PAKISTANS IT INDUSTRY PROFILE & STRATEGY

PRESENTED BY

PAKISTAN SOFTWARE EXPORT BOARD (PSEB)

PRESENTATION ROADMAP
Global IT Industry Overview Pakistan Economic Success Story

Pakistan IT Industry Profile

Strategic Framework Proposals for the Prime Ministers Directions

Since the technology bubble burst in 2000 growth in IT Services, which picked back up in 2003, has remained robust with higher growth in the Offshore Outsourcing component

GLOBAL IT INDUSTRY OVERVIEW

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GLOBAL IT SERVICES INDUSTRY OVERVIEW

IT INDUSTRY GROWTH
1.6 1.4

IT INDUSTRY GROWTH Year Growth (US $ Tril.) Rate

1.2
Trillions 1 0.8

2004
2005 2006 2007 2008
2004 2005 2006 2007 2008 2009 2010

1.045
1.103 1.165 1.238 1.312 1.394

5.6
5.6 5.6 6.3 6.3 6.3

0.6
0.4 0.2 0

2009

2010
Source: IDC Press Release 10th Jan. 2007

1.481

6.3

GLOBAL IT INDUSTRY OVERVIEW SERVICES GROWTH

900 800 700 600 Billions 500 400 300 200 100 0 2004 2005 2006 2007 2008 2009 2010 5 Source: Worldwide and US BPO 2004-08-IDC 2004 Bearing Point Report 2005
IT SW & Services ITES

GLOBAL IT INDUSTRY OVERVIEW GLOBAL IT OUTSOURCING

140 120 100 Billions 80 60 40 20 0 2004 2005 2006 2007 2008 2009 2010

Source: IDC-Global IT Economic Outlook 2004

ITPS GLOBAL MARKET SIZE

Total Global Spending Total Outsource able Actually being 0ffshored

US $ 1.045 Trillion

US$ 280 Billion

US$ 40 Billion

BPO 3%

BPO 43%
BPO 27%
IT Services & Software 5%

IT Services & Software 57%

IT Services & Software 27%

Source: Strategy for Increasing Exports of BPO Bearing Point Report 2005

GLOBAL IT INDUSTRY OVERVIEW US IT OUTSOURCING SPENDING

18 16 14 12

1 2 3 4

Manufacturing Banking Government Finance

5
6 7 8 9 10

Processes
Media Retail Services Utilities Healthcare

% age

10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

11
12

Transport
Insurance Wholesale Education Industries Construction

U.S. IS Outsourcing Spending Share by Vertical Industry

13 14 15 16

Source: Worldwide and US IT Outsourcing Services IDC Report 2004

GLOBAL IT INDUSTRY OVERVIEW BPO SERVICES SHARE

KEY HORIZONTAL BUSINESS FUNCTIONS
Human Resources Procurement Finance & Accounting Customer Care Logistics Engineering Sales & Marketing Facility Operations and Management Training Total

2002 $(M)
8 1 13 37 155 6 126 26 837 375

2003 $(M)
9 1 14 40 166 7 136 27 22 405

2004 $(M)
11 2 15 45 182 12 147 29 3 447

2005 $(M)
13 2 16 50 200 19 158 31 5 497

2006 $(M)
16 3 18 57 226 24 168 33 7 554

2007 $(M)
19 4 20 64 255 30 176 35 8 614

20032008 2008 CAGR $(M) (%)

22 6 22 72 288 37 183 38 10 682 20 34 10 12 12 37 6 7 39 11

Source: IDC-Market Opportunities by Horizontal Business Functions 2004

GLOBAL IT INDUSTRY OVERVIEW BPO MARKET SHARE

18% USA W. Europe Asia Pacific

22%

60%

Source: Gartner- Press Release 2006

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GLOBAL IT INDUSTRY OVERVIEW IT OUTSOURCING SUPPLIERS (USD 40 BILLION)

4.7 0.5

17.2
India Canada

0.9

China Eastern Europe

1.8

Philippines Mexico Others

1.9 12.6

Source: Strategy for Increasing Exports of BPO Bearing Point Report 2005

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Pakistans economic resurgence is based on strong fundamentals and is receiving international acclaim

