Entreprenuer (Incubator)

Problems facing IT Services firms (software houses) in Pakistan

Pakistan has a vibrant software industry. While PASHA has specific stats on how quickly the industry is growing, as someone on the ground the indicators of growth are very clear. We started about 7 years ago as a company and felt that (as one friend put it), “operating a business here is Jehad”. I list several things that are common problems that we have seen repeatedly and we aim to address in our incubation program.

  • Sales & Marketing: Most start-ups actually don’t know the difference between the two but the feel they need to do “something” to get more business. There is a general lack of professionals and skills in this area. Primarily because our schools are teaching this stuff and businesses are only now waking up to the need for online marketing. There are very few people who can even understand Services Sales, let alone IT services sales. Product marketing is relatively more common though with SEO/Online Marketing people available fairly easily.
  • Administrative: Seems like to get anything done in Pakistan, you need two people: a guy to do it, and a guy to get it done. This applies to pretty much everything it seems. From opening an account in a Bank to making sure the floors are cleaned every day.  I found in the first few months of our start that I could be doing this all day long and still not have covered everything. Of all the ways you can spend your time in the business, spending time on this probably adds least value.
  • Power: A nightmare in and of itself and it looks like it is here to stay.
  • Internet: The lifeblood of any IT services firm, the quality of service varies widely depending on where you are and how much you can afford to spend. Bandwidth is relatively cheap here but internet connections stable, reliable and affordable enough for VOIP communication or suitable for connected protocols like RDP and VPN are very hard to find. Redundancy is also an issue since the need here is 24×7. We loose 30 mins of work time every minute internet is down (because 30 employees are sitting idle looking like someone pulled the plug out of Kiyanu Reeves head in the Matrix)
  • ROA: Most people dont realize that there are only two assets for most consulting firms:
    • Client relationships: This ties in with our first point but also has to do with account management skills. Most clients view firms as “IT Partners” come for fulfillment in a wide range of technologies, industries and platforms, all of which one small company can not maintain cost effectively. To make the most of a client relation you need to get in a position where you can deliver as much of the clients problems as possible. The cost of acquisition of a client now a days is so high that doing a one-off project doesn’t justify spending that.
    • Total man-hrs of skill available to them for delivery. Loosely speaking this translates to employees but ignored avenues are contractor pools and corp-to-corp partnerships with cross-functional/cross-technology teams. In a Pakistan environment partnerships are particularly tricky to pull off because of the shortage of trust and dependability amongst our people in general. Another common challenge here is the ability to attract and retain excellent talent, increasing this is is a numbers game with employees looking for more money and broader career prospects (which small firms cant really offer).

Profit at the end of the day depends on improving the return on these assets (ROA). Ask one of the largest services though and you will find that they have perfect annual inventory and audit of their desks (physical assets) but absolutely no idea of the two mentioned above. How much they have changed, depreciated or grown. This is complex but the fact that these two are central to profit is irrefutable. Growth is a measure of progressively generating profits and spending them on increasing these assets.

  • Mentoring: None of these problems are new or unique. A lot of entrepreneurs however spend endless time reinventing the wheel because the general culture in Pakistan is to not share. The company of others around you who have gone through the process is useful in all the points mentioned above.

We talk here about COMMON problems that can easily be resolved – I am sure every software house has a set of peeves unique to them. We started a CSR initiative called Incube a few years ago to address many of these issues so as to accelerate things for services start ups. You can read more about the reasons and rationale that led us to it here.