in Pakistan. At present despite incentives by the government to improve the education of IT skills, the country is still behind some of its neighbours, as its emphasis has fallen on creating software programmers as opposed to service engineers.

“Yes, technical services and support in Pakistan it lacks a bit. They don’t have that niche of customer services. People who can offer good services, a good package, and good quality would certainly have an edge because of the awareness in the market. So yes, it’s lacking but it is coming,” commented Rasheed.

“There are hundreds of vendors in Pakistan. Any country can improve on service level, Pakistan can as well, but I believe that comes with maturity and volumes. I think in the last three years at least I’ve seen a significant improvement in terms of service level and support level, and I think that in the next two to three years it’s going to be very astonishing from the perspective of how the maturity will come in,” believes Rehman.

“Support is there definitely,” said Butt. “What is happening in the country is the universities are training lots of IT graduates up these days, but maybe the supply is more than the demand.”

Butt raises an important point, the statement by Professor Atta-ur-Rahman suggests that despite investment into the education sector, the increase of institutions providing IT graduates, may not automatically provide those of the calibre needed to take the industry forward.

“The present situation is quite alarming. Pakistan produces some 9,000 graduates in the field of information technology but a large percentage of these are substandard,” said Professor Atta-ur-Rahman.
||**||V- Thoughts for the future|~||~||~|
Rehman agrees there could be a potential problem, but says it could also work for, not against the country. “The reality is that all the people cannot become CIOs and CTOs and IT heads. A lot of people have to be system analysts, and automation people, data entry people, you need people at every level. So I look at it in a much more optimistic way. Certainly we have to do a lot and Pakistan has to do a lot in raising the standard and creating more top-notch universities. But at the moment the situation is very promising.”

“These guys know their stuff. A lot of them have worked overseas and gone back, and I suspect that’s all part of this confidence thing. People perhaps are coming back because they’re more comfortable with going back to the country. Many of them have got IT skills, so you’re coming across people who know these products,” said Calthorpe.

Pakistan may have someway to go before it can match other countries in terms of market adoption for information technology, but the country offers huge potential as the government, World Bank and national banks continue to bankroll new projects.

“There are definitely, opportunities. I've seen a lot of big tenders coming out, like the State Bank, National Bank of Pakistan, even the army are tendering,” said Holbrook.

“This country has around twenty million households, even if you consider a very big percentage of it not being your target market for the next ten years, it still leaves you with something like four or five million households that could be your target market in the next two to three years,” said Rehman.

“A revolution is in the offing,” commented Professor Atta-ur-Rahman. “I am determined to make it happen quickly. However, it is only a beginning. We have a long way to go. I am confident in the creativity of our youth. All we need is the facilitating environment and I am confident that we will forge ahead.”

“Now it is heating up because of all these political initiatives, because of the confidence, because of the money that’s available, now its getting exciting,” said Calthorpe. “People seriously want the best IT and best solutions, and they’re starting to look at them, it’s taking off. The time is now.”
||**||Public Access|~||~||~|
Public Access

Following a sizeable investment, bandwidth cost has now been reduced from $100,000 per megabyte per month to only $3,000 per megabyte per month in Pakistan making it by far the cheapest country in the region, next to India, Singapore and UAE.

Along with developments to the telecommunications sector, the Pakistan government has taken initiatives to spread Internet access across the country.

Within a few years analysts predict 95% of the population will be online and 450 cities will be connected to the Internet.

In Pakistan, ISPs started to provide services in 1996. Today, the ISP market in Pakistan is booming, and new ISPs are being set up at a regular interval. There has been over 120 licenses issued to ISP providers over recent years, and as a result Internet business has seen a year on year increase in subscribers. According to telecom company PTCL, Pakistan had 250,000 Internet subscribers by the year 2000 though this is still low when compared to other regional countries.

Internet penetration is seen as the key to unlocking IT potential in Pakistan, with Internet cafes springing up in many towns.

“Almost every street in the cities will have a café. I’m not talking the rural areas but definitely urban areas. Even at the airports you have Internet kiosks, where you can walk into the airport lounge and start using the Internet there. So the facilities are there, the government is trying to make it accessible to most of the people,” said Qaiser Butt, Acer’s country field’s manager.

About 1,800 Internet kiosks are starting to be established in different petrol service stations across Pakistan whereby even in remote areas those without resources to buy a computer can walk into an Internet kiosk.

The cost for Internet services in Pakistan is also very attractive. For sixteen rupees [$0.27] a web surfer can buy sixteen hours of time on the net.||**||

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