Pakistan, a promising new software hub

It's becoming a destination for freelance programmers, software coders and app designers

Pakistan isn’t usually considered one of the world’s information technology powerhouses; its share of global IT sales is only $2.8 billion, of which $1.6 billion represents tech and IT services and software exported abroad. This is a tiny percentage of the expected $3.2 trillion global market for 2015, and is dwarfed by India’s $100 billion worth of software exports per year.

Yet Pakistan’s IT sector is carving a niche for itself as a favoured place to go for freelance IT programmers, software coders and app designers. There are now 1,500 registered IT companies in Pakistan, and 10,000 IT grads enter the market every year.

Energetic members of the middle class educated in Pakistan’s top universities, they have honed their skills at the many hackathons, start-up fairs and expos, digital summits and entrepreneurial events at campuses, software houses and IT associations across the country.

Next comes showcasing their skills to a global market in order to grow businesses. So, Pakistani freelance programmers flock to global freelance hiring sites such as Upwork, or fiverr.com, where digital employers in the United States, Australia or Britain bid to hire programmers for small software and app projects.

On these platforms, hiring someone from Pakistan becomes as easy as hiring someone from Ireland or India, because traditional concerns about security, corruption and invasive bureaucracy in Pakistan do not apply.

The formula is working: The Pakistani programmers’ market ranks as the No 3 country for supplying freelance programmers – behind only the US and India, and up from No 5 just two years ago. It ranks in the upper 10 to 25 per cent on Upwork’s listing of growth rates for top-earning countries, alongside India, Canada and Ukraine.

Pakistan’s freelance programmers already account for $850 million of the country’s software exports; that number could go up to $1 billion in the next several months, says Umar Saif, who heads the Punjab IT Board and previously taught and did research work at MIT

The optimism one hears in Karachi and Lahore even withstood a scandal last May, when news broke that Axact, one of Pakistan’s largest IT companies, was operating as a fake degree mill.

Members of the tight-knit IT community reacted at first with fears for Pakistan’s chances to become a major player on the world’s IT stage. Perhaps those fears acted as a spur to the authorities, who arrested Axact’s chief within weeks after the scheme was laid bare.

In any event, three days after investigators raided Axact’s offices, Naseeb Networks International, a Lahore-based company that runs the online job marketplace Rozee.pk, announced that it had won a third round of investments, worth $6.5 million, from the

European investment firms Vostok Nafta and Piton Capital, bringing the company’s total venture capital funding to $8.5 million. It was the latest in a series of large venture capital investments in Pakistan over the last year and a half.

Two factors help account for Pakistan’s rapid recent growth as an IT contender. Success stories like Naseeb’s depend on building a reputation as trustworthy, talented players who can build long-term relationships with adventurous investors overseas.

“The single most important reason for us is the entrepreneur,” said Greg Lockwood, a partner at Piton Capital. He singled out Monis Rahman, the founder of Naseeb Networks, as someone who “has done a terrific job building NNI over the last several years in challenging conditions for a cash hungry start-up.”

In addition, the business model for global IT has changed drastically in Pakistan in
the last five years. No longer do huge, established entities like Microsoft engage large, overhead-laden Pakistani companies to deliver on software contracts that can require years in development.

Saif says foreign companies now look for young programmers in three-person businesses who create apps “out of their garages or bedrooms.”

Well aware of Pakistani irritants like undependable power and Internet connections, and lack of office space and mentors, Saif promotes software incubators across the country. Plan 9, in Lahore, is one of the largest, having graduated 66 IT companies, five of which are now worth more than $5 million.

Blooming ‘incubators’

Recently, Jehan Ara, president of the Pakistan Association of Software Houses, opened The Nest I/O in partnership with Google and Samsung in Karachi, and there are incubators at the Lahore University of Management Sciences and the National University of Sciences and Technology in Islamabad.

After developing an app in an incubator, a young IT company can get mentoring from international companies through a software accelerator like Invest2Innovate in Karachi or Lahore, or the Foundation at LUMS.

Some mentor over Skype but many are willing to travel to Pakistan. “IT entrepreneurs are gritty people,” Saif said. “They’ll go out of their way to help other entrepreneurs.”

It’s now also faster and easier for foreign companies to acquire the apps these programmers create, in contrast with negotiating traditional service contracts, and Saif anticipates that such start-ups will themselves become targets for acquisition by overseas companies.

According to him, venture capital is the one missing ingredient in an enabling environment that the government, universities and software associations are building.
Per Brilioth, the managing director of Vostok Nafta Investment, agrees. “The macro indicators and demographics are very strong,” he said, “and the country doesn’t seem to get a lot of investor attention, so valuations are reasonable.”

Those factors – and the rapidity with which Pakistan’s 200 million people are embracing the Internet on sub-$50 Chinese 3G smartphones – are markers on which Pakistan’s entrepreneurial leaders pin their hopes for the future. They see problems like Axact as bumps in the road as Pakistan builds a haven for IT development.