[FONT=Verdana, Arial, Helvetica, sans-serif]By Rafi-uddin Shikoh, Feb 28, 2007 Many ambitious young people in developing countries look to the West not only for higher education but to work for world-class Wall Street or Fortune 500 companies. In the late 80’s, Amer Hashmi of Pakistan, was one of those fortunate ones who got that opportunity, but always wished there could be choices much closer to home.
In 2004, with 12 years of a very successful career in the US/Canada technology services sector, Mr. Hashmi embarked on a mission to fulfill his wish and returned to Pakistan to establish a world class organization. He secured some seed capital and rallied 30 seasoned senior to mid-level, like-minded managers to go back.
He established System Innovations or Si3 as an end-to-end technology services provider for mid-to-large sized companies. Today, Si3 is pursuing a three-phase strategy to become a $150 million revenue company by 2010, and a $1 billion revenue company by 2015.
In its short two years, this big thinking has certainly paid off.
According to Si3, it has achieved 562% revenue growth in 2006 with $28 million in total signed revenues between 2004-06, and has been recognized by Pakistan Software Houses Association as the fastest growing IT services company in Pakistan.
Very quickly it has commenced its ‘growth with profitability’ Phase 2 that mixes organic growth with strategic acquisitions accross North America, the Gulf States and Malaysia.
Along with its commercial vision, Si3’s efforts to bring about social change is also noteworthy. Much as contemporary social entrepreneurs like Muhammad Yunus, founder of Grameen Bank, are setting commercial ventures that benefit society, Mr. Hashmi is also incorporating an innovative operational model to uplift the public sector and leverage the often ignored rural areas of Pakistan.
Market Opportunity
In 1989, Amer Hashmi attended the York University in Toronto, Canada, to study Finance and Marketing. Soon after graduation his career led him to manage large IT Outsourcing projects in North America. In 1996-97 when IT Outsourcing was just taking off, he overlooked the delivery of the largest IT Outsourcing deal of the time. The deal was worth 1.2 billion dollars over 10 years and was with the California State Auto Insuranse. He later worked on large system outsourcing/ integration deals at the IBM Global Services banking division.
Throughout this period of 8-10 years, Mr. Hashmi maintained strong ties with Pakistan, visiting often, observing the IT industry there. “When legacy moved to Client Services and enterprise computing and major IT outsourcing deals were taking off in the United States, Pakistan was just getting into software development. So I saw huge opportunity,” he explained.
To substantiate the market he hired some MBA students from Lahore to size the IT expenditure in the country–specifically as it relates to Enterprise Computing [running entire networks and other computing needs throughout large, often widely dispersed corporations]. At the completion of the study, the approximate IT market in year 2000 was estimated to be $160-175 million with variance 5-10% (included hardware, software and integration services).
“That excited me because I knew that Companies in Pakistan servicing this market were mostly software development houses which at that time had revenues of only $20 million in total, and serving a very small component of the full IT integration needs. I immediately knew there would be a huge market for IT turnkey services.”
Today, the Pakistani IT market is estimated at $1.5 billion with Government estimates saying a year-on-year growth of 30-33% (Source: Pakistan Software Export Board. $1.25 billion of which is internal and $250 million is in exports.)
An Inspired Beginning
Armed with this key insight and the enthusiasm and willingness to go back to Pakistan to build a world class company, Mr. Hashmi first approached IBM Global Services to establish a presence in Pakistan. “IBM had just invested in India and it was the beginning of their investment. They didn’t have much interest and obviously Pakistan was not a big enough market for them. So they said, Thank you, but no thank you.”
That may have been a good thing because soon Hashmi made a visionary leap. He decided to leverage his contacts from Silicon Valley, to NYC, to London, Toronto, and SE Asia who had technical and domain expertise – to help establish a world-class IT services company in Pakistan. “The idea was to make a billion dollar purely services, IT integration, and outsourcing company that would be at par with Accenture, WIPRO, EDS and the likes.”
