Pseb Presentation

PRESENTED BYPAKISTAN SOFTWARE EXPORT BOARD (PSEB)

PAKISTAN’S IT INDUSTRYPROFILE & STRATEGY

2

PRESENTATION ROADMAP

Global IT Industry Overview

Pakistan Economic Success Story

Pakistan IT Industry Profile

Strategic Framework

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GLOBAL IT INDUSTRY OVERVIEW

“Since the technology bubble burst in 2000 growth in IT Services,which picked back up in 2003, has remained robust with higher growthin the Offshore Outsourcing component“

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GLOBAL IT SERVICES INDUSTRY OVERVIEW

IT INDUSTRY GROWTH

Year Growth

(US $ Tril.)

Rate

2004 1.045 5.6

2005 1.103 5.6

2006 1.165 5.6

2007 1.238 6.3

2008 1.312 6.3

2009 1.394 6.3

2010 1.481 6.3

IT INDUSTRY GROWTH

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2004 2005 2006 2007 2008 2009 2010

Tri

llio

ns

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

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SERVICES GROWTH

0

100

200

300

400

500

600

700

800

900

Billions

2004 2005 2006 2007 2008 2009 2010

IT SW & ServicesITES

Source: “Worldwide and US BPO” 2004-08-IDC 2004 “Bearing Point Report” 2005

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GLOBAL IT OUTSOURCING

0

20

40

60

80

100

120

140

2004 2005 2006 2007 2008 2009 2010

Billions

Source: “IDC-Global IT Economic Outlook” 2004

7

ITPS GLOBAL MARKET SIZE

BPO 43%

IT Services & Software 57%IT Services & Software 27%

BPO 27%IT Services & Software

5%

BPO 3%

Total Global Spending Total Outsource able Actually being 0ffshored

US $ 1.045 Trillion US$ 280 Billion US$ 40 Billion

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

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US IT OUTSOURCING SPENDING

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

1 Manufacturing

2 Banking

3 Government

4 Finance

5 Processes

6 Media

7 Retail

8 Services

9 Utilities

10 Healthcare

11 Transport

12 Insurance

13 Wholesale

14 Education

15 Industries

16 Construction

U.S. IS Outsourcing Spending Share by Vertical Industry

0

2

4

6

8

10

12

14

16

18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

% age

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BPO SERVICES SHARE


KEY HORIZONTAL BUSINESS FUNCTIONS

2002$(M)

2003$(M)

2004$(M)

2005$(M)

2006$(M)

2007$(M)

2008$(M)

2003-2008CAGR (%)

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

10


BPO MARKET SHARE

60%22%

18%

USA

W. Europe

Asia Pacific

Source: “Gartner- Press Release” 2006

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IT OUTSOURCING SUPPLIERS (USD 40 BILLION)

0.9

0.5

1.8

1.9

4.7

12.6

17.2 India

Canada

China

Eastern Europe

Philippines

Mexico

Others


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PAKISTAN ECONOMIC SUCCESS STORY

“Pakistan’s economic resurgence is based on strong fundamentals and is receiving international acclaim… ”

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ECONOMIC SUCCESS STORY

One of the fastest growing economies in the world• Doubling of GDP between 1999 and 2006• Graduation to Middle Income Country • 8.4% growth in 2005 was 2nd highest in the world• 7% growth in 2006

Over 1000% growth in Foreign Direct Investment from USD 300 mil in 1999 to USD 3 billion in 2006

• Multi-billion dollar real estate investments by leading international developers like Emaar, Al Ghurair, and Tamimi in hotel and residential projects• Tremendous investments and growth in Telecom, IT, Real Estate, Electronic Media, Oil & Gas, Automobiles, Manufacturing and Finance

Over 400% growth in remittances from expatriates abroad from USD 1 billion in 1999 to USD 4 billion in 2005

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• Over 40 time increase in foreign exchange reserves between 1999 and 2006 to USD 12.5 billion

• Doubling of exports in same period to USD 17 billion in 2006

• A two and a half time reduction in external debt and liabilities ratio to total foreign exchange earnings to a healthy 137%

• Increase in Government revenue collection of 130% in same period to USD 11.7 billion with broadening of tax base

• Debt to GDP ratio of healthy 59% with a legal limit set at 60%

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•Moody’s B+ rating and Standard and Poor BB rating.

