Pakistan: Better Late Than Never In Outsourcing

Think software and services outsourcing, and places like Bangalore, Manila, and perhaps Budapest spring to mind. But Lahore or Karachi? The Pakistani cities might not be on the outsourcing map yet, but the country's software shops are out to change that. "As a natural course, American companies would not look at Pakistan," acknowledges Jehan Ara, president of the 250-member Pakistan Software Houses Assn. "So we have to get them to look at us, and once they do business with us and credibility is established, they come back for more."
It makes sense for Pakistan to follow in India's footsteps and try to boost its outsourcing business. The country, after all, shares India's British colonial history and has some 17 million English speakers. It has a huge community of émigrés with experience in technology. And like India, it has a culture that values education and hard work. Wages, meanwhile, stand at about the same level as in India, with call center workers earning about $12 per day and starting software engineers pulling in $5,000 or so annually.

Still, Pakistan remains far behind India. Last year the country's software and IT services business hit just $300 million, and exports made up only about 11% of that. India, by contrast, booked $12.8 billion in software and services exports in 2004. But the Pakistan Software Export Board, a federal body set up to promote outsourcing, forecasts that the business will grow by at least 45% annually in coming years. "Pakistan started late but now is catching up very fast in software development," says Prime Minister Shaukat Aziz.
Lower-level operations such as call centers are expected to grow even faster: Some 120 centers have opened in Pakistan in the past two years. Today they employ 3,500 people, and that number is expected to grow by 60% a year. Arwen Tech, a Karachi company that runs a 600-seat center, saw its sales double last year, to $10 million, serving clients such as Pakistan International Airlines and the local franchisee for KFC Corp. (YUM! ). Now the company is building a 1,500-seat facility and hopes to boost revenues tenfold, to $100 million, in the next five years as it attracts more international clients.

Pakistan could use the boost that outsourcing provides. Unemployment is officially pegged at 8%, although in reality it's far higher than that, and the government is looking for ways to fuel economic growth. Pakistan needs technology to increase efficiency and productivity. And software exports will help the country move away from its reliance on textiles, which make up 65% of total exports.
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