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EXECUTIVE SUMMARY
Service sector is one of the major contributor of country’s growth, grew by 7.9
percent in 2004-05 aided by remarkable growth in finance and banking sector
(21.8%), wholesale and retail trade (12.0%); and a modest growth in transport and
communication (5.6%). The per capita income in dollars has grown at an average
rate of 13.5 percent per annum during the last three years rising from $ 579 in 2002-
03 to $ 657 in 2003-04 and further to $ 736 in 2004-05.
Rahim yar khan is an industrial city with too many flour mills, oil mills, ginning and
cotton factories, even Fertilizer companies are here. It is a potential market for the IT
based solutions as currently companies are dependent on the solution providers from
Lahore or Karachi.
IT Solution provider is basically an idea to provide the client product of his own
requirement. In computer terminology we call it Customized Software. Which enable
the user to perform the functions according to his own environment and
2. INTRODUCTION
Due to the strong potential and rapid growth of the IT sector, Pakistani Govt. has
recognized the need and necessity to promote the industry in all the ways, locally
and export. Government took some very rational step in the promotion of IT sector
especially exemption of tax up to 2016. Government gives incentives to the IT
education as well as software houses. No tax charge on export.
Pakistan’s economic recovery has gained further traction during the fiscal year 2004-
05. The exceptionally strong growth was strengthened by accommodative
macroeconomic policies, growing domestic demand, renewed confidence of private
sector, fiscal discipline and competitive exchange rates. During the year 2004-2005
Pakistan’s economy extended in all three major components namely, agriculture,
manufacturing and services. The Real GDP grew by 8.4 percent in 2004-05 as
against 6.4 percent last year and surpassed the target (6.6%) for the year by a wide
margin. The growth in year 2004-2005 is supported by a healthy performance in
large-scale manufacturing (15.4%), impressive recovery in agriculture (7.5%) and a
strong growth in services sector (7.9%).
Service sector is one of the major contributor of country’s growth, grew by 7.9
percent in 2004-05 aided by remarkable growth in finance and banking sector
(21.8%), wholesale and retail trade (12.0%); and a modest growth in transport and
communication (5.6%). The per capita income in dollars has grown at an average
rate of 13.5 percent per annum during the last three years rising from $ 579 in 2002-
03 to $ 657 in 2003-04 and further to $ 736 in 2004-05.
Exports were targeted to grow by 11.3 percent in 2004-05 rising from $12.3 billion
last year to $13.7 billion this year, thereby registering an increase of $1.3 billion in
absolute terms.
One-half of the net increase in exports amounting to $651 million has come from the
non- traditional exports items, followed by 27 percent from other manufactures and
13.4 percent from primary commodities exports.
In service sector export relating to IT and IT enabled services (ITeS) during 2004-
2005 accounted for US$ 48.50 million, which is transacted through the State Bank of
Pakistan.
Whereas the export target for current fiscal year that is 2005-2006 are made for US $
72.00 million.
“Trends show that economies where services contribute over 60 percent to the GDP
enjoy a high per capita income of over $ 20,000. In the US, services sector
contribute 77 per cent to the GDP compared to agriculture, which though immense
contribute just 2 per cent while manufacturing and others contribute the rest of 21 per
cent.”
3. INDUSTRY ANALYSIS
Information Technology (IT) is revolutionizing the way, in which we work in evolving
business climate. In a short period of three decades, computer science has
developed from branch of electronics to one of the largest engineering disciplines
itself. The reason for the rapid growth in the demand for software development is
lead by the widespread use of computers in everyday life, evolution of high-powered
general-purpose computers and low cost of maintaining, debugging of software
products. The potential in the field of software development is still growing worldwide.
Pakistan is rich in human resource, which constitutes the foundation for any major IT
initiative. The technology has emerged as fastest growing sector in Pakistan. During
last 10 years, Pakistan has been developing human capital and infrastructure to cope
with rapidly advancing IT world. The Government is fully aware of IT being the driving
force in the new millennium. Presently, IT industry is in take off stage and catching up
with regional and global industry. Pakistan is also sharing internationally in IT.