• Over 1000% increase in stock index over same period making it one of the best performing exchanges in the world

• Over-subscribed international offerings of dollar, euro and Islamic Bonds at only 2% above US Government rates

• Free market rupee exchange rate hovering at PKR 60 for USD 1 for last four years

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• One of the largest educated, English-speaking workforces in the World with overall population of 160 million

• A supportive, forward-looking Government

• Proximity to Middle Eastern, Central and South Asian markets

• UBS Warburg, 2006 “Pakistan has arrived”

• Lehman Brothers, 2006 “Best IT outsourcing fundamentals”

• IDC, 2006 “Surprising new home of offshore outsourcing”

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PAKISTAN IT INDUSTRY PROFILE

“ Starting from a relatively low base in 2003, the Pakistan IT Industry has experienced rapid growth over the last three years … ”

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PAKISTAN IT INDUSTRY PROFILEOVERVIEW

Fifty percent annual growth reported by SBP 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

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INTERNET CONNECTIVITY

MAP

Transworld Associates, 2006

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IT COMPANIES BY LOCATIONPAKISTAN IT INDUSTRY PROFILE

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

S.No. City Figure Percentage (%)

1 Islamabad/Rawalpindi 307 33

2 Lahore 290 28

3 Karachi 344 38

4 Others 13 1

TOTAL 954

Karachi38%

Other Cities

1%

Lahore28%

Islamabad/Rawalpindi33%

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CALL CENTERS STATISTICSPAKISTAN IT INDUSTRY PROFILE

PSEB Registered Call Centers by cityCall Centers Share in Total Revenue

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

Call Center

26%

IT and Software

60%

Other ITeS14%

Islamabad/Rawalpindi“79”

Karachi“131”

Lahore“112”

Other Cities“8”

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PAKISTAN IT INDUSTRY PROFILE IT EXPORTS BY REGIONS

Source: “SBP” Jul-Dec 2006

USA

UK

THAILAND

UAE

CANADA

CHINA

JAPAN

HONGKONG

GERMANY

AUSTRALIA

SINGAPORE

OTHER

USA 58%

UK 9%

Others 16%

Thailand 4%

UAE 3%

Canada 2%China 2%

Japan 2%

Hong Kong 1%

Germany 1%

Australia 1%

Singapore 1%

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PAKISTAN IT INDUSTRY PROFILE GROWTH OF KEY COMPANIES

0

10000

20000

30000

40000

50000

60000

70000

80000

NCR IBM ZTE NetSol TouchStone TRG LMKR

Office Space (sq ft) 2003 Office Space (Sq ft) 2006

Between 2003-06 these seven sample IT companies grew by over 400 %

Source: “PSEB Survey” 2005

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PAKISTAN IT INDUSTRY PROFILE TOP 10 EXPORTERS FY 05-06

Xavor Pakistan Pvt Ltd10

Enterprise DB9

Geopaq Tech. (Pvt.)8

Trivor Software7

Descon IT24 Pvt Ltd6

Elixir Technologies5

System Pvt Ltd4

TRG Pvt Ltd3

Ovex Technologies2

Netsol Technologies1

Rank Companies

Pakistan (State Bank Figures)

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

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MULTINATIONAL DEVELOPMENT CENTERS & PROJECTS

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MULTINATIONAL DEVELOPMENT CENTERS & PROJECTS

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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

TELECOMWavetech: Large display systems in public

placesInov8: Leading mobile transaction

management platformMobile complete: mobile testing suitePixsense: Mobile Photos

JOB PORTALSRozee.com.pk: Online recruitment solutions

DOCUMENT MANAGEMENTeDox: Superior document management and

office automation solution with over 150 international customers

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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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FINANCEMixit: Stock Market Order Management, NYSE, USD 0.5 Bil per yearNetSol: Car Leasing and Services. Daimler Chrysler, Toyota, BMWSystems Limited: Mortgage Lien processing software has leading share of the US market)Autosoft: Retail banking Solution running in three countries Metalbid.com: world leading metal exchangeTPS: e-payment and e-banking (Customers: Al Bilad KSA, CBK, BoK, ESB, UBL Kuwait, 1Link, Allied Bank)

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HEALTHCARETSG: Leading medium size hospital data warehouse; 200 customers in USA Cure MD: Leading web based HIPAA complaint healthcare system

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WORLD CLASS COMPANIES

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

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SOFTWARE SERVICESCube XS: Level 4 Data Center for AT&T Visualsoft: Hardware and software system integrationKalsoft: Advanced infrastructure design and implementationAverox: Enterprise client/server based solutionSi3: System Integration solution providersTechlogix: Business process improvement solutionsTechaccess: Enterprise management solutionsSystems Ltd: IT and BPO servicesPi Sigma Group: Consulting and software developmentComcept: Innovative telecom solution provider

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IT ENABLED SERVICESPost 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 worldTouchstone BPO, Ovex, Infospan, TRG, IT24: IT enabled services/Call Centers

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PAKISTAN IT INDUSTRY PROFILE EXPORT OF IT SERVICES

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

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

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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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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

38Pakistani labor is cheaper than India.

