Investing in Pakistan's IT Businesses: Opportunities

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Investing inPakistan's IT BusinessesOpportunit
ies ChallengesAltaf H. Khan
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Overview

• IT is hot!
• Investing in IT is hot!
• The investment selection framework
• An objective selection procedure
• Brief intro of selected IT sectors
• Selection procedure in action
• Wrap-up

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Why IT is Hot?

• Internet has catalyzed a huge, world-wide demand
  for IT products services
• Stories of individuals making immense wealth
  quickly, has caught the imagination of the masses
• Limited-supply, huge-demand for IT pros has made
  it the hottest profession
• Underdeveloped countries see it as a quick fix
  for their decades-old miseries

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Why Investing in IT is Hot?

• Fabulous fables of Si Valley VCs, entrepreneurs
• Possibility of early, huge returns
• A large IT market, getting larger
• All businesses now require IT products services
  to improve profitability
• Internet makes it easier to address the global
  market

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Investment Selection Framework

• A vocabulary, describing objectives and
  constraints of investment opportunities
• Elements of this vocabulary act as a committee of
  critics, each member trying to influence the
  outcome in an individualistic selfish manner
• An opportunity is selected if it satisfies most
  of the critics in the investors committee to a
  reasonable degree, without overly upsetting the
  remaining ones

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The Sixteen Critics

• Marketing
• Market size
• Competitive advantage
• Human Resource
• Leadership
• Availability of
• Experienced pros
• Junior pros
• Training
• Infrastructure
• Telecom
• Distribution channels
• Buildings

• Finances
• Initial investment
• Returns
• Payback period
• Ease of exit
• Growth
• Scalability
• Diversification opportunities
• Sustainability

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Which IT Sector is Right for You?

1. Determine the investment selection profile for
   yourself
2. Determine the selection profile for various IT
   sectors
3. Invest in the sector that matches best with your
   own profile

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Selected IT Sectors

1. Professional Training
2. IT-enabled remote services
3. Custom software development
4. New technology, product, or business model
   development

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Selected IT Sectors

1. Professional Training
2. IT-enabled remote services
3. Custom software development
4. New technology, product, or business model
   development

• Training for working IT professionals
• Generally tool/ skill oriented
• Example
• Training on Microsoft, Oracle, Cisco products

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Selected IT Sectors

1. Professional Training
2. IT-enabled remote services
3. Custom software development
4. New technology, product, or business model
   development

• Examples
• Transcription
• Call center
• Online advice
• Accounting
• Insurance claims

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Selected IT Sectors

1. Professional Training
2. IT-enabled remote services
3. Custom software development
4. New technology, product, or business model
   development

• Focus of the current IT frenzy in Pakistan

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Selected IT Sectors

1. Professional Training
2. IT-enabled remote services
3. Custom software development
4. New technology, product, or business model
   development

• Cause of the recent NASDAQ boom bust
• Few success stories in Pakistan

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The Rating Scale

Very Unattractive Unattractive Moderate Attractive Highly Attractive
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The Rating Scale

Very Unattractive Unattractive Moderate Attractive Highly Attractive
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The Rating Scale

Very Unattractive Unattractive Moderate Attractive Highly Attractive
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The Rating Scale

Very Unattractive Unattractive Moderate Attractive Highly Attractive
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The Rating Scale

Very Unattractive Unattractive Moderate Attractive Highly Attractive
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Professional Training
Dimension Rating
Market size
Competitive advantage
Leadership
Experienced professionals
Junior professionals
Training
Telecom
Distribution channels
Buildings
Initial investment
Returns
Payback period
Ease of exit
Scalability
Diversification opportunities
Sustainability
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IT-Enabled Remote Services
Dimension Training Remote
Market size
Competitive advantage
Leadership
Experienced professionals
Junior professionals
Training
Telecom
Distribution channels
Buildings
Initial investment
Returns
Payback period
Ease of exit
Scalability
Diversification opportunities
Sustainability
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Custom Software Development
Dimension Training Remote Custom
Market size
Competitive advantage
Leadership
Experienced professionals
Junior professionals
Training
Telecom
Distribution channels
Buildings
Initial investment
Returns
Payback period
Ease of exit
Scalability
Diversification opportunities
Sustainability
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New Product, Technology, BM
Dimension Training Remote Custom Products
Market size
Competitive advantage
Leadership
Experienced professionals
Junior professionals
Training
Telecom
Distribution channels
Buildings
Initial investment
Returns
Payback period
Ease of exit
Scalability
Diversification opportunities
Sustainability
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Which IT Sector is Right for You?

1. Determine the investment selection profile for
   yourself
2. Determine the selection profile for various IT
   sectors
3. Invest in the sector that matches best with your
   own profile

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Which Sector is Right for You?
Dimension Training Remote Custom Products
Market size
Competitive advantage
Leadership
Experienced professionals
Junior professionals
Training
Telecom
Distribution channels
Buildings
Initial investment
Returns
Payback period
Ease of exit
Scalability
Diversification opportunities
Sustainability
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Summary

• Selecting among competing investment
  opportunities can be made more objective by
  formulating them in terms of the framework
  suggested here
• This framework is useful, forcing us to consider
  early in the investment life-cycle the issues
  that we will face during the entry, monitoring,
  and exit phases