Pre-Feasibility Study

SOFTWARE HOUSE

Small and Medium Enterprises Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6th Floor LDA Plaza Egerton Road, Lahore
Tel (042)111 111 456,
Fax: (042) 36304926-7
helpdesk@smeda.org.pk

REGIONAL OFFICE
PUNJAB
REGIONAL OFFICE
SINDH
REGIONAL OFFICE
KHYBER PAKTUNKHWA
REGIONAL OFFICE
BALOCHISTAN

8th Floor LDA Plaza,

Egerton Road,
Lahore.
Tel: (042) 111 111 456,
Fax: (042) 36370474
helpdesk.punjab@smeda.org.pk

5TH Floor, Bahria Complex II,

M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 35610572
helpdesk.sindh@smeda.org.pk

Ground Floor
State Life Building The Mall,
Peshawar.
Tel: (091)111 111 456, 9213046-7
Fax: (091) 286908
helpdesk.NWFP@smeda.org.pk

Bungalow No. 15-A Chamn

Housing Scheme Airport Road,
Quetta.
Tel: (081) 2831623, 2831702
Fax: (081) 2831922
helpdesk.balochistan@smeda.org.pk

June, 2010
1 EXECUTIVE SUMMARY.............................................................
....................................................1
2 INTRODUCTION TO SMEDA.........................................................
...............................................2
3 PURPOSE OF THE DOCUMENT.......................................................
............................................2
4 OPPORTUNITY RATIONALE.........................................................
...............................................3
5 INDUSTRY STRUCTURE............................................................
....................................................3
5.1 CLASSIFICATION OF INDUSTRY..................................................
...................................................5
5.1.1 Product/Service Based Classification......................................
...............................................6
5.1.2 Market Based Classification...............................................
....................................................7
6 MARKET ANALYSIS...............................................................
........................................................9
6.1 MARKET DEMAND...............................................................
........................................................9
6.2 OPPORTUNITIES IN MARKET.....................................................
..................................................10
7 QUALITY MANAGEMENT............................................................
...............................................11
7.1 MANAGERIAL BEST PRACTICES...................................................
..............................................11
7.2 OBJECT ORIENTED DESIGN AND QUALITY ASSURANCE................................
.............................11
7.3 MARKETING STRATEGY..........................................................
...................................................12
8 PRODUCT/SERVICE...............................................................
.......................................................12
8.1 SERVICES....................................................................
...............................................................12
The main technological services that will be offered, by category, include:.....
.................................12
8.1.1 Systems Integration.......................................................
........................................................12
8.1.2 Technology Outsourcing....................................................
...................................................13
8.1.3 Business Process Outsourcing (BPO)........................................
..........................................13
8.1.4 Customized Application Development........................................
..........................................13
8.1.5 IT and Business Processes Consultancy.....................................
..........................................13
8.1.6 Information Security......................................................
.......................................................14
8.1.7 Products Based Solutions..................................................
...................................................14
8.2 INDUSTRIES..................................................................
..............................................................15
8.2.1 Leasing and Finance.......................................................
.....................................................15
8.2.2 Insurance.................................................................
.............................................................15
8.2.3 Banking...................................................................
..............................................................15
8.2.4 Government................................................................
..........................................................15
8.2.5 Defence...................................................................
..............................................................15
8.2.6 Manufacturing.............................................................
.........................................................16
8.2.7 Health....................................................................
...............................................................16
8.2.8 Education.................................................................
.............................................................16
8.2.9 Information Technology....................................................
....................................................16
9 HUMAN RESOURCES...............................................................
.....................................................16
10 MACHINERY & EQUIPMENT........................................................
.............................................17
10.1 IT EQUIPMENT...............................................................
.............................................................17
10.2 FURNITURE AND FIXTURE......................................................
....................................................17
10.3 VEHICLE....................................................................
.................................................................17
11 INFRASTRUCTURE...............................................................
........................................................17
12 PROJECT DETAIL...............................................................
...........................................................18
12.1 PROJECT COST...............................................................
............................................................18
12.2 PROJECT FINANCING..........................................................
........................................................19
12.3 PROJECT VIABILITY..........................................................
.........................................................19
12.4 PROPOSED BUSINESS LEGAL STATUS.............................................
............................................19
13 ASSUMPTIONS..................................................................
..............................................................19
13.1 REVENUE ASSUMPTIONS........................................................
....................................................19
13.2 OPERATING EXPENSES ASSUMPTIONS.............................................
...........................................19
13.2.1 Working Capital Assumptions..............................................
............................................20
13.2.2 Accounting Depreciation on Assets........................................
.........................................20
13.2.3 Debt Assumptions.........................................................
...................................................20
13.2.4 Miscellaneous Assumptions................................................
.............................................20
14 FINANCIAL PROJECTIONS........................................................
.................................................21
14.1 PROJECTED INCOME STATEMENT.................................................
..............................................21
14.2 PROJECTED BALANCE SHEET....................................................
.................................................22
14.3 PROJECTED CASH FLOW STATEMENT..............................................
...........................................23
15 ANNEXURE.....................................................................
.................................................................24
15.1 ANNEXURE 1 PROJECT COST AND MEANS OF FINANCING.............................
............................24
15.2 ANNEXURE 2 REVENUE GENERATION..............................................
.........................................25
15.3 ANNEXURE 3 LIST OF FIXED ASSETS............................................
..............................................26
15.4 ANNEXURE 4 STAFF SALARIES..................................................
................................................27
15.5 ANNEXURE 5 IMPORTANT CONTACTS..............................................
.........................................28
15.6 ANNEXURE 6 TAX DEDUCTION INCOME SLABS......................................
....................................30
DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject
matter
and provide a general idea and information on the said area. All the material in
cluded in this
document is based on data/information gathered from various sources and is based
on certain
assumptions. Although, due care and diligence has been taken to compile this doc
ument, the
contained information may vary due to any change in any of the concerned factors
, and the
actual results may differ substantially from the presented information. SMEDA do
es not
assume any liability for any financial or other loss resulting from this memoran
dum in
consequence of undertaking this activity. The prospective user of this memorandu
m is
encouraged to carry out additional diligence and gather any information he/she f
eels
necessary for making an informed decision.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
DOCUMENT CONTROL
Document No.
PREF-93
Prepared by
SMEDA-Punjab
Revision
2
Issue Date
May 2006
Revision Date
June 2010
Issued by
Library Officer
11 EEXXEECCUUTTIIVVEE SSUUMMMMAARRYY

