Pakistan - An Outsourcing Haven

Pakistan gaining attention as outsourcing haven
From Khalid Hasan: Daily Times, July 25, 2007

WASHINGTON: Pakistan is getting much attention in offshore outsourcing and it is only the threat of terrorism that has kept the sector from achieving its full potential, according to a professional magazine.

Patrick Thibodeau writes in the current issue of Computerworld that despite this handicap, Pakistan has a developing offshore IT services industry and in many areas of the country, it’s “business as usual.” In March this year, Chicago-based consulting firm AT Kearney Inc for the first time added Pakistan to a list of 50 countries that it evaluates for their offshore services . AT Kearney’s Global Services Location Index weighs more than 40 metrics, such as a country’s labor pool, infrastructure and legal system. Johan Gott, an analyst at AT Kearney, said Pakistan was added to the list of evaluated countries in order to stay ahead of interest from the consulting firm’s clients. Although it’s doubtful that large companies will build offshore development centres in Pakistan, Gott said the country does have potential - particularly with smaller companies seeking outsourced IT services. “In many respects, it’s similar to India in terms of education and people skills,” he added.

According to the article, AT Kearney is not the only market watcher that thinks offshore development may pick up in Pakistan. In a report last year, New York-based Lehman Brothers Holdings Inc said Pakistan’s IT industry was growing at a high rate, with more than 330 companies having registered with the country’s software export board. According to Lehman Brothers, Pakistan’s advantages include relatively low wages - amounting to as little as half the level of salaries in India - as well as reasonable real estate costs, plentiful government incentives and a readily available supply of workers. One of the largest IT services firms with operations in Pakistan is Calabasas, California-based NetSol Technologies Inc NetSol, which is listed on the Nasdaq Stock Market, has offices in the UK, China and Australia. The company was founded in Pakistan in the mid-1990s, and employs about 600 engineers there on projects for global clients in such industries as automotive and financial services.

Najib Ghauri of NetSol says the US is Pakistan’s largest trading partner, and Pakistan’s economy is doing well. “Anytime anybody goes to Pakistan, they always come back bullish,” he said. Todd Furniss, chief operating officer at the , says Pakistan has a reasonably stable economy and a legal system based on English law. “That infrastructure should make it a logical destination for services,” he added. However, it is not the case, he added, because of a number of issues facing the country, including the lack of an IT industry group similar to India’s National Association of Software and Services Companies. He also questioned whether Pakistan’s educational system is adequately preparing students for the IT services labour market. The biggest problem holding back Pakistan’s IT services industry is the geopolitical situation, according to Furniss. “That is really is a central issue,” he said. There are many other countries that offer similar outsourcing options and “don’t come with the issues that Pakistan comes with right now”, another computer executive observed.