Media Presentation Summary

PAKI ST AN’S I T IN DUS TRY PROFILE & STRATEGY

PRESENTED BY

PAKISTAN SOFTWARE EXPORT BOARD (PSEB)

PRESENTATION ROADMAP Global IT Industry Overview Pakistan IT Industry Profile Strategic Framework

2

GLOBAL IT INDUSTRY OVERVIEW IT INDUSTRY GROWTH IT INDUSTRY GROWTH 1.6

Year

Growth (US $ Tril.)

Rate

1

2004

1.045

5.6

0.8

2005

1.103

5.6

2006

1.165

5.6

0.2

2007

1.238

6.3

0

2008

1.312

6.3

2009

1.394

6.3

2010

1.481

6.3

1.4 1.2 Trillions

IT INDUSTRY GROWTH

0.6 0.4

2004 2005 2006 2007 2008 2009 2010

Source: “IDC Press Release” 10th Jan. 2007

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GLOBAL IT INDUSTRY OVERVIEW GLOBAL IT OUTSOURCING 140 120 100 Billions

80 60 40 20 0 2004

2005

2006

2007

Source: “IDC-Global IT Economic Outlook” 2004

2008

2009

2010

4

ITPS GLOBAL MARKET Total Global Spending

US $ 1.045 Trillion

SIZE

Total Outsource able

Actually being 0ffshored

US$ 280 Billion

US$ 40 Billion

BPO 3%

BPO 43% BPO 27%

IT Services & Software 57%

IT Services & Software 5%

IT Services & Software 27%

Source: “Strategy for Increasing Exports of BPO” Bearing Point Report

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GLOBAL IT INDUSTRY OVERVIEW US IT OUTSOURCING SPENDING 1 Manufacturing 2

Banking

3

Government

4

Finance

5

Processes

12

6

Media

10

7

Retail

8

Services

9

Utilities

10

Healthcare

11

Transport

12

Insurance

13

Wholesale

14

Education

15

Industries

16

Construction

18 16 14

% age

8 6 4 2 0 1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

U.S. IS Outsourcing Spending Share by Vertical Industry

Source: “Worldwide and US IT Outsourcing Services” IDC Report 2004

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GLOBAL IT INDUSTRY BPO SERVICES SHAREOVERVIEW KEY HORIZONTAL BUSINESS FUNCTIONS

2002 $(M)

2003 $(M)

2004 $(M)

2005 $(M)

2006 $(M)

2007 $(M)

20032008 2008 CAGR $(M) (%)

Human Resources

8

9

11

13

16

19

22

20

Procurement

1

1

2

2

3

4

6

34

Finance & Accounting

13

14

15

16

18

20

22

10

Customer Care

37

40

45

50

57

64

72

12

Logistics

155

166

182

200

226

255

288

12

Engineering

6

7

12

19

24

30

37

37

Sales & Marketing

126

136

147

158

168

176

183

6

Facility Operations and Management

26

27

29

31

33

35

38

7

Training

837

22

3

5

7

8

10

39

Total

375

405

447

497

554

614

682

11

Source: “IDC-Market Opportunities by Horizontal Business Functions” 2004

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GLOBAL IT INDUSTRY OVERVIEW BPO MARKET SHARE

18%

22%

Source: “Gartner- Press Release” 2006

60%

USA W. Europe Asia Pacific

8

GLOBAL IT INDUSTRY OVERVIEW IT OUTSOURCING SUPPLIERS (USD BILLION) 4.7

17.2

0.5

India Canada

0.9

China Eastern Europe

1.8

Philippines Mexico Others

1.9 12.6

Source: “Strategy for Increasing Exports of BPO” Bearing Point Report 2005

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“ Starting from a relatively low base in 2003, the Pakistan IT Industry has experienced rapid growth over the last three years … but sustaining this growth will require some targeted measures”

PAKISTAN IT INDUSTRY PROFILE

10

PAKISTAN IT INDUSTRY PROFI OVERVIEW Over 950 active IT companies Over 125 ISO & CMM certified companies – a world leader Seven MNC Development Centers and many more projects Three Public Companies; Several World Class Product Companies Two billion dollar industry, including one billion dollars of exports IDC: “Surprising new home of offshore outsourcing in South Asia.”Lehman Brothers: “Best IT fundamentals of any offshore outsourcing country.” PSEB re-engineered website (www.pseb.org.pk) receiving 1 million hits a month, 70% from overseas

11

PAKISTAN IT INDUSTRY PROFI IT COMPANIES BY LOCATION Karachi 38%

Lahore 28%

Other Cities 1% Islamabad/Rawalpindi 33%

S.No.

