Universities, IT firms must collaborate - CEO Infotech, Naseer A Akhtar - Analysis of Financial Statements

"Lack of access to international markets for Pakistan's information technology firms has kept this sector's performance significantly below its true export potential," said Chief Executive InfoTech, Naseer A Akhtar.
In an exclusive interview with BR Research, Akhtar contended that "despite the passage of almost twenty years since the inception of this sector in the country, it can still be considered to be in a nascent stage as the government is yet to develop any concrete policies for its regulation and growth".
While acknowledging that the sector has grown at a steady pace over the past decade, Akhtar asserted that due to the lack of a vision for the expansion of this industry and the complete absence of government support, "the industry has not been able to capitalise on opportunities to the extent that it should have".
Akhtar contended that policymakers are ignorant of the growth potential of this industry as they remain focused on conventional foreign exchange earning sectors such as textiles. "We are a self regulating, self-supporting sector. After all these years in the business, I am still having a hard time finding the relevant forums for voicing the interests of this industry," he said.
"At the most, the country's total IT exports stand around $750 million, right now," said Akhtar. He added that even if remittances sent from Pakistani IT experts employed abroad are included, the total foreign exchange earned by the sector does not exceed $2 billion.
The chief executive stressed that neither the Pakistan Software Export Board nor the Federal Bureau of Statistics, has so far compiled any comprehensive data regarding the quantum of IT exports from the country.
"Under the Shaukat Aziz government, Dr Atta-ur-Rehman was tasked with developing a vision for the country's software industry, however those plans fell through and since that time we have remained directionless," he recounted.
Academics, industry on different paths
"There is no consolidated database for IT graduates and other employable persons with relevant skills and qualifications," said the IT veteran. Akhtar claimed that he had attempted to establish a portal that would connect prospective employees with local IT firms but was unable to complete this project due to a cold response from some leading universities.
"There is a disconnect between stakeholders. The academia and industry are not co-operating with each other. Universities are not taking any input from the companies or reaching out to them to understand the emerging needs of the job market," he said, adding that "educational institutes are not evolving their course offerings in tandem with the changing requirements of the local industry.
"As a result of this gap, right now against each application for a network engineer, we are receiving ten applications from telecom engineers. So companies have no choice but to take them and retrain them even though this conversion entails massive costs for employers" explained the CEO.
"Better collaboration on research in the field of information technology is crucial to propel the country's IT sector towards growth," asserted the chief executive.
Lessons from the region
"Over a recent visit to Sri Lanka, I learnt that their government has set a tangible goal for the growth of their software industry over the next five years," said Akhtar, explaining that similar targets should be set by the government of Pakistan along with a well-defined strategy for achieving this target.
"While we wait for our exports to reach $2 billion, India's exports from the same sector crossed $50 billion last year," he said. Highlighting the fact that the Indian economy is about eight times bigger than Pakistan's, the chief executive argued that Pakistan's IT exports can potentially stand around $5-7 billion.
Akhtar also pointed out that Pakistani IT firms are typically involved in high-value processes such as software development and systems integration when compared to India's thrust on support centres and other services that add lesser value. Hence, Pakistani companies should be able to expand their revenues more rapidly, he claimed.
Info Tech has set up its own headoffice in Singapore. Akhtar revealed that the Singaporean government provides crucial support for IT firms. It contributes towards the office rent expenses that the company incurs in Singapore. Besides this, it also subsidises business trips as well as courses and training for the enhancement of the expertise of the company's employees.
Turning his focus to Pakistan, Naseer Akhtar stressed, "firstly, the government has to acknowledge the potential of this industry. The finance minister and other high-ranking government representatives should be worried about how to increase the country's income instead of managing how to spend the existing resources".
"The focus must shift towards generating revenues from the current thrust on allocating expenditures," he summed up.
Tapping the Middle East, Africa
One of the key success areas for InfoTech has been its systems for tax governance. "Most companies either do not understand the dynamics of tax governance in developing economies or provide solutions that are too expensive for most businesses operating in these markets," said Akhtar.
InfoTech has just completed implementing such a system for the government of Ghana and is also working on similar projects in Kenya, Tanzania and Malawi. The company has also secured the assistance of ADB, African Development Bank and DFID for the development of revenue and tax efficiency systems.
Akhtar claimed that Pakistani companies are able to provide better overall service quality at rates which are comparable to those charged by Indian competitors. Besides, there is a natural connection between Pakistan and the Middle Eastern states.
He highlighted that Pakistani companies performed very well during the 1980s in the construction of infrastructure in the Middle East but thereafter they have lost their edge. He said that Pakistanis are always well received in the ME and African region and companies looking to establish linkages there will continue to find an amicable environment.
The chief executive revealed that at present, about a third of the company's total revenues are derived through exports. Encouraged by a strong demand for the company's services in the MENA region, InfoTech is in the process of establishing offices in Kenya, Nigeria and Saudi Arabia.
Prospects
Akhtar is confident that the country's IT exports can register exponential growth within a couple of years, if supportive policies are introduced by the government. His proposal includes increased liaising between industry stakeholders and universities for the reformulation of their curriculum in line with market demands.
Simultaneously, the government must give importance to country's IT sector. Akhtar pointed out that the most lucrative segment of the industry is software development where companies can net as much as 80 percent profit and it is an area in which skilled labour can be made available quickly.
Domestic sales of the sector stand around $1 billion, according to him. While he claimed that margins on domestic sales are typically low, Akhtar added that local operations help companies develop the expertise needed for more lucrative international contracts.
The chief executive concluded that the ongoing war against terrorism and political uncertainty have tainted the company's image globally.
He said that to deal with such negative perceptions, many companies including his own have opted to set up their headoffices in other countries. The government, he feels, needs a coherent plan to improve the country's image and to facilitate such businesses that can generate lucrative employment opportunities for educated youth while becoming a major source of foreign exchange earnings for the country.
COURTESY: Economics and Finance Department, Institute of Business Administration, Karachi, prepared this analytical report for Business Recorder.
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