This project entails opening up a Software House that will cater to both local a
nd export
markets in the Middle East, USA and UK. The company s corporate office will be ope
ned in
Lahore, Pakistan. The Software House will provide automated and Information Tech
nology
(IT) enabled solutions catering to businesses across various verticals in Pakist
an, Middle
East, UK and USA.
The Software House will have IT specialists with vast industry experience and kn
owledge.
The company will offer a wide range of consulting services and cost-effective de
velopment
of customized application softwares. In addition to this, the focus of the firm
will be to
become a multi-dimensional technology company deriving revenue and customer sati
sfaction
from a variety of Information Technology services and custom software offerings
including
Technology Outsourcing, Systems Integration, Application Development, Processes
Consulting, Business Intelligence Consulting, and Information Security Consultin
g among
others.
Foreign-based companies have entered a recovery phase and started outsourcing th
eir
multiple services to the IT and IT-enabled companies of various countries. Pakis
tan has
potential to grab its share in IT-enabled services market as well as contribute
towards
providing software applications to various developed countries. The demand is ex
pected to
flourish in the upcoming years. Many countries prefer outsourcing from Pakistan
because of
the lower cost of manpower and advanced technological infrastructure. This enabl
es the IT
sector to bring in good investment opportunities in the country. This will also
be helpful in
making more job opportunities in Pakistan.
The estimated cost of the project is Rs.16.24 million. The project is proposed t
o be financed
through 50% debt and 50% equity. The project NPV is around Rs. 19.89 million, wi
th an IRR
of 43.5% and payback period of 3.35 years. The project will be run by qualified
professionals. The legal business status of this project is proposed as Sole Prop
rietorship .
22 IINNTTRROODDUUCCTTIIOONN TTOO SSMMEEDDAA