City

Figure

Percentage (%)

1

Islamabad/Rawalpindi

307

33

2

Lahore

290

28

3

Karachi

344

38

4

Others

13

1

TOTAL Source: “PSEB National Census of IT Companies”, 2006

954 12

PAKISTAN IT INDUSTRY PROFI CALL CENTERS STATISTICS Call Centers Share in Total Revenue Call Center 26%

IT and Software 60%

PSEB Registered Call Centers by city

Lahore “112”

Other Cities “8”

Other ITeS 14%

Source: “PSEB National Census 2006” “Bearing Point Strategy for Increasing Exports of BPO” September 20, 2005

Islamabad/Rawalpindi “79”

Karachi “131”

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PAKISTAN IT INDUSTRY PROFILE IT EXPORTS BY REGIONS Others 16%

USA UK

Singapore 1% Australia 1%

THAILAND UAE

Germany 1% Hong Kong 1%

CANADA CHINA

Japan 2% China 2% Canada 2%

JAPAN HONGKONG

UAE 3% Thailand 4%

GERMANY AUSTRALIA SINGAPORE OTHER

UK 9% USA 58%

Source: “SBP” Jul-Dec 2006

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PAKISTAN IT INDUSTRY PROFILE GROWTH OF KEY COMPANIES Between 2003-06 these seven sample IT companies grew by over 400 %

80000 70000 60000 50000 40000 30000 20000 10000 0 NCR

IBM

ZTE

Office Space (sq ft) 2003

Source: “PSEB Survey”

NetSol

TouchStone

TRG

LMKR

Office Space (Sq ft) 2006

15

PAKISTAN IT INDUSTRY TOP 10 EXPORTERSPROFILE FY 05-06 Pakistan (State Bank Figures) Rank

Companies

US$ Million

1

Netsol Technologies

5.26 (*)

2

Ovex Technologies

2.93

3

TRG Pvt Ltd

2.23

4

System Pvt Ltd

1.94 (*)

5

Elixir Technologies

1.51

6

Descon IT24 Pvt Ltd

1.4

7

Trivor Software

1.2

8

Geopaq Tech. (Pvt.)

0.99

9

Enterprise DB

0.85

10

Xavor Pakistan Pvt Ltd

0.75

Source: “SBP”, “PSEB”, “Bearing Point Study” September 20, 2005

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PAKISTAN IT INDUSTRY PROFILE

MULTINATIONAL DEVELOPMENT CENTERS & PROJECTS

17

PAKISTAN IT INDUSTRY PROFILE

MULTINATIONAL DEVELOPMENT CENTERS & PROJECTS

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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES TELECOM Wavetech: Large display systems in public places Inov8: Leading mobile transaction management platform Mobile complete: mobile testing suite Pixsense: Mobile Photos JOB PORTALS Rozee.com.pk: Online recruitment solution Personforce.com: US Online recruitment solution DOCUMENT MANAGEMENT eDox: Superior document management and office automation solution with over 150 international customers

19

PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES PERSONAL PRODUCTIVITY Scrybe: Leading Web based email and calendaring solution RETAIL ITIM: Fast growing retail solution with over 50 UK customers SOCIAL NETWORKING Naseeb.com: Muslim social networking portal

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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

FINANCE Mixit: Stock Market Order Management, NYSE, USD 0.5 Bil per year NetSol: Car Leasing and Services. Daimler Chrysler, Toyota, BMW Autosoft: Retail banking Solution running in three countries Metalbid.com: world leading metal exchange TPS: e-payment and e-banking (Customers: Al Bilad KSA, CBK, BoK, ESB, UBL Kuwait, 1Link, Allied Bank) 21

PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

ENTERPRISE COMPUTING Ultimus: Business Process Management. 160 international customers including Microsoft & White House Five Rivers Technologies: Clear Cube Partner and world leader in fast growing field of centralized computing. 22

PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

SOFTWARE SERVICES Visualsoft: Hardware and software system integration Kalsoft: Advanced infrastructure design and implementation (*) Averox: Enterprise client/server based solution Si3: System Integration solution providers Techlogix: Business process improvement solutions Techaccess: Enterprise management solutions (*) Systems Ltd: IT and BPO services Pi Sigma Group: Consulting and software development Comcept: Innovative telecom solution provider

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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

IT ENABLED SERVICES Post Amazers: Animation. “Son of Mask” and “Exorcist : The Sequel” LMKR: Seismological and Geological Data Management. BP, CALTEX, TEXACO. iEngineering: Platform Management. Most comprehensive database in the world Touchstone BPO, Ovex, Infospan, TRG, IT24: IT enabled services/Call Centers

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PAKISTAN IT INDUSTRY PROFILE EXPORT OF IT SERVICES Mode

IT Exports

1. Cross Border

USD 150 million

2. Consumption Abroad

USD 200 million (Average USD 250,000 expenditure by over 800 entities)

3. Commercial Presence Abroad

USD 450 million

4. Temporary Movement

USD 250 million (At least 5000 workers earning at least USD 50,000 per year on average)

Grand Total

USD 1,050 million

Source: “Pakistan’s IT Revenue grossly understated” V1.4, PSEB, 31/08/2006

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PAKISTAN IT INDUSTRY PROFILE LOCAL INDUSTRY REVENUE Area

Revenue FY 05-06

PC/Laptops/Servers 1,000,000 new and used CPU@ USD 600 per CPU

USD 600 million

Peripherals – 1/3 of Computer Sales

USD 200 million

International Software Vendors

USD 150 million

IT Services Software and services, IT enabled services, (Other than sales to Multinationals, Multilaterals, and Foreign Missions)

USD 200 million

Total Domestic IT Revenue

USD 1,150 million

Source: “PSEB” and “Bearing Point” 2005-2006

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PAKISTAN IT INDUSTRY PROFI TOTAL INDUSTRY SIZE

Export of IT Services

Local IT Industry Revenue

Total Industry Size

USD 1,050 Million

USD 1,150 Million

USD 2.2 Billion

Source: “Pakistan’s IT Revenue grossly understated” V1.4, PSEB, 31/08/2006

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PAKISTAN IT INDUSTRY PROFILE COMPARISON WITH INDIA, 30th June 2005 Country

Estimated Global IT Revenue

IT Personnel

Internet Bandwidth Usage

Pakistan

USD 2 billion

75,0001

600 MBS2

India

USD 36 billion3

965,2504

6.21 GBS5

Ratio

1:18

1:12.87

1:10.35

Source:

1. PSEB Study “Assessment of IT Professionals in Pakistan” – 2005 2. “PSEB Domestic Business Department” 3. “NASSCOM” 2006 4. “NASSCOM 2006” 5. “NASSCOM Strategic Review”, 2004, p 207

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“While the Pakistan IT Industry has made impressive strides over the last three years, sustaining the growth will require a strong measures that are part of an integrated strategic framework and vision …”

STRATEGIC FRAMEWORK 29

STRATEGIC FRAMEWORK INTERNATIONAL BEST PRACTICES & LESSONS LEARNT 2000 SIZE, DOMAIN, TECHNOLOGY, COUNTRY IMAGE

1990 DEVELOPMENT AND COMMUNICATION COSTS FALL BY SEVERAL ORDERS OF MAGNITUDE MAKING LARGE SCALE OFFSHORE IT ECONOMICALLY FEASABLE AND CAUSING DEMAND TO SURGE

1950 MANPOWER MARKETING

2003 MANAGEMENT

1980 FUNDING MANAGEMENT

2000 MANPOWER

30

IT and Area Market Human Capital

Office Space

Telecom Bandwidth Finance Public Policy

Telecom Industry

IT industry

Controlled, Domestic, Oligopolistic

International, Highly Competitive

High Margin, Capital intensive business that can afford expensive manpower

Small, Manpower intensive companies that cannot afford high priced manpower

High rents affordable

High rents not affordable

n.a.

