Budget 2009-10 and the IT Industry – The Good & Bad News

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Since the budget 2009-10 was announced, i was looking for what impact would it have on the local IT industry. Even though not all that much has been written on the topic by journalists, which was kind of disheartening, I did find somethings online. As with everything, there’s both good news and bad news here.

20080612_budget-logo.jpgThe good news is, there is word on Phase II of PSEB’s certification scheme coming along, with a whopping fifty (50) companies for CMMI level 2, thirty (30) companies CMMI level 3 and fifteen (15) companies CMMI level 5. Also, this time PSEB will fund twenty (20) for ISO27001 Information Security Management System and twenty (20) for ISO20000 IT Service Management System certifications for member companies across the country. These come at a hefty Rs. 460 million price tag to the national exchequer, but will definitely help put a lot more Pakistani companies on the world map.

For the uninitiated, PSEB’s past certification schemes (since 2002) have so far led to 120 companies being ISO9001 Certified, and 21 companies assessed at various maturity levels of CMMI, with 4 currently undergoing assessment. PSEB subsidizes the consultancy fee and the audit/assessment fee for selected organizations at different rates. Uptil now, it’s been either 80-20, 75-25 or 70-30 subsidies where PSEB bears the larger amount and the company bears the smaller. E.g. for 80-20, 80% cost will be borne by PSEB and 20% by the selected organization. This reduces the certification costs drastically, and allows the selected company to compete head to head with bigger business in the international market.

Also, we have word on new IT parks being setup at Karachi & Lahore Airports at a cost of Rs. 50 million, which should help in subsidizing start up costs for various companies.Why choose airports for IT parks you ask? I have no idea either.

Overall, the government has earmarked Rs. 2.3 billion for IT in this years’ Public Sector Development Plan (or 0.42%) through 65 projects.

As for the bad news, since we (the IT industry as a whole) come under the Services category, there’s the question of imposition of 16% GST. Quite plainly, it means that whatever we earn (locally and internationally), gets taxed. This will come as a devastating blow to all of us, simply because it means that our prices (or margins) for the next year will expand (or shrink) dramatically. So far, i’ve only seen Netsol’s Salim Ghauri’s views on the subject. Why is PASHA quiet here, i’d like to know!

So there you have it. Comments and questions are welcome!

Update: So i hear that PASHA is not quiet at all, just not publicizing their stance much. I’ve been informed that they’ve sent a letter of recommendations for the revival of the IT industry, which does contain some very good points mind you, and are very pushing hard for it.

Image Credit: Dailytimes.com.pk

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  • Companies can have good certifications — but without marketing assistance they can encounter difficulties in maintaining enough business to remain viable as commercial entities.

    Certification assistance is both good and necessary but not sufficient to help the industry realize its immediate potential.

    The most immediate challenges are to be found in regard to sales and marketing. These challenges are often larger than individual company capabilities and resources.

    The process of creating and maintaining sales and marketing initiatives at PSEB and at individual companies is neither quick nor easy. But it is absolutely necessary. Clients do not grow on trees. They come in through dedicated efforts over a long period of time.

    The procurement cycle for IT projects can be 6-18 months after solid leads have been identified in Western markets, which itself is an expensive and time consuming activity. I would question our understanding of sales and marketing processes and our understanding of what is needed to be truly successful in those areas. I would also question the commitment of resources for sales and marketing assistance.

    There are longstanding traditions of looking down on sales and marketing in favour of engineering activities. But without increased attention on sales and marketing, everything else is at risk of becoming irrelevant.

    Let us identify deficiencies and move to correct them.

    Correction does not and cannot involve the types of activities that were in vogue several years back. The last two years have seen substantial changes in sales and marketing methods, supply chains and ROIs for different activities.

    In Pakistan, approaches to sales and marketing in the IT sector are not out of place with the approaches that would have been used to sell products and services in the B2B field 80 years ago. They are labour intensive, relatively low-tech and frequently ignore how international business is conducted today.

    As Oprah would say, it’s time for a time-warp makeover in Pakistan.

  • First a great post and a good analysis by Mansoor, secondly i agree with Mitchell regarding the marketing efforts by the companies, here i would like to explore a little on the role of OVERSEAS PAKISTANI MISSIONS ALL OVER THE WORLD,

    I am away from Pakistan for last three years now and i am working in GULF, here what i have experienced and seen is, our EMBASSY (PAKISTANI) is just working as a Point of Contact to the government(or probably i m calling for more)

    While when we look at our competitive neighbor who is whopping ahead of us ONLY FOR ONE BIG REASON, that is .. “THEIR EMBASSY IS ACTIVELY PURSUING THE INTEREST OF THEIR INDUSTRY ACCORDING TO THE LOCAL MARKET REQUIREMENTS”

    here are some of the important steps they have taken

    1. They have websites working under the control of embassy, which provides all information about job seeking to accommodation to every thing.

    2. You face any problem just goto embassy they have committees formed (OUTSIDE EMBASSY STAFF) to help the residents in the region.

    3. The ambassador and his team is actively working on HOW TO MARKET THEIR HUMAN RESOURCE IN THE EMERGING DEMANDS, THEY GO TO SEE BIG MULTINATIONALS AND LOCAL TYCOONS TO ASK THEM PERSONALLY THAT WHAT KIND OF LABOR OR PROFESSIONALS ARE REQUIRED and THEY MAKE THEIR DEMAND

    4. THE HELP OF EMBASSY IN ACTIVELY HELPING COMPANIES SPECIALLY IN IT PRODUCTION FIELD, IS AMAZING

    now

    i just want to ask the GOVT, or the concerned authorities when they are ready to learn ?? this is not a big deal, this is just about taking an initiative. They can join in Symposiums, they can help in calling local Pakistani companies to join the FAIRS and other events, PSEB can sponsor them to come and market the products and i am very very sure that Our professionals ARE NOT LESS THAN ANY ONE ELSE IN THE WORLD (IF NOT BETTER) and i have seen products sold near million $s are actually CRAP just nothing else..

    Good luck to us

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