PAKISTAN ECONOMIC SUCCESS STORY

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ECONOMIC SUCCESS STORY

One of the fastest growing economies in the world Doubling of GDP between 1999 and 2006 Graduation to Middle Income Country 8.4% growth in 2005 was 2nd highest in the world 7% growth in 2006

Over 1000% growth in Foreign Direct Investment from USD 300 mil in 1999 to USD 3 billion in 2006 Multi-billion dollar real estate investments by leading international developers like Emaar, Al Ghurair, and Tamimi in hotel and residential projects Tremendous investments and growth in Telecom, IT, Real Estate, Electronic Media, Oil & Gas, Automobiles, Manufacturing and Finance
Over 400% growth in remittances from expatriates abroad from USD 1 billion in 1999 to USD 4 billion in 2005
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ECONOMIC SUCCESS STORY

Over 40 time increase in foreign exchange reserves between

1999 and 2006 to USD 12.5 billion Doubling of exports in same period to USD 17 billion in 2006 Increase in Government revenue collection of 130% in same period to USD 11.7 billion with broadening of tax base Debt to GDP ratio of healthy 59% with a legal limit set at 60% A two and a half time reduction in external debt and liabilities ratio to total foreign exchange earnings to a healthy 137%

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ECONOMIC SUCCESS STORY

Free market rupee exchange rate hovering at PKR 60 for USD 1 for last four years Over 1000% increase in stock index over same period making it one of the best performing exchanges in the world

Over-subscribed international offerings of dollar, euro and Islamic Bonds at only 2% above US Government rates

Moodys B+ rating and Standard and Poor BB rating.

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ECONOMIC SUCCESS STORY

One of the largest educated, English-speaking workforces in the World with overall population of 160 million
A supportive, forward-looking Government Proximity to Middle Eastern, Central and South Asian markets UBS Warburg, 2006 Pakistan has arrived Lehman Brothers, 2006 Best IT outsourcing fundamentals IDC, 2006 Surprising new home of offshore outsourcing

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 Starting from a relatively low base in 2003, the Pakistan IT Industry has experienced rapid growth over the last three years

PAKISTAN IT INDUSTRY PROFILE

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PAKISTAN IT INDUSTRY PROFILE OVERVIEW

Fifty percent annual growth reported by SBP Over 950 active IT companies Over 125 ISO & CMM certified companies a world leader Seven MNC Development Centers and many more projects Three Public Companies; Several World Class Product Companies Two billion dollar industry, including one billion dollars of exports IDC: Surprising new home of offshore outsourcing in South Asia.Lehman Brothers: Best IT fundamentals of any offshore outsourcing country. PSEB re-engineered website (www.pseb.org.pk) receiving 1 million hits a month, 70% from overseas
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INTERNET CONNECTIVITY MAP

19 Transworld Associates, 2006

PAKISTAN IT INDUSTRY PROFILE IT COMPANIES BY LOCATION

Lahore 28% Karachi 38%

Other Cities 1% Islamabad/Rawalpindi 33%

S.No. 1 2 3 4 Lahore Karachi Others

City Islamabad/Rawalpindi

Figure 307 290 344 13 TOTAL 954

Percentage (%) 33 28 38 1

Source: PSEB National Census of IT Companies, 2006

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PAKISTAN IT INDUSTRY PROFILE CALL CENTERS STATISTICS

Call Centers Share in Total Revenue PSEB Registered Call Centers by city

Call Center 26%

Lahore 112

Other Cities 8

Islamabad/Rawalpindi 79

IT and Software 60%

Other ITeS 14%

Karachi 131

Source: PSEB National Census 2006 Bearing Point Strategy for Increasing Exports of BPO September 20, 2005

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PAKISTAN IT INDUSTRY PROFILE IT EXPORTS BY REGIONS

Others 16% Singapore 1% Australia 1% Germany 1% Hong Kong 1% Japan 2% China 2% Canada 2% UAE 3% Thailand 4%
USA UK THAILAND UAE CANADA CHINA JAPAN HONGKONG GERMANY AUSTRALIA SINGAPORE OTHER

