Professional Documents
Culture Documents
IT Sector in Pakistan
IT Sector in Pakistan
Forefront
This blog post is based on two policy talks held at CDPR entitled, “Bringing
Pakistan’s Tech Sector to the Forefront” and “Realizing Pakistan’s IT Export
Potential“.
Several college graduates and young entrepreneurs are dreaming of the next
billion-dollar idea. This conception is not far-fetched. A group of young
Estonians developed Skype in 2003 which was eventually sold to Microsoft for
$8.5 billion in an all cash deal! In fact, all tech giants across the world today
have had humble beginnings. WhatApp was sold to FaceBook for 19 billion
dollars, almost three times Pakistan’s defence budget. Such is the scope and
potential of this sector.
On the flip side, statistics say nine out of ten startups are bound to fail[1]. Those
that succeed do so because of the right product fit. They have ideas that tap into
a real market need and create innovative products that simplify lives. How do
they make the right product? If their product is removed from the market, it will
be sorely missed. This is when they have hit the jackpot.
With latest technology and access to faster internet, the tech industry is
producing services and products, across sectors, that are increasingly more
dynamic and revolutionary. The industry’s access to seed, private equity and
venture capital funds is also improving.
Patari, an online streaming application and a household name for music lovers,
made headlines when it secured $200k in seed money in 2017. In 2015, Eatoye,
an online food delivery service, was acquired by one of the world’s largest food
portals, FoodPanda and continues to expand across Pakistan. More recently,
Airlift nabbed $12 million in Pakistan’s largest Series A funding – a company’s
first significant round of venture capital financing – ever for a startup in all of
South Asia. It is a ride-hailing startup which connects passengers with buses on
a fixed-rate, operating in Pakistan’s largest cities.
These prominent app-based startups and many more cater to the domestic
market, are part of the local economy and form an important element of the tech
eco-system. There is another major component of this sector which caters to the
international market (through software development and business process
outsourcing) and is deeply embedded into the global value chain. However,
most Pakistani firms provide low value products and services. Despite this, IT
exports reached the billion-dollar mark in 2017-18, with software exports
comprising $700 million. In fact, IT experts place the total exports at $2.5
billion (incorporating an estimated $1.2 billion earned by freelancers). This is
however still much lower than India’s exports at approximately $125 billion for
the same year[2].
Rising exports and domestic success stories show the immense potential of this
sector. But two fundamental constraints are limiting this potential – restricted
supply of skilled labor and lack of a supportive ecosystem.
Skilled workforce
The tech industry is highly skill and knowledge intensive. It may be able to
withstand disruptive energy supply, but it will not flourish without an adequate
supply of skilled labor.
The academic path to becoming a tech professional is not well defined. Product
development relies on a workforce with more refined skill set, based on
knowledge about product design, technology and marketing. Pakistan is not able
to develop a niche in gaming (which is 80% of the revenue of Google and Apple
Store) because its workforce lacks knowledge about game development and
design.
At the same time, it needs creative minds that are able to come up with
innovative solutions to problems put forward by international clients. Basic
software development only requires writing codes towards an end-goal already
defined by the client and therefore does not enable/require the workforce to
become creative.
Since the required skills do not exist amongst Pakistani graduates’ firms, those
wishing to capture the high-end market – have to also invest in skills
development. In addition to a product risk (i.e. whether they have the right
product fit in the market) the companies also end up facing an execution risk
(due to inadequate skills).
Developing good business models and creative products is only possible if the
firms are supported by a strong educational/ training system. At the moment
very few universities focus on subjects like entrepreneurship, computer design
or branding which can help entrepreneurs when they start on their own and
enable them to add value to their products. Pakistan also lacks a strong cohort of
tier 2 universities.
Overall, the multifaceted nature of producing IT products/services requires a
multi-disciplinary education. Currently, Pakistan’s education system does not
nurture this kind of thought process or encourage innovation.