Pakistan is in best position to take on the challenges in the global market. IT Sector
in Pakistan can be categorized in three sub sectors:
Software Industry
Hardware Industry
Communication and Service Industry
These companies derive their revenues from export and domestic markets in a ratio
of 60:40.
On the exports side, they derive 22.5% revenues from products and 38.5% revenues
from services. The majority of the product-exports are “customized” rather than
“shrink-wrapped” products. On the domestic side, however, the ratios are somewhat
reversed with products and services contributing 23% and 16.5% respectively. The
industry is serving the private sector markets with around 85% of the total sales
going to private sector (local and foreign combined) and the rest going to public
sector, equally divided between domestic and foreign.
Currently a few software companies have either ISO 9000 or CMM certifications most
of the companies has dedicated quality assurance team and this number is planned
to increase.
3.2 STATISTICS OF THE PAKISTANI IT INDUSTRY
3.4.2 BPO
Business process outsourcing is an emerging concept that gives numerous cost
advantages over the conventional in-house development. Already, many of the
fortune 500 companies have established their offshore development centers in Asia
to reduce their cost and sky-rocket the profit. The BPO industry is growing rapidly in
Pakistan, with exports up by 45 percent in the fiscal year 2003-4 alone.
A number of leading IT firms in Pakistan, such as KalSoft (Pvt.) Ltd. in Karachi, are
providing ERP solutions and enabling the recognition of Pakistan as an ERP solution
provider.
3.4.4 Gaming
Computer games are now a huge market with firms such as Electronic Arts and
Capcom investing billions of dollars into the industry, and earning similar amounts
through the widespread fame and sales of hits such as FIFA 2005, the Prince of
Persia trilogies, Halo and Counter Strike etc. Game development is emerging in
Pakistan’s IT Industry as well with some serious work being done in the field
indicating progress. One such example is Commando 4, Pakistan’s first ever 3D
animation game developed by MicroPoint.
Another major player in Pakistan’s Gaming Industry is Soft flux which was founded in
January 2005. The company targets the exploding mobile gaming industry. In July
2005, Micromiles released Cap Snap, a mobile game for Nokia and Siemens
mobiles, a successful launch which was followed by the development of a website for
mobile games (gameknock.com).
3.5.1 Internet
Pakistan at the time of its inception in 1947 owned a meager telecom base with just
7000 telephone lines. Telecom service was meant just to meet the needs of country
administration.
The measures taken to promote Internet and software are as follows:
1. 20-50% reduction on the leased lines for ISPs, and software exporters.
2. Concessions to Schools, universities & institutions for Internet usage.
3. Majors cities of country are connected with fiber optic/digital cross connect
system.
4. Segregation of telephone and internet traffic to bring internet away from time
metering.
5. Second high capacity fiber optic link commissioned in 1998 (catering 20 new
cities).
6. Currently about 100 licenses stand issued out of them 50 are operating the
service.
7. Custom duty on the telecom & Internet equipment reduced
8. Waiver granted from 25% CED on leased lines given to license ISPs &
Software
9. Exporters.
10. In year 2004 total 1612 cities including 1091 of Punjab, 202 of Sindh, 209 of
N.W.F.P and 110 of Balochistan were connected which now reached at 1900.
3.5.2 E-Commerce
The present government in Pakistan has also recognized the importance of e-
commerce and finally getting the attention, which it rightly deserves. Electronic
Commerce enhances trade efficiencies by eliminating the delays and cutting the
documentation costs by allowing trade partners to exchange transaction data
digitally. Though e-commerce is already taking place in Pakistan, and its level is the
lowest in the region.
3.5.3 Incentives
Information technology parks with low rents, fiber optic connectivity, libraries
and conference rooms.
Provision of funds for software companies to get ISO-9000 and CMM level
certifications.
Foreign investors allowed 100% ownership of equity in "IT/ITeS companies"
Tax exemption for IT companies till 2016.
100% repatriation of profits allowed to IT companies.
5% custom duties on import of IT-related equipment.
Seven years' tax holiday for Venture Capital funds.
The rate of depreciation on computer equipment is 30%.
The State Bank of Pakistan (SBP) has allowed the opening of Internet
Merchant accounts by banks.