Knowing that the talent needed to build such an organization was not in Pakistan, Mr. Hashmi had to work hard to get the right team. Financing turned out to be the easy part. So he scoured for the best Pakistani diaspora talent in North America to gauge their interest and willingness to come back to Pakistan. After pitching his plan to more than 200 seasoned IT professionals, he soon got commitments from 6 senior level and 20-30 mid-tier good managers to come back.
[FONT=Verdana, Arial, Helvetica, sans-serif]With people commitment and some initial investment lined up, he resigned from IBM in 2003 and went back to Pakistan. The same year, a Senior Partner of AF Ferguson (PWC of Pakistan) Mr. Khalid Rafi was retiring. He took a strong liking to Mr. Hashmi’s business idea and joined forces as a major investor.
In 2004 the venture went live with Mr. Khalid Rafi, ex-Senior Partner of PricewaterhouseCoopers Pakistan as the Chairman and Mr. Amer Hashmi appointed by Si3 Board as the President and CEO.
Soon three more prominent investors joined, Mr. Hussain Dawood, Chairman of Dawood Group (one of the highest net-worth individuals in Pakistan), Mr. Iqbal Ali Mohammad of the GulAhmed family, and a Malaysian conglomerate Rasma Corporation Bhd.
With a strong globally experienced team in place and its influential investors who would open up doors, Si3 began to win large public and private clients in Pakistan which included Habib Bank Ltd., United Bank Ltd, Dubai Islamic Bank, National Logistics Corporation (NLC), Pakistan defense Sector, Pakistan State Oil and many more.
**Mybank Ltd - Turn-key IT Infrastructure and Application Outsourcing **
One of its pioneering projects was with a mid sized bank Mybank Limited (formerly Bolan Bank Limited). It was going through an organization-wide overhaul, with a new management team in place, which for the first time had decided to completely outsource all of its technology services.
In order to focus on its core competency of banking and customer service, the bank decided to outsource functions where others could do a better job for the bank. Si3 was selected in an international bidding process to roll out entire IT Infrastructure and Application Outsourcing across its 50 branch network spread over 22 cities in Pakistan on a turn-key basis over a 7-year timeline.
Globally Competitive Value Proposition
Building upon what Mr. Hashmi calls its “unshakeable foundation” in Pakistan; Si3 is poised to expand globally through an impressive value proposition. “We don’t see Pakistan just in terms of labor arbitrage. I would label it as - high value at an extremely competitive price. Labor arbitrage gives you the impression of low skills.” Mr. Hashmi specifically cites its engineers who are CCIE (CISCO Certified Internet experts) which is the highest level of Cisco certification.
“A CCIE with ten years of experience makes $250k in the US. In Pakistan the average is $25k a year and at Si3 the average is $30k/year. So the value proposition to our clients out there, in the Middle East and North America is – a global CCIE at an extremely competitive price. So if you position Pakistan globally, we are half if not 1/3rd the price of India in certain areas, half the price of China, and 1/3rd the price of Malaysia.”
Ghalia Naseer who is the Brand Manager at Si3 and manages its corporate relations, highlights the integration of this value proposition in all of its operations, “Our greatest strength are our people. When clients see our proposal, the most important aspect are the bios of the team who come with Fortune 500 backgrounds, have highest levels of certifications, and have delivered results with high integrity.
The Company says it invests heavily in technical training and certifications and communicates and embraces a set of core values of respect, integrity, customer focus, excellence, and innovation.
Ms. Naseer adds, “In attracting talent we offer best of breed methodologies and practices that would make any globally experienced professionals transition smooth. What makes us standout—especially as we appeared out of no where in the last two years, is that we have this huge vision – very clearly communicated to be a $1 billion company by 2015.”
Global Expansion – Malaysia, North America, GCC
To achieve its aggressive growth targets, Si3 is pursuing a combination strategy of organic and non-organic growth. The Company has already done one acquisition in Pakistan and is in final discussions and due diligence to complete a high value acquisition in Kuala Lumpur, Malaysia.