The Small and Medium Enterprises Development Authority (SMEDA) was established w
ith
the objective to provide fresh impetus to the economy through the launch of an a
ggressive
SME support program.
Since its inception in October 1998, SMEDA had adopted a sectoral SME developmen
t
approach. A few priority sectors were selected on the criterion of SME presence.
In depth
research was conducted and comprehensive development plans were formulated after
identification of impediments and retardants. The all-encompassing sectoral deve
lopment
strategy involved recommending changes in the regulatory environment by taking i
nto
consideration other important aspects including finance, marketing, technology a
nd human
resource development.
SMEDA has so far successfully formulated strategies for industries such as horti
culture,
including export of fruits and vegetables, marble and granite, gems and jeweller
y, marine
fisheries, leather and footwear, textiles, surgical instruments, transport, dair
y etc. Whereas the
task of SME development at a broader scale still requires more coverage and enha
nced reach
in terms of SMEDA s areas of operation.
Along with the sectoral focus a broad spectrum of business development services
is also
offered to the SMEs by SMEDA. These services include identification of viable bu
siness
opportunities for potential SME investors. In order to facilitate these investor
s, SMEDA
provides business guidance through its help desk services as well as development
of project
specific documents. These documents consist of information required to make well
-
researched investment decisions. Pre-feasibility studies and business plan devel
opment are
some of the services provided to enhance the capacity of individual SMEs to expl
oit viable
business opportunities in a better way.
This document is in the continuation of this effort to enable potential investor
s to make well-
informed investment decisions.

33 PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT

This particular pre-feasibility comes under the Information Technology sector, a s

ub-sector
of Information and Communication Technology and is in regard to setting up a Softwa
re
House in any big city of Pakistan.
The objective of this pre-feasibility study is primarily to provide an overview
of the IT and IT
Enabled Services (ITeS) business. This project pre-feasibility may form the basi
s of an
important investment decision and in order to serve this objective, the document
covers
various aspects of the business concept development, start-up, marketing, financ
e and
business management.
44 OOPPPPOORRTTUUNNIITTYY RRAATTIIOONNAALLEE

Competing in a worldwide scale, Pakistan s IT industry has experienced massive gro

wth in
IT exports. With the fast paced industry growth rate and government s investor fri
endly
policies, Pakistan has become a major player in the IT industry, not just on the
South Asian
but on a global scale as well.
One of the biggest reasons to invest in IT is the fact that the Government of Pa
kistan has
allowed 100% ownership of equity and 100% repatriation of profits for foreign in
vestors.
Major tax incentives for companies have been allowed till 2016. Also, the Govern
ment has
given tax exemption on the income from export of computer software and related s
ervices.
55 IINNDDUUSSTTRRYY SSTTRRUUCCTTUURREE

Information technology (IT) with its revolutionary power as a critical enabler o

f growth,
development, and modernization is increasingly moving to the core of national
competitiveness strategies worldwide. Recent economic history has shown that, as
developed
countries approach the technological frontier, IT is crucial for them to continu
e innovating in
their processes and products and to maintain their competitive advantage. Equall
y
importantly, IT has proven instrumental for enabling developing and middle-incom
e
economies to leapfrog to higher stages of development and fostering economic and
social
transformation.
In the recent past, global recession has slowed down the economies, but informat
ion
technology is showing the way to recovery of the businesses and economies throug
h
innovative and smarter solutions. Pakistan s economy has been under tremendous pre
ssure
during the period. This has also adversely affected the IT Sector. The growth ha
s slowed
down with no significant and sizeable investments coming during the year 2009-10
into the
country. Despite this slow-down, the IT Sector is still vibrant enough and is en
visaged to
pick-up by the end of next year 2010-11.
The overall size of the Information and Communication Technology (ICT) industry
in
Pakistan has risen above $12 billion, including $1 billion under foreign direct
investment
(FDI). It is expected that IT exports in 2009-10 will reach US$ 250 million appr
oximately
against a target of US$ 280 million. This under-achieved status is mainly attrib
uted to the
overall uncertain situation that prevailed during the year 2009-10, which made t
he
international investors reluctant to invest and undertake business in Pakistan a
nd many local
companies in expanding initiatives within the country. According to a report by
the Pakistan
Software Export Board (PSEB), the top five companies that have contributed the m
ost to the
IT sector are Netsol Technologies, Ovex Technologies, TRG Private Ltd, Systems P
rivate
Ltd, and Elixir Technologies.1
In the Public Sector Development Programme (PSDP) the amounts given in Table1-1
were
allocated for information technology sector for various projects. These projects
were
executed by various Ministries/ Divisions.
Table 5-1 PSDP Budget Allocation for IT Sector Projects2

2009-10
2010-11
Budget Allocation (Rs.)
2.0 billion
3.2 billion
IT Projects (Nos.)
65
71
Cost of Projects (Rs.)
16 billion
14 billion

