While technological developments have enabled global distribution of software development teams, and wage differentials have stimulated offshore software service export industries. The overriding factor in the growth of globalisation in this industry is the search of talented software development people. The best software talent is in increasing demand as the software industry itself grows, and as software systems become a competitive tool in many other industries.
The software publisher is also required to support their products, and for some, like Oracle databases or Amazon web server, this support requires local service technicians, not just a telephone hotline. Support of this type is usually part of their sales office and often employs local people. Here the publisher's share a motivation to develop offshore capabilities with the software services firms that custom-build, customize, install, and maintain systems for local companies. These “local services” operations depend very much on frequent contact with customers to determine requirements, understand the systems environment, and keep up with changing business demands. They very often bring local talent into the company and sometimes acquire local services firms to build this capability
Why Pakistan for OffShore Development?
International businesses seeking to outsource their IT services and software development should seriously consider Pakistan for several strategic reasons.
Pakistan’s infrastructure, policies, and expansive talent pool are uniquely positioned to meet the needs of international businesses looking to outsource their IT services and software development. The country's advanced high-speed internet services have created a well-developed communication and data infrastructure, leading to a rapid growth in Pakistan’s gig-economy contributions and ranking it as the 4th highest country for freelancers globally. This burgeoning sector is supported by an impressive talent pool; over 25,000 IT graduates annually join a workforce exceeding 500,000 IT and ITeS professionals, including around 300,000 active freelancers. The desirability of Pakistan’s talent pool is evident worldwide.
Further enhancing its appeal, Pakistan offers significant incentives for businesses, such as income tax credit on IT & ITeS exports, zero income tax for registered technology startups, tax holidays for venture capital funds, 100% repatriation of dividends and investments, and preferential rates on commercial loans. These policies are crucial steps towards facilitating ease of business in the country.
The presence of over 600,000 English-speaking IT and BPO professionals, skilled in current and emerging IT products and technologies, adds to the attractiveness of Pakistan as a destination for outsourcing. This linguistic proficiency is critical for smooth communication and collaboration with global partners. Additionally, the local software sector, valued at approximately $3.0 billion, includes more than 19,000 ICT companies, with around 6,000 of them exporting ICT products and services to over 120 countries.
Pakistan's export performance in the ICT sector is particularly noteworthy. In FY 2021, exports in telecommunication, computer, and information services surged to $2.1 billion, marking a 47% increase from the previous year. Exports to the United States, which is Pakistan's largest market, grew by 55%, and there are high expectations for further growth in the coming years.
The Government of Pakistan is actively working to unleash the potential of its ICT sector, with a focus on digitally-first capabilities to support global demand. The success stories of companies such as Careem, Bykea, Finja, SehatKahani, and PakWheels, fueled by significant venture financing, highlight the burgeoning potential in Pakistan's IT sector. In 2020 alone, US$ 77 million was raised in venture financing, with an additional $500 million available, showcasing the country's capacity to support growth-focused global brands.
To facilitate the growth of IT and software development companies, Pakistan offers low-cost rental spaces in Software Technology Parks (STPs) equipped with fiber-optic connectivity. Currently, over 800,000 sq. ft. of IT-enabled office space is available in these parks, located in major cities like Islamabad/Rawalpindi, Lahore, and Karachi.
These parks host around 80 public and private IT/ITeS companies, engaged in software development and export services. Significantly, the annual cost of employing a software engineer in Pakistan is just a fraction of the cost in the USA and Europe, making it an economically attractive option for international businesses.
Two major options for an international company bring their software development department in Pakistan. Either they hire any local offshore / outsourcing company which will export human resources to them or they can setup their own office. Going to the second option cost 50% (less) than hiring any local vendor company when even offshore / outsourcing companies are 300% cheaper than the US and set up own office will be 500 - 700% cheaper than US (operationally).
Karachi, Lahore and Islamabad are the business hub of Pakistan. Karachi is known as "New York of Pakistan" while Lahore is known as "Boston of Pakistan". Islamabad is the capital state so nothing to pretend near prediction for it. It generates 70% total running revenue and has around 15% total population. It is the biggest pool of cost-effective & most talented/experienced software engineers, infrastructure and operational cost as compared to Lahore and Islamabad.
Local Entrepreneurs are scaling their companies on an International level, started different incubation and start-up accelerator programs by innovating and providing a platform to young Entrepreneurs. Entrepreneurs and Investors from Silicon Valley are taking interest for migrating their software development here that removes any doubt regarding the opportunity cost in Pakistan.
In the end, as everything is encouraging then why not try Pakistan for setting up your next offshore development office?