Mr. Hashmi estimates the Malaysian market including telco to be about $9 billion annually of which $3-4 billion is in IT. “We figured the know-how, strategy and understanding of clients will not be gained from sitting in Pakistan. You have to invest. We have already opened the office for business acquisition. Also our Malaysian investors have opened up doors.”
At the same time Si3’s aggressive targets could not be met without addressing the largest IT market - North America; of which the US is estimated to represent 1/3rd of the global IT market of some $500 billion in expenditure and Canada is at approximately $55 billion. Given Mr. Hashmi’s contacts there and an initial equity injection that came from North America it is giving special attention to this market as well.
“It is very difficult to penetrate these markets from Pakistan given the tremendous competition that exists for talent. Very early on with the Board we decided that wherever we expand our market we should have a bit of the Si3 for them. When they have equity in Si3, the mindset is totally different. One of the investors is now the Si3 MD of US and Canada.” The Company has opened up a Toronto office and has won five significant deals in US and Canada.
Finally, in regards to the Gulf market, he points to the booming $10 billion worth of investments that have come in to Pakistan. “The ties have become stronger during the last five years and IT expenditure has also increased in this market.”
Mr. Hasmi estimates the market size of Saudi Arabia at $5 billion and the rest of GCC at $4 bill and growing.
“We have been starting to get requests during the last year – for a big Pakistani IT company to be there. Keeping with our strategy of entering new geographies only after we feel we are well connected and have local investment, we are currently actively seeking investors there. We are looking to add a heavy institutional investor component or high net worth individuals from Saudi Arabia or UAE to our Business model.”
“Why? Again – they can open many doors for us. High end clients like to work with Arabic speaking individuals – so to get the professional staff we would need their help. Also we need strong partner for government contract access.”
**Social Motive – Si3 Technology Campus in Rural Pakistan**
As Si3 pursues an aggressive commercial growth strategy, Mr. Hashmi also sees it playing a small yet significant role in nation building.
“Si3 views IT expenditure in the country as the plumbing of the country. If we can help automate public serving entities WAPDA, PTCL, Habib Bank, Army, PIA, all of the large institutes that cater to the 160+ mill of our population, we feel that our own quality delivery will lead to the betterment of life in the country.”
A specific initiative with a social motive is the upcoming Si3 Technology Campus being planned in Bahaawalpur, a rural town in the Province of Punjab considered a historical seat of education. While most technology companies in Pakistan only establish offices in main urban centers of Karachi, Lahore or Islamabad, Si3 is looking to establish a huge technology campus in a rural part of Pakistan.
This is being made possible due to the approx. 30,000 km of fiber-optic cable that has been laid across Pakistan connecting more than 100 cities and towns to high-speed network access. “You can have someone working in Multan, Sahiwal , Bhawalpur or Rahim Yar Khan connected to Morgan Stanley in New York at an extremely low cost of international bandwidth connectivity’,” adds Mr. Hashmi.
"The infrastructure available now will allow for our younger generation of 18-24 to get trained in a world class facility in the rural sector. We circulate that money into their villages and buildup a professional class in these regions that Pakistan would not have envisioned before.”
The project is scheduled to be up and running by first quarter of 2008 and will have living facilities, research facility, training center, data center, and development center with world class professors living on campus – tennis courts, pools, and cinemas.
This is certainly an innovative – win-win operational strategy with both social and commercial value. “We move our cost base from Karachi or Lahore which is now Rs. 40k a month to Rs. 10k a month in the rural setting. This is also preparing us for the future–when 5 years in, Pakistani pay scales also increase like India’s has. This way the Campus will help us long-term in keeping global competitive pricing while contributing to the society.”
Si3 is striving towards achieving these bold aims. Surely and steadily it is moving to reach the targeted billion dollar mark while making impressive social contributions. For those young people who are vying to work for world class companies closer to home, Si3 is definitely one to keep an eye out for.