1 PSEB Pakistan IT Industry Yearbook 07-08 (http://www.pseb.org.pk)

2 Planning Commission Government of Pakistan (http://www.planningcommission.gov.
pk/)
There are 1082 active IT companies in the country out of which 110 are ISO certi
fied while
over 25 companies are undergoing Capability Maturity Model Integration (CMMI)3
assessment currently. The country has 110,000 IT professionals including expatri
ates from
North America and Europe.4
Several global IT companies such as NCR, IBM and Oracle use Pakistan as a region
al hub
for South Asia and Middle East. The year 2009-10 saw slight improvement in the n
etwork
readiness index rankings. It increased from 98 in last year to 87 in the current
year, showing
the potential of Information Technology (IT) sector to perform well. Pakistan of
fers various
competitive advantages over other outsourcing destinations, such as high quality
software
development, swift and easy establishment of business, low cost basis, emerging
and state-of-
the-art telecommunication and IT infrastructure. In spite of this, Pakistan stil
l ranks much
lower than its regional competitors.
The Government of Pakistan has been proactively taking measures to develop the I
T sector in
Pakistan. It is working to extend a greater cooperation and interaction between
the
government, industry and academia to get maximum benefits of information technol
ogy.5 A
few of the incentives offered include tax exemption till 2016, establishment of
IT Parks with
low rent, foreign ownership of equity invested in IT and 100% repatriation of pr
ofit allowed
to IT companies.4
Table 5-2 Statistics of Pakistan s IT/ITES Industry4
IT companies registered with PSEB
1082
Substantial IT companies region-wise:

Karachi
611
Islamabad/Rawalpindi
479
Lahore
544
Other regions
105
Foreign IT and telecommunication companies
60
Number of CMMI-assessed companies:

CMM Level 5
1
CMMI Level 5
2
CMMI Level 3
3
CMMI Level 2
16
Total industry size
US$ 2.8 billion
IT and IT-enabled services exports
US$ 1.4 billion
Percentage growth in exports (2009-2010)
19%
IT graduates produced per year
Approx. 20,000
Export targets for fiscal year 2010-2011
US$ 350 million
Number of institutes offering IT/CS programs
110
IT professionals in export-oriented activities
More than 15,000
IT professionals employed in Pakistan
110,000
Space utilized in IT & Software Technology parks
11 parks covering 750,000 sq ft

3 Capability Maturity Model Integration (CMMI) is a process improvement approach

that helps organizations
improves their performance.
4 Pakistan Software Export Board (http://www.pseb.org.pk/)
5 Pakistan Telecom and IT news (http://propakistani.pk/2010/05/10/size-pakistan-
ict-industry-rises-12-billion/)
The major achievements for 2009-10 are delineated below: 6
Human Resource Development
The educated and highly skilled human resource is imperative for the growth of i
nformation
technology. Pakistan has to equip not only its educational institutions at all l
evels with the
information technology facilities but also it has to establish new vocational tr
aining centres
throughout the country which focus on providing training to convert the latent h
uman
resource available into a highly skilled IT workforce that is competitive at the
world level.
Information Technology Industry Development
In order to strengthen the local information technology industry to compete in t
he
international markets, following projects were executed during the year 2009-10:

Purchase of Land in Karachi and Lahore for Establishment of IT Parks was approve
d for
capacity building of IT industry. This project will boost the information techno
logy
infrastructure and facilitate more companies to establish their business in Paki
stan.
IT Parks Construction projects consultancy for both Karachi and Lahore airports w
as
launched during the year. These parks will facilitate more IT firms to establish
their
businesses in the country.
Standardization of Pakistani Software Industry Program was initiated to obtain
internationally recognized certifications by local companies. As a result, the n
umber of
Capability Maturity Model Integration (CMMI) assessed companies has increased.
Currently CMMI certified companies according to their level include, two CMMI Le
vel-5,
three CMMI Level-3 and sixteen CMMI Level-2 companies. Also, now there are 110 I
SO-
9000 certified. ISO 27001 consultancy and audit of ten IT companies has been com
pleted
this year.
Automation of Domestic Industry on Open Source Systems. This project was initiat
ed to
encourage the local companies to develop expertise in open source arena as well
as to
provide automation at low cost for domestic industry

