(Challenges Faced by IT Industry in Pakistan)
In Pakistan, there are more than 5000 IT companies operating and among them, small and medium-sized companies are in the majority. If we consult small companies about their ongoing operations the basic problem that companies face is pertaining to the Internet. It is a lifeline for IT companies yet this basic facility is not available in full strength and stream to everyone. Some complaint about speed, others are worried about the reliability of networks, etc. Internet service providers who provide good quality internet with speed and reliability cost more than conventional broadband service providers. Internet provided in the IT parks also faces interruptions frequently and this is not only the case of less IT-intensive areas but areas where the IT industry is flourishing rapidly. Companies invest heavily in the installation of IT equipment’s and as pledged to them by ITP’s and STPs they will get excellent internet facility but to their surprise, no efforts were made in years so far to ensure smooth and fast internet connectivity; putting all their work in sheer jeopardize.
- Human resources
Human resource is the biggest challenge in the Pakistan IT industry. Although IT-intensive nations of the world such as US, Singapore, India, etc. are also facing dire issues to attract quality human resources for IT services, they have adopted different models such as academia-industry collaboration, IT skill training programs, funds, and grants for the uplift of IT graduates, etc. But in Pakistan, industry – Academia linkage is very weak and universities providing IT educations are least bothered about changes in industry requirements. For the last many years very basic IT courses are being taught to IT graduates in universities and once the graduate enters the market they face the grim reality of ignorance about the latest IT certifications, programs, tools, and expertise. They invest their time again to learn these new skills and this way their motivation upon entering the market is marked by disappointment and inability to demonstrate market required skills.
Also Read: (IT Business Focus in Pakistan)
IT resources are willing to relocate to areas where the IT industry is prospering and therefore graduates migrate to these cities. Human resources in KP and Balochistan is a challenging issue due to the non-availability of institutes to produce quality graduates and also those who want to get involved in the IT industry rush to nearby cities such as Karachi, Islamabad, and Rawalpindi to get better job opportunity and clients. Also, salaries offered in IT-intensive cities are handsome compared to other cities along with no IT awareness and less opportunity to grow.
Infrastructure, as discussed in Episode 1, is the very basic issue faced by the IT industry in Pakistan. Due to deficiency of funds invested by the Government for IT sector, lack of proper governance, inadequate legal system to protect and enforce due diligence in IT-related problems and commercial cases of intellectual property infringement and etc. Resentment and lack of trust as a direct consequence of appalling industry ethics have also stopped international vendors from granting funds to the IT industry besides, the confidence of investors to promote IT via FDI or passive investments.
IT Infrastructure is the combination of all software, hardware, networks and human resources to keep the operations running. Bad Internet connectivity downplays the effectiveness of IT infrastructure and energy crises has enraged IT companies to extent that infant companies wind up businesses in a few years due to unachievable revenue targets. Companies fear to install their IT hardware due to security threats and locations where security concerns are minimal, the rental charges and office spaces are expensive.
- Basic Amenities
IT industries of the US, Canada, China, Singapore and now India as well have proven records of billion-dollar IT industry operations. This is possible due to the ecosystem provides by these countries to their IT industries, Silicon Valley is the prime example. Apart from this IT hub in China, India, Canada, and Singapore have facilitated their Industry with state of the art IT infrastructure, IT grants and promotion of their IT businesses and portfolios worldwide. In Pakistan, IT industry craves for basic amenities such as accessibility to main markets to attract customers, office spaces, entertainment facilities for the workforce in IT parks, subsidized food courts, etc. Unavailability of such a trivial yet basic need hinders the focus of businesses from their core operations. This might sound ridiculous but Companies are struggling with all of these issues in Pakistan.
- Security Challenges
Law and order have remained at the core of challenges faced by any industry in Pakistan. Businesses may find resources, facilities and IT related support but lack of security restrict businesses from either investing or expanding their businesses. Companies with sound resources have shifted their businesses abroad and others have managed to fortify themselves in few selective cities.
Graduates are not ideally equipped with IT skills which are high in demand therefore, they mostly turn to certifications for learning and scaling up their IT skills. Unfortunately, in Pakistan, there are not many platforms to provide the latest IT related certifications and inculcate IT skills in their poor skill set. Similarly, due to a lack of certifications many individuals and agencies providing IT services fall short of applying for international IT projects. The international project requirement for IT certification is very important and gone the days when anyone could stand and bid for IT projects.
- Unskilled Graduates
Academia is unaware of emerging IT practices. In India, particularly the government has laid a lot of emphasis on educating youngsters for the Latest IT trends and various training and development programs have been initiated to equip graduates with IT skills. Also technical and non-technical IT education is imparted in vocational institutes to meet the global appetite of skilled IT resources.
Except for few universities in Pakistan, who might be setting their pace with regional IT shifts and requirement others might not have even bothered to change the edition of their course books. Teachers have less or no practical knowledge about the latest trends in the market and students are not engaged in activities that can strengthen their IT insight.
