Why Pakistan for Outsourcing

Pakistan is fast becoming the destination of choice for a significant number of international IT/ITeS companies looking to relocate their operations offshore. The ready availability of skilled professionals, an appropriate IT infrastructure, and affordable rates for connectivity, result in considerable time and cost savings to entrepreneurs.

Large English Speaking Population:
Total Population of Pakistan is approximately 160 Million. There is no English language barrier, as the medium of instruction in educational institutions at all levels is English. There is a large population of English speaking Pakistanis who test their English language skills regularly in international exams such as TOEFL and IELTS and score well. The accent is generally better than India, Philippines, South Africa and Egypt.

Educated Labor Pool:
Pakistan is home to over 2 million computer-literate people. The domestic IT workforce is expected to double by the end of 2006, offering a significant human resource pool of technology-literate people. 39% of graduating IT students possesses three years of practical experience. This educated labor pool is fairly cost effective as compared to India, Philippines, South Africa and Egypt. Base monthly labor rates for contact center representatives in Pakistan are lower as compared to India, South Africa and the Philippines.

Infrastructure:
Pakistan has a well-developed power and telecommunications infrastructure that allows for high reliability and redundancy, particularly important in the contact center and back office business processing services sectors.

Hub for Top Educational Institutions:
There are multiple engineering, arts and sciences, medical, law, social sciences and management institutions in Pakistan. In one of the major cities i.e. Lahore we have host of internationally renowned institutions in diverse fields like FAST, Lahore University of Management and Sciences, National College of Arts, King Edward Medical College, University of Engineering and Technology and University of Punjab.

Location and Communications Infrastructure:
Strategically located in South East Asia, Pakistan serves as a bridge to the world between the Middle East and the Far East. With three major international airports and thirty-eight domestic airports, Pakistan is accessible via fifty international airlines. Pakistan's geographical location, a rapidly expanding transportation and communications infrastructure, and conducive business environment makes it an attractive destination for investors.

Destination of Choice:
The Government of Pakistan is committed to the growth of the IT industry. National IT policies and regulations, and a highly attractive incentives package, offer a coherent framework within which businesses can operate in Pakistan. These developments have led to the creation of an enabling business environment in the country, where new businesses can be established in less than a week:

• Pakistan is home to over 2 million computer-literate people
• The domestic IT workforce is expected to double by the end of 2006, offering a significant human resources pool of technology-literate people
• 39% of graduating IT students possess three years of practical experience
• There is no language barrier, as the medium of instruction in educational institutes is English
• Real estate, bandwidth and PCs are easily available and reasonably priced

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Pakistan better for outsourcing than India or China, says Aziz

LONDON: Prime Minister Shaukat Aziz has urged Western companies to outsource jobs to Pakistan and use it as a manufacturing hub to make cheap goods.

“Pakistan has a stable political environment, and is a better place for western companies to outsource than India or China,” the prime minister said in an interview with John Waples of The Sunday Times, a leading British newspaper,

“Use Pakistan as a regional hub for manufacturing and then export, because the location is unique. The challenge now is one of implementation and making things work better. The Pakistan of today and tomorrow is not the Pakistan of yesterday,” the paper quoted Aziz as saying.

“When the world was taking off in the 1980s and 1990s, we were busy with internal politics. This did not provide the continuity that a developing country needs,” he said.

The report said the Pakistani government is going all out to persuade western businesses to use the country’s cheap labour and land to make money.

This year Pakistan’s exports are set to hit $ 14 billion and President Pervez Musharraf is predicting that GDP growth will rise from 6.7% to 7.5%. Last Wednesday evening, he told delegates at the Expo 2005 that 700 foreign companies were operating in Pakistan, and they were all making double-digit returns - some were making 50%. He said the hourly labour rate is only $0.37 in Pakistan, lower than India ($0.58) and China ($0.67).

Foreign investment, led by the US and Britain, in Pakistan has been growing at 100 percent a year, the newspaper said. Pakistan has just issued its second international bond, this time raising $600m, an issue that was two times oversubscribed. The Karachi stock exchange was the best-performing exchange in 2003 and last year it rose a further 50%.

The report gives examples of foreign investment in Pakistan, such as a Manchester firm called Drillcorer that has just moved production of its drills to Pakistan. Honda is moving two motorcycle factories to Pakistan. For the past two years Pakistan’s manufacturing sector has being growing at more than 15% a year. app

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Pakistan not yet on the outsourcing map

Originally appeared in DAWN, September 12, 2005
By Naween A. Mangi, Writer at DAWN
Rafiq Dossani, PhD

Despite a late start, Pakistan's information technology entrepreneurs and the government are hoping to make it big in the global marketplace for outsourcing of IT-enabled services. How have other countries succeeded and where does Pakistan stand?