5.1 Classification of Industry

On the basis of reports and research software industry can be categorized as fol
low:
i) Product /Service Base
Product Focused
Services Focused
Hybrid Operation

ii) Market Base

Domestic-Focused Local Firms
Export-Focused Foreign Firm
Export-Focused Local Firms
Export-Focused Foreign Firms
Dedicated Development Centre

6 Planning Commission Annual Plan Government of Pakistan (http://www.planningcom

mission.gov.pk/)
5.1.1 Product/Service Based Classification

In terms of product/service strategy there are product focused or packaged softw

are
companies, software/IT services and software/IT consulting companies working in
a niche
product/service market.
5.1.1.1 Product Focused

In Pakistan numbers of products have been developed and are successfully working
in
multiple organizations. However, there is still plenty of room for growth in thi
s area.
Potential Areas for Product-Focused Companies
i) Financial Management System
ii) Payroll/ Supply Chain Mgt. System
iii) Share & Portfolio Mgt. System
iv) Flagship Product.
v) Medical Insurance Plan
vi) PBM (Project Building & Monitoring)
vii) E-Call , E-Share and E-CRM Solutions in B2C
viii) Purchase & Inventory Mgt. System
ix) Fixed Assets Management System
x) Real-Estate-Property System
xi) Hospital Mgt. & Patient Filing System
xii) MOR (Manage Your Own Risks)
xiii) Software Measurement and Metric Tool (SMMT)
xiv) E-CRM Solutions in B2B, E-DoX, E-FaX, E-College

5.1.1.2 Service Focused

The second largest focus area is the customized services. Companies focusing on
customized
services provide standardized software applications with some customization. In
this category
a software house can work on more than one project. The customized services prov
ided by
the software houses are given in Table 5-4.
Potential Areas for Service-Focused Companies
i) EPR Solutions & B2C & B2B Business Model- KalPoint
IVR Systems

Public Map-Geographic Info System

ii) Web Designing and Development
TTI Voice hardware platform mostly for banking sector

5.1.1.3 Hybrid operations-Changes in Existing Product

Another area that has potential in Pakistan market is implementation of already

developed
Standard ERP Solutions like Oracle, SAP-R/3, SAGE and ACCPAC etc. In this area t
here is
very little competition prevailing in local market.
5.1.2 Market Based Classification

Another way of classifying the software industry is according to their market or

ientation i.e.
those companies that are predominantly export-focused, domestic-focused and with
hybrids
working in between in both export and domestic markets.

5.1.2.1 The Export-Focused Local Firm

These firms are owned by Pakistan-based entrepreneurial team (that may or may no
t have
been aided/encouraged by a group of expatriates), but with an explicit purpose o
f exporting
software products or services. Majority of firms are targeting on offshore progr
amming and
coding for foreign clients. In this category, the companies focusing on products
have numbers
relatively smaller than those focusing on export of services. Companies that are
following
this business model are:
i) Three sixty Degrees (Lahore)
ii) Post Amazers (Karachi)
iii) Advanced Communications (Islamabad)
iv) Makabu (Islamabad)
v) Netsol (Lahore, Karachi and Islamabad)
vi) Autosoft Dynamics (Karachi and Islamabad)

5.1.2.2 The Export-Focused Foreign (Expatriate) Firm

These firms are based either overseas or in Pakistan and are usually run by an e
xpatriate
entrepreneurial team, with an explicit purpose of using Pakistan-based offshore
development
facility to deliver a product or service demanded by foreign market. This type o
f business
model has been adopted by services and product-focused companies alike. Within b
oth
services and products domains, this type of model has been more valuable than Ex
port-
Focused Local Firm model. Some salient examples of companies following this busi
ness
model are:
i) Elixir Technologies (Islamabad)
ii) Etilize Inc. (Karachi)
iii) Ultimus (Islamabad)
iv) MixIT (Karachi)
v) TechLogix (Lahore)
vi) Prosol (Islamabad)
vii) Xavor (Lahore)

5.1.2.3 The Domestic-Focused Local Firm

These firms plan to export its products or services abroad and are merely using
the domestic
market as a vehicle to gain reputation. These companies first do enough large proj
ects
fairly quickly in the local market to build a reputable portfolio of customers,
to develop a
domain expertise, and to migrate effectively to a much more sophisticated and qu
ality
conscious foreign market. The more successful of these firms have already begun
to look
overseas, primarily the Middle Eastern region, for a portion of the export marke
t and have
been fairly successful. Some salient examples of this type of business model are
:
i) 2B Technologies (Karachi)
ii) ZRG (Karachi)
iii) TPS (Karachi)
iv) Lumensoft (Lahore)
v) Yevolve (Karachi)
vi) SI3 (Karachi)
vii) Softech Systems (Lahore)
viii) AppXS (Karachi)
ix) Genesis Solutions (Karachi)