Total Price in Market

42,927 6,179 4,500

8,571 1,000 800

1,500 2,328 2,000

2,600 847 700

3,000 1,500 1,000

58,598 11,854 9,000

0% 100-200% 100-200%

Personnel

G&A Expense

Telecom

Property Rentals

Depreciation

Total Expenses

Markup

USA India Pakistan

58,598 23,708 to 35,562

18,000 to 27,000

Source: The Buying Triangle, LLC, 2006

OPERATING COSTS IN US, INDIA & PAKISTAN

US$ Cost per FTE(Full Time Employee)

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STRATEGIC FRAMEWORK

“While the Pakistan IT Industry has made impressive strides over the lastthree years, sustaining the growth will require sustained measures that are part of an integrated strategic framework …”

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STRATEGIC FRAMEWORK

INTERNATIONAL BEST PRACTICES & LESSONS LEARNT

1950 MANPOWER MARKETING

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

1980 FUNDING MANAGEMENT

2000 MANPOWER

2003 MANAGEMENT

2000 SIZE, DOMAIN, TECHNOLOGY, COUNTRY IMAGE

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Area Telecom Industry IT industry

Market Controlled, Domestic, Oligopolistic

High Profile

International, Highly Competitive

Under the Radar Screen

Human Capital High Margin, Capital intensive business that can afford expensive manpower

Small, Manpower intensive companies that cannot afford high priced manpower

Office Space High rents affordable High rents not affordable

Telecom Bandwidth n.a. Quality major problem. Cost also problem

Finance Multiple sources Only VC

Public Policy Deregulation policy major challenge and success

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

IT & TELECOM INDUSTRY COMPARISON

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0

10

20

30

40

50

60

70

80

90

Telecom Bandwidth

IT enabled Office Space

Human Capital

Marketing/Country Image

Availability of Finance

Company Capability Development

Public Policy

Facilitation

Strategy & Research

Other

IT INDUSTRY FEEDBACK

IT Industry feedback was conducted with the collaboration of Top IT Companies inIslamabad, Lahore & Karachi. The scale of 0-90 shows the importance of the area of concern.The colored bars represent the areas of concern.

Areas of Concern

No. of Companies

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STRATEGIC FRAMEWORKDirect Drivers:

Office Space HR MarketingTelecommunications Bandwidth

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

Indirect Drivers:

Provide Reliable bandwidth of sufficient capacity in quick time

Provide Quality IT-Oriented Office Space at affordable rates in sufficient quantities and in quick time

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

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

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STRATEGIC FRAMEWORK

STRATEGY & RESEARCHCurrent Profile

• Pakistan IT Industry Size Study, National Census of IT Companies, Strategic Framework for IT Industry Development, Others

• Committee formed (SBP, MoIT, Statistics, EAD, PSEB) to gather statistics

Target – 2010

Accurate and current industry data, clear strategy, effective implementation

Next Steps

• Gartner Study

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STRATEGIC FRAMEWORK

Current Profile

• PSEB has developed methodology for launch of VC Fund based on interaction with several international VC, domestic financiers, and Grant Thornton study

VENTURE CAPITAL FUND & ENTREPRENEURSHIP DEVELOPMENT

Next Steps

• Meeting of PM with Limited Partners• Center for screening business plans and forwarding to financiers, creating entrepreneurial culture, and supporting M&A and IPO

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STRATEGIC FRAMEWORK

IT PARKS

Current Profile

• PSEB operates 750,000 square feet in 11 STP

Proposed IT Parks

- Transparency through Inclusivity, Publicity and Objectivity- BOT (Nationwide Census of IT Companies, National Assessment of Public Land, Three City Survey of IT Company Location Preferences)- Due Diligence (International Parks & Domestic Projects)- Market Teasers- Retention of top consultants

Next Steps

• CAA land in Karachi and Lahore

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STRATEGIC FRAMEWORK

Current Profile

• Reengineered Website now receiving one million hits monthly

• Monthly bulletins with subscription of 5000

MARKETING & PRPR, Sales Pipeline, Matchmaking

• Sales Pipeline for GLOBAL 2000/MNC Development Centers

• Joint Action Plans (JAC)/MOU: Malaysia, China, and Turkey. Singapore and Mauritius in pipeline.