UK 9%
USA 58%

Source: SBP Jul-Dec 2006

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PAKISTAN IT INDUSTRY PROFILE GROWTH OF KEY COMPANIES

Between 2003-06 these seven sample IT companies grew by over 400 %

80000 70000 60000 50000 40000 30000 20000 10000 0 NCR IBM ZTE NetSol TouchStone TRG LMKR

Office Space (sq ft) 2003

Office Space (Sq ft) 2006

Source: PSEB Survey 2005

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PAKISTAN IT INDUSTRY PROFILE TOP 10 EXPORTERS FY 05-06

Pakistan (State Bank Figures) Rank 1 2 3 4 Companies Netsol Technologies Ovex Technologies TRG Pvt Ltd System Pvt Ltd

5
6 7

Elixir Technologies
Descon IT24 Pvt Ltd Trivor Software

8
9 10

Geopaq Tech. (Pvt.)

Enterprise DB Xavor Pakistan Pvt Ltd
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Source: SBP, PSEB, Bearing Point Study September 20, 2005

PAKISTAN IT INDUSTRY PROFILE

MULTINATIONAL DEVELOPMENT CENTERS & PROJECTS

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PAKISTAN IT INDUSTRY PROFILE

MULTINATIONAL DEVELOPMENT CENTERS & PROJECTS

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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

TELECOM Wavetech: Large display systems in public places Inov8: Leading mobile transaction management platform Mobile complete: mobile testing suite Pixsense: Mobile Photos JOB PORTALS Rozee.com.pk: Online recruitment solutions

DOCUMENT MANAGEMENT eDox: Superior document management and office automation solution with over 150 international customers

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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

PERSONAL PRODUCTIVITY Scrybe: Leading Web based email and calendaring solution

RETAIL ITIM: Fast growing retail solution with over 50 UK customers

SOCIAL NETWORKING Naseeb.com: Muslim social networking portal

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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

FINANCE Mixit: Stock Market Order Management, NYSE, USD 0.5 Bil per year NetSol: Car Leasing and Services. Daimler Chrysler, Toyota, BMW Systems Limited: Mortgage Lien processing software has leading share of the US market) Autosoft: Retail banking Solution running in three countries Metalbid.com: world leading metal exchange TPS: e-payment and e-banking (Customers: Al Bilad KSA, CBK, BoK, ESB, UBL Kuwait, 1Link, Allied Bank)

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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

HEALTHCARE TSG: Leading medium size hospital data warehouse; 200 customers in USA Cure MD: Leading web based HIPAA complaint healthcare system

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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

ENTERPRISE COMPUTING Ultimus: Business Process Management. 160 international customers including Microsoft & White House Five Rivers Technologies: Clear Cube Partner and world leader in fast growing field of centralized computing.
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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

SOFTWARE SERVICES Cube XS: Level 4 Data Center for AT&T Visualsoft: Hardware and software system integration Kalsoft: Advanced infrastructure design and implementation Averox: Enterprise client/server based solution Si3: System Integration solution providers Techlogix: Business process improvement solutions Techaccess: Enterprise management solutions Systems Ltd: IT and BPO services Pi Sigma Group: Consulting and software development Comcept: Innovative telecom solution provider

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PAKISTAN IT INDUSTRY PROFILE WORLD CLASS COMPANIES

IT ENABLED SERVICES Post Amazers: Animation. Son of Mask and Exorcist : The Sequel LMKR: Seismological and Geological Data Management. BP, CALTEX, TEXACO. iEngineering: Platform Management. Most comprehensive database in the world Touchstone BPO, Ovex, Infospan, TRG, IT24: IT enabled services/Call Centers
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PAKISTAN IT INDUSTRY PROFILE EXPORT OF IT SERVICES

Mode 1. Cross Border 2. Consumption Abroad IT Exports USD 150 million USD 200 million (Average USD 250,000 expenditure by over 800 entities) USD 450 million USD 250 million (At least 5000 workers earning at least USD 50,000 per year on average)