5.1.2.4 The Domestic-Focused Foreign Firm

The Domestic-Focused Foreign (Expatriate) Firm is almost non-existent due to the

small size
and lack of maturity of the local market. It does, however, find some expression
in the
relocation of Pakistani expatriates back to Pakistan with a desire to set up com
panies that
either serve the local the prime example being SI3 whose expressed purpose is to w
ork on
the domestic front or the export market but who end up doing quite a fair bit of w
ork in the
domestic market as well.

5.1.2.5 Dedicated Offshore Development Centre

There are fairly limited offshore development foreign companies. It is different

from the
Export-Focused Foreign (Expatriate) Firm in the sense that it is often an add-on t
o an
already existing company who s strategic and managerial processes and controls are
quite
well-established. It, therefore, does not get an equal say in the long-term visi
on and strategic
direction of its parent. Some salient examples of this type of business model ar
e:
i) MetaApps (Lahore)
ii) ITIM Associates (Karachi)
iii) Clickmarks (Karachi)
iv) Trivor Systems (Islamabad)
v) Strategic Systems International (Lahore)

Table 5-3 Market Base Business Model

Domestic-Focused
Local Firms
Export-Focused
Local Firm
Export-Focused
Foreign Firm
Dedicated
Development
ZRG
Three Sixty Degree
Etilize
ITIM Associates
TPS
Post Amazers
Prosol
MetaApps
Lumensoft
Advanced Comm.
Adamsoft
Clickmarks
Yevolve
Netsol
Ultimus
Enabling Tech.
2B Technologies
Makabu
MixIT
Trivor System
S13
Autosoft Dynamics
Techlogix
Strategic System
Softech System
Sidaat Hyder
Xavor
ESP Global
Genesis Solution
Avanza Solution
Elixer

Alchemy Technology
Gonet

AppXS
Kalsoft

Oratech
Jinn Technologies
Askari Info System
Secure network

Acrologix
Systems Ltd.

Comcept
Progressive System

LMKR
Millennium Software

CARE
Cressoft

66 MMAARRKKEETT AANNAALLYYSSIISS

6.1 Market Demand

Foreign-based companies have entered the recovery phase and started outsourcing
their
multiple services to the IT and IT-enabled companies of various countries. Pakis
tan has
potential to grab its share in IT-enabled services market although it is also co
mpetent in
providing software applications to various developed countries, demand will be f
lourishing in
the upcoming years.
United States of America is the largest buyer of Pakistan IT-enabled services wi
th the share
of 58 percent in the overall country s exports. It is followed by UK, where the ex
ports are
hovering around 10 percent. The pie of total exports shows 16 percent share to t
he other
countries including Australia, Canada, Thailand, UAE and others.
Companies such as IBM, Microsoft, Cisco Systems, Hewlett Packard, and Novell cho
ose to
get services from sub-contractors in low cost countries with strong IT capabilit
y, HR capital
and infrastructure and low risk. These companies are also moving many developmen
t and
support jobs to such locations.
Ratios of revenue generation from export and domestic market are approximately 6
0:40. In
export, revenues generate from products and services are 22.55% and 38.55% respe
ctively.
Majority of the product-exports are customized rather than shrink-wrapped products.
Exporters are optimistic on the sustainability of export growth gradually in tan
dem with the
recovery of developed economies where country has good markets. The demand of lo
cal IT
services has gotten better in the traditional exports market in the recent times.