Naween A. Mangi spoke from New York to Ron Hira, professor of public policy at the Rochester Institute of Technology, and Rafiq Dossani, senior research scholar at the Walter H. Shorenstein Asia-Pacific Research Center at Stanford University.

Software exports, call centres and medical transcription firms have become all the rage over the last three years. Young entrepreneurs are returning after years spent working at major tech firms in the US to start up their own ventures and the government is forecasting that IT will be the next big thing in Pakistan's economy.

So far, the numbers tell a less-than-compelling story. In 2004, although the software and IT enabled services business was worth $300 million, (including hardware the figure is $600 million), exports and outsourcing made up for just $33 million of that. By comparison, India logged $12.8 billion in software and services exports in 2004.

Still, the Pakistan Software Export Board, a federal body set up to promote outsourcing, forecasts that the business will grow by at least 45 per cent annually for the next five years. A lot of that growth will come from call centres and business process outsourcing which last year made up one-fourth of total exports. In the next ten years, the PSEB aims to be at the top of the class of tier two global IT companies.

But as experts and practitioners agree, Pakistan will need more than ambitious aims to meet that goal. Prof Ron Hira, whose new book Outsourcing America assesses the impact on the US job market, says the outsourcing industry is set for rapid growth in the next few years and if done right, developing countries like Pakistan could benefit from the boom.

Hira is an expert who has testified before the US Congress on the implications of outsourcing. "Pakistan isn't on the map yet," he says. "India dominates what most people think about [when it comes to outsourcing]."

Rafiq Dossani, an expert on outsourcing and a senior research scholar at Stanford University says there are several reasons for that. First, is the poor quality of infrastructure.

"When the Internet tanked recently, that created a really bad perception that the country has not thought through even the most rudimentary aspects," Dossani says. "Deregulation in this area is too limited." He says that while voice services have benefited from the deregulation, data services are still uncompetitive.

He says there are too many stumbling blocks since bandwidth is more expensive than in other countries. "The costs are outrageous at four or five times what they should be," he says.

Dossani identifies the thin segment of English speakers as a second hurdle in the way of a flourishing outsourcing industry in Pakistan. "Of the 30 per cent of the population that lives in urban Pakistan, one tenth speak English that's good enough to work at a call centre," he says. "And of those five million or so, only about one million are available to come into this field as the rest are working elsewhere."

Then, he says poor marketing also holds the industry back. "You just don't see the trade body [in Pakistan] working like India's Nasscom to project a positive image," he says. "The Pakistani diaspora has done well and there is a great need to better use that network."

He forecasts that the outsourcing business in Pakistan can be at least $1 billion in size but says this is only possible if alliances are formed with countries like India and China.

"The Philippines has done well by understanding that it cannot reach critical mass on its own and therefore forming alliances and pitching themselves as a second location to offset country risk," he says. Dossani also says Pakistan has the advantage of a highly skilled group of entrepreneurs which "is the reason why the tiny industry does exist."

Hira adds that since Pakistan entered into the industry late, playing catch up is an inevitable need. However, the sector can take advantage of the circumstances in other countries. "India has done a lot of things right," he says. "They have been successful at not just attracting foreign investment but also building their own companies and leveraging the large Indian diaspora," Hira says.

"India is also so talked about that people are comfortable doing business there. But since wages are rising, Pakistan can use that as an entry point." He says that while countries like India have accumulated critical mass and scale, others are distinguishing themselves in different ways.

Eastern European wages are slightly higher than Pakistan and companies in that region have specialized in near-shoring by targeting the European market. Russia, meantime, is aiming at the U.S. market in both services and manufacturing while the Philippines and Malaysia are targeting services.

"The question really is how you separate yourself from the pack," Hira says. "You can compete on price to a certain extent but you have to offer something more to distinguish yourself."

He says U.S. companies are now moving from pilot stage outsourcing to full deployment which indicates both the success of the pilot projects and the rapid growth that is likely to come in the outsourcing market for the next few years. "There will continue to be a backlash from U.S. workers, but by and large there has not been any real policy movement to restrict outsourcing so there is still a large opportunity," he says.

Hira admits that the extent to which a growing outsourcing industry ties into the broader economy in terms of job creation remains unclear but he says, other advantages emerge. "In India, for example, it remains unclear that they've been able to link the benefits [from outsourcing] back in, but the big benefit is that they have created world class management which can then move into other sectors."

Therefore, Hira recommends that Pakistan take a long-term vision not for the next three or five years but for the next two decades. "Right now you can try to pick up the low hanging fruit and absorb the excess demand but don't just think about attracting the individual company to come [to Pakistan]," he says. "Think about how this will fit into the larger set of skills for your country so that you can differentiate yourself much later down the road."

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