• Over one hundred and fifty PR Events and Artifacts

• Tradeshows: Last year PSEB sponsored fifty one companies in nine international tradeshows and delegations and four domestic events.

• Customer Events & Leads Passing

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STRATEGIC FRAMEWORK PUBLIC POLICY

Current Profile• Removal of GST on computers (Malaysia MMSC 100% Corporate Tax Free and duty free, Turkey Technoparks Corporate and Personal Tax Free, India STP Duty Free Imports and reimbursement of sales Tax, Vietnam Tech parks no import tax, no VAT and 10% Corporate Tax

Taxes & Tariffs, Convergence, IPR

• Convergence: Facilitation of Cogilent CEO release • Working with PTA and PTCL to reduce BW cost and improve quality.

• Data Confidentiality Act

Next Steps• MoIT/PSEB to be consulted on all proposed legislation impacting IT including that tabled by organizations like CBR .

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STRATEGIC FRAMEWORK

HUMAN RESOURCE DEVELOPMENT

Current Profile

• Currently 90,000 IT graduates. Need 230,000 by 2010.

• Strategy to increase Tier One institution output, improve Tier Two institution quality, and expand professional training

• Academic Programs >> Internship >> Apprenticeship >> Professional Training

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STRATEGIC FRAMEWORK

Current Profile

• Visa processing, Software NOC

• Open Source: 11 migrations saving PKR 35 million;700 trainees; translation of instruction kit into Bhasa

• ERP: Launching with BSF

• Industry associations (PASHA, OPEN, APSENA, TIE, ACCO, CSP, PCA, and ISPAK)

FACILITATION

Regulatory Facilitation & Targeted Interventions

Establishment of a Visa Handling Desk in MoFA for expediency in handling IT company visas; similar expediency for issuance of work permits by BOI.

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STRATEGIC FRAMEWORK

COMPANY CAPACITY DEVELOPMENT

Current Profile

• Under PSEB sponsored program over 110 ISO certified companies, and over 20 CMMi certified companies (by 1H07) making Pakistan a world leader.

Target – 2010

Over 300 ISO 9000, CMMi, Six Sigma, ITIL, OPM3, and ISO 27001 certified companies

Next Steps

• ISO 27001

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STRATEGIC FRAMEWORK

INTERNAL

Current Profile

• Over 40% attrition rate owing to non-competitive salaries.

Next Steps

• ISO Certification, ERP, ECM

• Have requested 280% Funding Increase amounting to USD 1.63 million

Target – 2010

Best management practices, automated, ISO 9001 and ISO 27001 certified.Market competitive salaries and 45 Additional positions

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EXPERT ENDORESMENTS OF FRAMEWORK

• Professor Wong Poh Kam, Director of the Entrepreneurship Center National University of Singapore

• Dr. Robert Firth, Director Institute of Systems Sciences National University of Singapore

• Professor Ken Morse, Managing Director, MIT Entrepreneurship Center

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48%

55%59%

66% 67% 67% 67%

33% 33% 33% 33% 33% 33% 33%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Year

Per

cen

tag

e G

row

th

IT Export Revenue Growth Rate (%) IT Domestic Revenue Growth Rate (%)


GROWTH PERCENTAGE 2003-2010

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IT REVENUE GROWTH

Domestic Revenue

Global Export Sales

Export Revenue (Estimated)

Export Revenue (State Bank)


1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

US

D i

n M

illi

on

s

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Fiscal Year

56

IT INDUSTRY PROJECTIONSCategories 05-06 06-07 07-08 08-09 09-10

Export Revenue (SBP) in USD Millions 75 120 198 330 550

Export Revenue in USD Millions 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

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

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STRATEGIC FRAMEWORK

VISION 2010

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. Accurate, yearly updated industry data.

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STRATEGIC FRAMEWORK

Global economic downturn

Country Branding

Support of Other Government Agencies (CDA, CAA, PTA, PTCL, HEC, SBP, SECP, CBR, MOFA, MOF, Planning Commission)

EXTERNAL RISK AREAS

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THANK YOU