Quality major problem. Cost also problem

Multiple sources

Only VC

Deregulation policy major challenge and success

Intellectual Property Protection, Convergence, and Taxes & Tariff equal challenge 31

STRATEGIC FRAMEWORK

Direct Drivers: Telecommunicatio ns Bandwidth Provide Reliable bandwidth of sufficient capacity in quick time

Indirect Drivers:

Office Space Provide Quality ITOriented Office Space at affordable rates in sufficient quantities and in quick time

HR Provide adequate quality manpower in sufficient quantities with acceptable attrition, in quick time

Marketing Sustained dominance of niches; Bring development house or call centre of large technology or other MNC to Pakistan

Finance

Promote innovation, rapid growth and support the Strategy

Company Capability Development

Employ certifications as a “rite of passage”

Policy

Legislation that promotes and protects the IT industry

Facilitation

Grease the wheels of private enterprise

Internal

Strategy, Systems, Culture

Strategy & Research

Research on the IT Industry 32

STRATEGIC FRAMEWORK STRATEGY & RESEARCH Current Profile • PSEB In-house Pakistan IT Industry Size Study • PSEB National Census of IT Companies • PSEB Strategic Framework for IT Industry Development • Committee formed (SBP, MoIT, Statistics, EAD, PSEB) to gather statistics • Other Studies: BPO, Best Practices

33

STRATEGIC FRAMEWORK VENTURE CAPITAL FUND & ENTREPRENEURSHIP DEVELOPMENT Current Profile • PSEB has developed methodology for launch of VC Fund based on interaction with several international VC, domestic financiers, and Grant Thornton study • VC Benefits: VC funded companies have x2 sales, x3 tax payments, faster growth and innovation. In USA 11% of GNP and jobs by VC backed companies. In India USD 1.3 billion disbursed in 2003 alone. Similar successes in Israel, China and now Malaysia. • Private VC Ventures unsuccessful in Pakistan: KASB Ventures, Pak Libya Holding Company VC, Pakistan Ventures Limited, ABAMCO, EMP Fund, TRG & AMZ operating as acquisition vehicles, TMT as incubator 34

MARKETING & PR

STRATEGIC FRAMEWORK

PR, Matchmaking, Sales Pipeline Current Profile

• Sales Pipeline for GLOBAL 2000/MNC Development Centers: Abu Dhabi Group/Raseen, MGI Wenham/SKP Consulting, Mondo/Aqcel, Softflux/Micromiles and Ingen. Contracts being negotiated with Microsoft and IBM. Pipeline: SUMMIT/Orascom Technology Solutions, Bearingpoint GDC, Barclay’s Bank.) • Reengineered Website now receiving one million hits monthly with seventy percent from overseas. Over 150 leads directly passed to member companies. • Monthly bulletins with industry news updates, PSEB activities, and international report references now circulated to 3000 international and domestic corporate and Government leaders – increasing at over 500 a month. 35

MARKETING & PR

STRATEGIC FRAMEWORK

•Over one hundred and fifty PR Events including domestic and international TV interviews, radio interviews (including NPR), Magazine articles/interviews, promotion campaigns, advertisements and press releases. •Tradeshows: Last year PSEB sponsored fifty one companies in nine international tradeshows and delegations and four domestic events. • Joint Action Plans (JAC)/MOU: Signed with Malaysia, China, and Turkey. Singapore and Mauritius in pipeline. Projects/leads as outcomes. Target – 2010 Pakistan to be positioned in key international markets as Tier One IT destination; Create awareness of IT industry growth and potential in the country, and awareness of PSEB programs in the IT industry. 36

PUBLIC POLICY

STRATEGIC FRAMEWORK

Convergence, Intellectual Property, Taxes & Tariffs Current Profile • Removal of GST on computers • Facilitation of Cogilent CEO release • Working Papers on reducing Telecom BW cost and improving quality. • Data Protection Act Target – 2010 IPR, Electronic Transactions, Electronic Crimes, Data Protection, and Convergence Regulation to keep abreast of technological and market advancement 37

STRATEGIC FRAMEWORK HUMAN RESOURCE DEVELOPMENT Current Profile • Currently 90,000 IT graduates in the economy. 35,000 in IT industry including 10,000 in export companies. Studies on employment and compensation. • PSEB strategy is to increase the enrollment and output of Tier One Academic Institutions (Outreach Program), while improving the quality of select Tier Two institutions (Professional Development Centers, Soft Skill Development Program). • To further improve quality and international competitiveness, PSEB undertakes Internship Programs (3000 interns placed), Apprenticeship and Company Training Support Programs (Over 700 trained).