Instant, reliable and high-speed connectivity available.
Over 85% of telecommunications infrastructure is on fiber optic cables.
Internet access is available in over 1900 cities/towns across Pakistan.
First country in region to establish DWDM telecommunications infrastructure.
Several cellular companies are using digital transmission (GSM and TDMA).
The cost of 2 Mbps connection has been lowered to $2000/month.
Redundant backup connectivity is available through PTCL for call centers.
3.7 Weakness
3.8 Threats
4.1.1 Consultancy
The first step would be providing consultancy regarding the software problems of the
client. And perform a customer specification analysis, in which the core requirements
of the system will be identified and comprehensive functional specifications for the
software that need to be developed to ensure the solution of customer’s problem.
4.1.2 Demonstration
The prototype or demonstration version of the software will be prepared to give the
customer an idea how exactly the system will work for them. Customer can visually
see how the system will perform its functions. Hence the Demonstration version will
enable customer to have an idea about the core system.
4.1.3 Design
After the finalization of the system requirements, the design work will be started. The
object-oriented and normalized database will be designed for making the system
extensible and easy to maintain. It will include the object model diagram which shows
the relationship between all modules and classes.
Chief Executive
Officer (CEO)
Quality Office
Consultancy Development Support
Assurance Management
4.3 OFFICE EQUIPMENTS AND PERSONNEL
4.3.1 Human Resources
The project should have highly educated and skilled manpower to support its
software development operations. Initially 10 technical staff will be hired which is
likely to grow to over 24 by the beginning of the next year.
The majority of technical team would have full command on methods, tools and
technology necessary to develop high quality enterprise software systems and would
be capable to generate an idea from scratch, analyze it, form a solution, implement it
and then deploy it.
Staff should be trained and fully equipped with latest technology and advancement.
Location
The suggested location for software house will be on Club Road, which is a
promising commercial area of the city. The Land can be leased for 10 years to save
heavy costs. The second best location is Firdous Market, Rahim Yar Khan which is a
commercial area and based on computers and mobile shops.
Vehicles
The company will provide a 1000cc car to CEO and 2 800cc cars for CSA and
Marketing Manager. The marketing team will also be provided with two motorbikes
which will be purely used for office purpose.
5. OPERATIONAL PLAN
This is the plan how the operation would be carried on, the diagram shows the
relationship between Analyst, Tester, Designer and Programmer. Their respective
works has been discussed earlier.
TECHNOLOGY
We will have developers for Dot Net Frame Work, Platform Independent
Programming, C sharp and Java based application programmers. The database will
be chosen according to the system requirement from MySQL to MsSQL and Oracle.
We will have licensed version of Microsoft VISUAL STUDIO 12, MySQL 2007 and
Oracle i8.
6. FINANCIAL PLAN
Based on certain assumptions, the financial results of the project have been
projected.
Rupees
Capital Investment Required 30,00,000
Working Capital 5,00,000
Total Investment 35,00,000
Rupees
Debt 14,00,000
Equity 21,00,000
Total Investment 35,00,000
Location
The suggested location for software house will be on Club Road, which is a
promising commercial area of the city. The Land can be leased for 10 years to save
heavy costs. The second best location is Firdous Market, Rahim Yar Khan which is a
commercial area and based on computers and mobile shops.
Total 581,000
Furniture and Fixture
Total 276,000
Human Resource
Technical
Non-Technical
The estimated revenues are more than 700,000 Rupees a month as we are going to
target not only the local market but focus will also be on the Exports. We are
spending high costs on qualified personnel to make the quality standards and it will
gain access to international market.
We are estimating a profit of 30% on our investment and the project payback period
will be 4 years.
Year 1 Year 2
000’ 000’
Revenue 8400 10,080
Operating Expense 5520 6624
Depreciations 120 120
Earnings before Interest and Tax 2760 3336
Interest 196 196
Earnings before Tax 2564 3140
Tax Charge - -
Earnings After Tax 2564 3140
References
Economic Survey
SBPs Annual Report
Pakistan Software Export Board
Federal Bureau of Statistics
Pakistan Economist
SMEDA Pre-feasibility Reports
Various Websites for Guidance