3. Commercial Presence Abroad 4. Temporary Movement

Grand Total

USD 1,050 million

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Source: Pakistans IT Revenue grossly understated V1.4, PSEB, 31/08/2006

PAKISTAN IT INDUSTRY PROFILE LOCAL INDUSTRY REVENUE

Area
PC/Laptops/Servers 1,000,000 new and used CPU@ USD 600 per CPU Peripherals 1/3 of Computer Sales

Revenue FY 05-06
USD 600 million

USD 200 million

International Software Vendors

IT Services Software and services, IT enabled services, (Other than sales to Multinationals, Multilaterals, and Foreign Missions)

USD 150 million

USD 200 million

Total Domestic IT Revenue

Source: PSEB and Bearing Point 2005-2006

USD 1,150 million

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PAKISTAN IT INDUSTRY PROFILE TOTAL INDUSTRY SIZE

Export of IT Services

Local IT Industry Revenue USD 1,150 Million

Total Industry Size USD 2.2 Billion

USD 1,050 Million

Source: Pakistans IT Revenue grossly understated V1.4, PSEB, 31/08/2006

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PAKISTAN IT INDUSTRY PROFILE COMPARISON WITH INDIA, 30th June 2005

Country Estimated Global IT Revenue USD 2 billion USD 36 billion3 IT Personnel Internet Bandwidth Usage 600 MBS2 6.21 GBS5

Pakistan India

75,0001 965,2504

Ratio

1:18

1:12.87

1:10.35

Source:

1. PSEB Study Assessment of IT Professionals in Pakistan 2005 2. PSEB Domestic Business Department 3. NASSCOM 2006 4. NASSCOM 2006 5. NASSCOM Strategic Review, 2004, p 207 37

OPERATING COSTS IN US, INDIA & PAKISTAN

US$ Cost per FTE (Full Time Employee)
USA

India

Pakistan

Personnel G&A Expense Telecom Property Rentals

42,927 8,571 1,500 2,600 3,000 58,598 0%

6,179
1,000 2,328 847 1,500 11,854 100-200%

4,500
800 2,000 700 1,000 9,000 100-200%

Depreciation
Total Expenses Markup

Total Price in Market

58,598

23,708 to 35,562

18,000 to 27,000

Pakistani labor is cheaper than India.

Source: The Buying Triangle, LLC, 2006

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While the Pakistan IT Industry has made impressive strides over the last three years, sustaining the growth will require sustained measures that are part of an integrated strategic framework

STRATEGIC FRAMEWORK
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STRATEGIC FRAMEWORK INTERNATIONAL BEST PRACTICES & LESSONS LEARNT

2000
SIZE, DOMAIN, TECHNOLOGY, COUNTRY IMAGE

1990 DEVELOPMENT AND

COMMUNICATION COSTS FALL BY SEVERAL ORDERS OF MAGNITUDE MAKING LARGE SCALE OFFSHORE IT ECONOMICALLY FEASABLE AND CAUSING DEMAND TO SURGE

2003
MANAGEMENT

1950
MANPOWER MARKETING

1980
FUNDING MANAGEMENT

2000
MANPOWER

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IT & TELECOM INDUSTRY COMPARISON

Area Market Telecom Industry Controlled, Domestic, Oligopolistic High Profile High Margin, Capital intensive business that can afford expensive manpower High rents affordable n.a. Multiple sources Deregulation policy major challenge and success IT industry International, Highly Competitive Under the Radar Screen Small, Manpower intensive companies that cannot afford high priced manpower High rents not affordable Quality major problem. Cost also problem Only VC Intellectual Property Protection, Convergence, and Taxes & Tariff equal challenge

Human Capital

Office Space Telecom Bandwidth Finance Public Policy

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IT INDUSTRY FEEDBACK
90 80 70 60

No. of Companies

50
40 30 20 10 0

Telecom Bandwidth IT enabled Office Space Human Capital Marketing/Country Image Availability of Finance Company Capability Development Public Policy Facilitation Strategy & Research Other

Areas of Concern IT Industry feedback was conducted with the collaboration of Top IT Companies in Islamabad, Lahore & Karachi. The scale of 0-90 shows the importance of the area of concern. The colored bars represent the areas of concern.