38

FACILITATION

STRATEGIC FRAMEWORK

Current Profile • In the current year Visa processing facilitated for over 100 individuals, Foreign Exchange Remittance NOC for SW costing over USD 100,000 to fifty four companies, and corporate advisory to numerous companies. • New memberships 283 /renewals 223, Call centers newly registered 195 and renewal of 16 call centers occurred in calendar year 2006. • OSRC: 11 migrations saving PKR 35 million;700 LAMP trainees from 38 workshops; OSRC Web Portal (700 per day); I000 instruction kits; international open source organization interaction • ERP: APTPMA (Textile Processing), PRGMEA (Ready Made Garments) /PHMA (Hosiery), PAAPAM (Auto Parts), SIMAP (Surgical Instruments) • Interaction with industry associations (PASHA, OPEN, APSENA, TIE, ACCO, CSP, PCA, and ISPAK)

39

INTERNAL

STRATEGIC FRAMEWORK

Target – 2010 Best management practices, automated, ISO 9001 and ISO 27001 certified. Market competitive salaries and 45 Additional positions Next Steps • ISO Certification, ERP, ECM • Have requested 280% Funding Increase amounting to USD 1.63 million

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PAKISTAN IT INDUSTRY PROFILE 80% GROWTH PERCENTAGE 2003-2010 70%

Percentage Growth

60% 50%

55%

66%

67%

67%

67%

59%

40%

48%

30%

33%

33%

33%

33%

33%

33%

33%

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

20% 10% 0% Year

IT Export Revenue Growth Rate (%)

IT Domestic Revenue Growth Rate (%)

41

IT REVENUE GROWTH

USD in Millions

9,000 8,000 7,000 6,000

Domestic Revenue Global Export Sales

5,000

Export Revenue (Estimated)

4,000

Export Revenue (State Bank)

3,000 2,000 1,000 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Fiscal Year Source: “Strategy for Increasing Exports of BPO” Bearing Point Report 2005

42

IT INDUSTRY PROJECTIONS Categories

05-06

06-07

07-08

08-09

75

120

198

330

550

150

239

396

660

1,100

Export Revenue Global in USD Millions

1,000

1,250

1,584

2,640

4,400

Domestic Revenue in USD Millions

1,000

1,862

2,476

3,294

4,381

Export Revenue (SBP) in USD Millions Export Revenue in USD Millions

09-10

Total IT Revenue in USD Millions

2,000

3,112

4,060

5,934

8,781

IT Graduates working in the Economy

90,000

110,319

138,388

178,046

235,459

Total HR working in IT industry

52,500

74,729

127,756

177,262

250,000

IT Graduates working in the Export IT Firms

10,000

16,569

27,615

46,025

76,709

IT Graduates working in Domestic IT Firms

25,000

33,250

44,223

58,816

78,225

Bandwidth in Mbps

608

1,222

2,456

4,937

9,924

43

VISION 2010

STRATEGIC FRAMEWORK

• Over ten billion dollars in annual turnover from several hundred million dollar services companies, leading product companies, and ten additional FORTUNE 500 and GLOBAL 2000 development centers. • Internationally recognized as a leading IT destination • 800 IT companies in the country • 10 IT/Technology Parks nationwide providing 20 million square feet • 230,000 IT graduates in the country • 250,000 IT and non-IT graduates employed by the IT Industry • USD 200 mil annual disbursement by VC Funds to the IT Industry • 10 GBS International Internet Traffic with 99.99% uptime • Over 300 ISO, CMM, ISO 27001, Six Sigma, OPM3, ITIL and certified companies • Effective regulation for Convergence Facilitation, IPR protection, data protection, • and prevention of electronic crimes and smooth regulatory approvals. 44 • Accurate, yearly updated industry data.