- IT Ecosystem
Lack of structured effort at all levels means public and private partnerships and government intervention to promote IT-related activities. IT ecosystem means a syndicated network that synchronizes all stakeholders at one place or synergies IT players to create a more productive atmosphere for the scalability of the IT industry. Due to numerous socio-economic factors, law and order situations, political irregularities, investment barriers, trade barriers, geopolitical constraints, etc. are some of the reasons why the IT ecosystem is in the doldrums. Developing countries have immature infrastructural arrangements and focuses of governments are normally towards strengthening fundamental economic need in contrast to other industries such as IT.
- Lack of trust (Ideas Get Stolen)
Companies in Pakistan have one of the biggest reservations when questioned about business development and investment in new verticals i.e. the ideas get stolen and they feel threatened to express their ideas on any forum with anyone. This problem is related to patents and copyrights which is, unfortunately, least regulated. Companies face lots of hassle to protect their idea from getting copied and while they are on development phase someone with access to better resources copy and launch the product in the market. Even small companies or startups fear to discuss their ideas on special forums and occasions with large organizations and investors as they lack trust in individuals and organizations’ ethics.
Also Read: (Opportunities and Challenges in Limelight)
- Tax system ( Issues concerning FBR and EOBI)
The incumbent government has put high stress on the collection of tax from all industries. Some relaxations have been granted to emerging industries and those with prospective potential to attract business and remittances in the country. The IT industry, in particular, has been granted relaxation in foreign remittances. Tax is not applied in amounts transferred by the client abroad for services acquired but in contrast, the local projects and services carry a fair share of tax and they are tax-deductible. Companies have highlighted numerous problems in getting the company registered with FBR and the maintenance of their accounts. Due to no proper guidelines and single window operations to facilitate IT companies’ lots of issues are being faced by companies while streamlining their tax issues. Similarly, FBR issue short notices to companies and often accounts of companies are charged for tax penalties which disrupt their operations. Also, EOBI has a history of harassing small companies to register on their panel. Guidelines are often vague and unclear and short notices are served and if the company remains non-compliant their offices are sealed.
- Public Awareness
Pakistan is home to the highest percentage of the youth population. The majority of them are unskilled and illiterate. Universities are concentrated in few locations but among them imparting quality education and skills-based training are very few. Given the situation, people are least familiar with Information technology. Due to financial constraints, economic downturns, unemployment, in-adequate arrangements for free basic education, school and college curriculums not updated in years, unqualified and inexperienced teachers, weak monitoring and evaluation of concerned institutions are some of the facts that has kept masses unaware of technological changes as well as unfamiliarity with better resources to support routine activities. Rigorous and focused effort to equip people with trending skills is missing from national social development agenda and few initiatives adopted to train youngsters to Blockchain technology, Artificial intelligence and etc. are limited to few cities.
- Industry Linkage and Communication
B2B i.e. business to business and industry to academia linkages are broken and not effectively pursued. In a recent discussion with IT companies and stakeholders, it was highlighted that networking between IT companies in the region is very weak. Companies in KP and Balochistan are the least connected to companies and IT stakeholders around Pakistan. Similarly, the linkages between IT parks and incubation centers are regulated by software exports board and their respective administrations. IT expos, workshops, seminars, conferences are organized and also, subsidy in international events are granted to member companies. But not all companies are located in IT parks, STPs, NIC’s, etc. therefore, just a small percentage enjoys the perk of PR and networking and business development.
On the other hand, the linkage between Educational institutes and the IT industry is very weak. Industrial liaison-ship is the secondary focus in many institutes and by not engaging industry in the education paradigm for producing quality graduates with required skill sets is a big challenge for all industries across Pakistan.
- Adaptation to Latest IT trends
Industry adaptation to the Latest IT practices, standards, innovations, discoveries, certifications, programs, tools, software, hardware, etc. is near to none. Few companies who are robustly pursuing the latest IT practices find it difficult to carry out their activities in Pakistan and normally relocate to other countries. Companies may be are aware of the latest IT trends but adopting and executing projects based on new advanced technologies is challenging due to the unavailability of skilled human resources.
- Projects Won by IT Giants and International IT Service Providers
Joint Ventures (JVs); Venture Capitals (VCs) are the most attractive models across the IT industry around the globe. In Pakistan this concept is thriving and government is revising policies on different levels to regulate SOPs for JVs and VCs. JVs will allow big companies within Pakistan and Outside Pakistan to bid for any project in collaboration with small company and it will be made mandatory to uplift the IT industry overall. Similarly, VC’s will allow potential investors to invest in the innovative ideas of startups and small scale IT companies to promote and expand their businesses. Currently, companies with better resources and capacity win all projects advertised by government or private entities. These companies along with international IT giants discourage small companies from expanding or becoming part of megaprojects.
- Non-supportive Role by IT Boards
Pakistan software export board (PSEB), Pakistan Software House Association (Pasha), Provincial IT boards and Federal IT Regulatory framework are the supporting authorities of the IT industry. They have standard SOPs for IT industry working ethics, business, and other regulatory requirements. Companies associated with PSEB and Pasha in cities like Islamabad, Lahore, and Karachi highlight their sheer efforts to promote the IT industry but companies in far-flung areas and not directly associated with them complain about their scope of work and access to their support when required. Companies are legally required to be associated with PSEB and Pasha for certain project tenders but apart from these companies complain about the efficiency and effectiveness of these bodies across the country.
Next Episode of IT Industry Guide will contain information on the Challenges Faced By IT companies of Pakistan in Foreign Markets