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Direct Drivers:
Telecommunications Bandwidth Provide Reliable bandwidth of sufficient capacity in quick time Office Space

STRATEGIC FRAMEWORK
HR Provide adequate quality manpower in sufficient quantities with acceptable attrition, in quick time Marketing Sustained dominance of niches; Bring development house or call centre of large technology or other MNC to Pakistan

Provide Quality IT-Oriented Office Space at affordable rates in sufficient quantities and in quick time

Indirect Drivers:
Finance Company Capability Development Policy Promote innovation, rapid growth and support the Strategy Employ certifications as a rite of passage Legislation that promotes and protects the IT industry Grease the wheels of private enterprise Strategy, Systems, Culture Research on the IT Industry 43

Facilitation
Internal Strategy & Research

STRATEGIC FRAMEWORK STRATEGY & RESEARCH

Current Profile
Pakistan IT Industry Size Study, National Census of IT Companies, Strategic Framework for IT Industry Development, Others Committee formed (SBP, MoIT, Statistics, EAD, PSEB) to gather statistics Target 2010 Accurate and current industry data, clear strategy, effective implementation

Next Steps

Gartner Study
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VENTURE CAPITAL FUND & ENTREPRENEURSHIP DEVELOPMENT

STRATEGIC FRAMEWORK

Current Profile

PSEB has developed methodology for launch of VC Fund based on interaction with several international VC, domestic financiers, and Grant Thornton study

Next Steps Meeting of PM with Limited Partners Center for screening business plans and forwarding to financiers, creating entrepreneurial culture, and supporting M&A and IPO

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STRATEGIC FRAMEWORK IT PARKS

Current Profile

PSEB operates 750,000 square feet in 11 STP

Proposed IT Parks - Transparency through Inclusivity, Publicity and Objectivity - BOT (Nationwide Census of IT Companies, National Assessment of Public Land, Three City Survey of IT Company Location Preferences) - Due Diligence (International Parks & Domestic Projects) - Market Teasers - Retention of top consultants Next Steps CAA land in Karachi and Lahore
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MARKETING & PR
PR, Sales Pipeline, Matchmaking
Current Profile

STRATEGIC FRAMEWORK

Reengineered Website now receiving one million hits monthly Monthly bulletins with subscription of 5000

Sales Pipeline for GLOBAL 2000/MNC Development Centers

Joint Action Plans (JAC)/MOU: Malaysia, China, and Turkey. Singapore and Mauritius in pipeline. Over one hundred and fifty PR Events and Artifacts Tradeshows: Last year PSEB sponsored fifty one companies in nine international tradeshows and delegations and four domestic events. Customer Events & Leads Passing
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STRATEGIC FRAMEWORK PUBLIC POLICY

Taxes & Tariffs, Convergence, IPR
Current Profile Removal of GST on computers (Malaysia MMSC 100% Corporate Tax Free and
duty free, Turkey Technoparks Corporate and Personal Tax Free, India STP Duty Free Imports and reimbursement of sales Tax, Vietnam Tech parks no import tax, no VAT and 10% Corporate Tax

Convergence: Facilitation of Cogilent CEO release Working with PTA and PTCL to reduce BW cost and improve quality. Data Confidentiality Act

Next Steps MoIT/PSEB to be consulted on all proposed legislation impacting IT including that tabled by organizations like CBR .
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STRATEGIC FRAMEWORK HUMAN RESOURCE DEVELOPMENT

Current Profile Currently 90,000 IT graduates. Need 230,000 by 2010. Strategy to increase Tier One institution output, improve Tier Two institution quality, and expand professional training Academic Programs >> Internship >> Apprenticeship >> Professional Training

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STRATEGIC FRAMEWORK

FACILITATION
Regulatory Facilitation & Targeted Interventions
Current Profile Visa processing, Software NOC Open Source: 11 migrations saving PKR 35 million;700 trainees; translation of instruction kit into Bhasa ERP: Launching with BSF Industry associations (PASHA, OPEN, APSENA, TIE, ACCO, CSP, PCA, and ISPAK)

