Pakistan’s Offshore IT Potential Held Back By Political Risks

There’s a report about Pakistan IT market published by the popular IT magazine Computer World. Here is some text from the article. As you can see this is a subjective matter and perceptions are important. As discussed at G&W before, I do think that the cost of doing business is increasing in Pakistan while the salaries are not that competitive compared with India.

Consulting firm A.T. Kearney Inc. for the first time added Pakistan to a list of 50 countries that it evaluates for their offshore services market potential. A.T. Kearney’s Global Services Location Index weighs more than 40 metrics, such as a country’s labor pool, infrastructure and legal system.

According to Lehman Brothers, Pakistan’s advantages include relatively low wages — amounting to as little as half the level of salaries in India — as well as reasonable real estate costs, plentiful government incentives and a readily available supply of workers.

Not so bullish is Todd Furniss, chief operating officer at the Everest Research Institute, an independent arm of consulting firm Everest Group in Dallas. He questioned whether Pakistan’s educational system is adequately preparing students for the IT services labor market.

But the biggest problem that is holding back Pakistan’s IT services industry is the geopolitical situation there, according to Furniss. “That is really is a central issue,” he said.

Companies seeking offshore services have a wide range of choices, said Cliff Justice, head of globalization at Houston-based consulting firm EquaTerra Inc. There are many other countries that offer similar outsourcing options and “don’t come with the issues that Pakistan comes with right now,” Justice said.

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  • Actually Babar, many of us in the IT industry are actually hopeful because this is the first time that Pakistan has actually come on the radar of AT Kearny. IDC, too, has placed Pakistan on the up and coming destination list, so I would say let us look at this positively – as the glass being half full as opposed to half empty. Salaries in Pakistan are actually 30% lower than those in India but yes our major problem is that of being perceived as an insecure destination. Image has been a problem for us from way back when. And yet as an industry we have taken on the challenge and continue to grow at close to 50% every year. I am an optimist and I believe things will get better.

  • Agreed and we need to keep working on our image. For example this article has a factual mistake. It quotes Furniss as saying “Pakistan’s lack of an IT industry group similar to India’s National Association of Software and Services Companies, known as Nasscom.” We should write to computer world about this.

    I also saw an article in WSJ which talked about the soaring salaries in India. It said:
    Rafiq Dossani, a scholar at Stanford University’s Asia-Pacific Research Center who recently studied the Indian market, found that while most Indian technology workers’ wages remain low — an average $5,000 a year for a new engineer with little experience — the experienced engineers Silicon Valley companies covet can now cost $60,000 to $100,000 a year. “For the top-level talent, there’s an equalization,” he says.

  • Thanks for pointing that out. I will ask Ashraf Kapadia, the President of P@SHA, to write to them and correct the misconception that we do not have an industry association.

    Actually India has two problems at the moment – one of increasing salaries and the other of shortage skilled manpower to meet growing needs. That is why several of their companies are talking to Pakistan to try and outsource some of the work.

    Whereas one should never turn down business, and growth is dependent on both product and service companies, we need to continue to focus on developing increasing IP in Pakistan. That is the way forward.

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