Establishment of a Visa Handling Desk in MoFA for expediency in handling IT company visas; similar expediency for issuance of work permits by BOI.
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STRATEGIC FRAMEWORK COMPANY CAPACITY DEVELOPMENT

Current Profile

Under PSEB sponsored program over 110 ISO certified companies, and over 20 CMMi certified companies (by 1H07) making Pakistan a world leader.
Target 2010 Over 300 ISO 9000, CMMi, Six Sigma, ITIL, OPM3, and ISO 27001 certified companies Next Steps ISO 27001

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STRATEGIC FRAMEWORK INTERNAL

Current Profile Over 40% attrition rate owing to non-competitive salaries. Target 2010 Best management practices, automated, ISO 9001 and ISO 27001 certified. Market competitive salaries and 45 Additional positions Next Steps ISO Certification, ERP, ECM Have requested 280% Funding Increase amounting to USD 1.63 million
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EXPERT ENDORESMENTS OF FRAMEWORK

Professor Wong Poh Kam, Director of the Entrepreneurship Center National University of Singapore
Dr. Robert Firth, Director Institute of Systems Sciences National University of Singapore Professor Ken Morse, Managing Director, MIT Entrepreneurship Center

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PAKISTAN IT INDUSTRY PROFILE GROWTH PERCENTAGE 2003-2010

80% 70% 60%
Percentage Growth

66% 59% 55% 48%

33% 33% 33% 33%

67%

67%

67%

50% 40% 30% 20% 10% 0%

Year

33%

33%

33%

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

IT Export Revenue Growth Rate (%)

IT Domestic Revenue Growth Rate (%)

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IT REVENUE GROWTH

9,000 USD in Millions 8,000 7,000

Domestic Revenue

6,000 5,000 4,000 3,000 2,000 1,000 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Fiscal Year

Global Export Sales Export Revenue (Estimated) Export Revenue (State Bank)

Source: Strategy for Increasing Exports of BPO Bearing Point Report 2005

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IT INDUSTRY PROJECTIONS
Categories
Export Revenue (SBP) in USD Millions Export Revenue in USD Millions Export Revenue Global in USD Millions

05-06
75 150 1,000

06-07
120 239 1,250

07-08
198 396 1,584

08-09
330 660 2,640

09-10
550 1,100 4,400

Domestic Revenue in USD Millions

1,000

1,862

2,476

3,294

4,381

Total IT Revenue in USD Millions IT Graduates working in the Economy Total HR working in IT industry
IT Graduates working in the Export IT Firms IT Graduates working in Domestic IT Firms

2,000 90,000 52,500

10,000 25,000

3,112 110,319 74,729

16,569 33,250

4,060 138,388 127,756

27,615 44,223

5,934 178,046 177,262

46,025 58,816

8,781 235,459 250,000

76,709 78,225

Bandwidth in Mbps

608

1,222

2,456

4,937

9,924

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STRATEGIC FRAMEWORK VISION 2010

Over ten billion dollars in annual turnover from several hundred million dollar services companies, leading product companies, and ten additional FORTUNE 500 and GLOBAL 2000 development centers. Internationally recognized as a leading IT destination 800 IT companies in the country 10 IT/Technology Parks nationwide providing 20 million square feet 230,000 IT graduates in the country 250,000 IT and non-IT graduates employed by the IT Industry USD 200 mil annual disbursement by VC Funds to the IT Industry 10 GBS International Internet Traffic with 99.99% uptime Over 300 ISO, CMM, ISO 27001, Six Sigma, OPM3, ITIL and certified companies Effective regulation for Convergence Facilitation, IPR protection, data protection, and prevention of electronic crimes and smooth regulatory approvals. 57 Accurate, yearly updated industry data.

STRATEGIC FRAMEWORK EXTERNAL RISK AREAS

Global economic downturn Country Branding

Support of Other Government Agencies (CDA, CAA, PTA, PTCL, HEC, SBP, SECP, CBR, MOFA, MOF, Planning Commission)

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THANK YOU

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