Pakistan s market demand can be viewed by last year s growth at around 37% in revenu
e and
27% in terms of technical and professional employment. Another encouraging sign
is the
reverse brain drain caused by returning Pakistani entrepreneurs who see the rela
tively less
competitive and virgin market at home as a tremendous opportunity for setting up
a Pakistan
based company.
There are quite a few hundreds of software houses in Pakistan and the count is i
ncreasing
rapidly. These software houses are working to make Pakistan a bright mark in the
world of
IT. They are producing many useful products which have modernized the processes
of
traditional industries and also increased their productivity. As we see, compute
r has become a
significant part of every walk of our lives and many processes have become autom
atic now.
All the big shopping malls have computerized billing system now. Almost every or
ganization
keeps its data in computerized form. Computer and internet awareness is also inc
reasing and
the trend of e-commerce is emerging fast. People, whatever field they belong to,
consult
internet for any queries which come into mind.
Most of the Pakistani companies are working for financial institutions, automobi
le, call
centres and miscellaneous services sectors in different countries.
The demand in the market exists for the following solutions and services
Table 6-1 Market Demand
Financial and Leasing Solutions

Banking, ATM Solutions

Inventory, Payroll and Marketing

Retail Store Systems

Mortgages, Portfolio Management

Call Center Automations

Health Care Solutions

VOIP Billing

Manufacturing and ERP Solutions

Traveling & Hotel Management

Project Management & Business

Human Resource Solutions

Table 6-2 Services Available in the Market

ZRG Call Center & Telephony
Solutions

Softech Systems Financial & Trading

Systems

TPS Banking and Switching Solutions

Genesis Solutions ATMs, Info

&Vending Kiosks
 Lumensoft ERP & Inventory Systems

Alchemy Technologies Risk-Mgmt

Solutions

Yevolve Software for Handheld in

Transport/SCM

AppXS Financial & Trading

Systems

2B Technologies Call Center Solutions

Oratech Oracle-based Applications

SI3 System Integration & Back-Office

Outsourcing

Askari Info Systems ERP,

Financials-Accounting

Acrologix ERP, Archiving, foreign-

language OCR

Concept Communications Systems

LMKR Large DBs, GIS, Petrochemicals

etc.

CARE - Telecom Eqpt., ASICs, EDA

Tools etc.

6.2 Opportunities in Market

The following opportunities are present in IT Sector of Pakistan:

Development of packaged software
Quality training and development of specialized human resources
Re-engineering and computerization of government/public sector and private secto
r
organizations installation of network (LANS, WANS, etc)
 E-information switch over to Urdu as a computer language
Reorganization and growth of communications infrastructure
Foreign exchange earning potential utilization of available educated human resou
rces pool
unlimited e-commerce potential
Global and domestic Internet explosion
World-wide growth and lowering of cultural barriers due to the use of the intern
et and
globalization will drive IT usage
Government drive for documentation will provide growth opportunities
Entertainment potential of IT and the internet
77 QQUUAALLIITTYY MMAANNAAGGEEMMEENNTT

7.1 Managerial Best Practices

The proposed Managerial Best Practices (MBP s) for the project could be as follows
:
Develop effective export-focused operations, to the extent possible, seek a stro
ng
expatriate connection (e.g. a founder or co-founder either based abroad or opera
ting
equally from home and abroad) and use his/her personal connections and networks
to get
a foot-in-the-door or even acquire first customers.
Actively pursue alliances with synergistic entities and off-shoring and marketin
g
relationships with past clients
Engage with software multinationals (e.g. Microsoft, IBM, SAP, NCR, Oracle etc.)
in
development and marketing arrangements.
Understand the importance of developing a domain expertise and maintaining a foc
us.
Develop a domain expertise by learning to take the big-picture view of the clien
t s
business operations and look for opportunities to sell business rather than tech
nology
solutions. Get domain experts involved, if need be. Avoid the temptation of on-to
day-
off-tomorrow type of contracts.
Focus on better-developed segments of market. Understand requirements and diffic
ulties
in creating a market single-handedly and plan accordingly.
Price innovatively.
Use the financial clout, domain knowledge, and regional network of locally opera
tive
multi-nationals (MNCs) to fund start-up.
Understand where you need help (e.g. management, marketing, institution building
, legal,
accounting) and seek it.
Be creative and innovative about projecting Pakistan as a responsible country. P
ersuade
your customers and foreign partners to visit Pakistan and see for themselves.
Develop strong domain expertise to lock in customers, move towards value additio
n to
avoid being pressed by the pressures of the commodity business, or continually c
ut costs
by automating your own processes.
Counter the shortage of quality labour by hiring expatriate or returning Pakista
nis. Hire
people with the right attitude, not skill-set or coursework.
Know the land, its people and their customs and, to the extent possible, play by
its rules.
Make use of connections to get your way around. Make use of facilitation agencie
s e.g.
SMEDA, PSEB. BoI, or P@SHA where possible.
7.2 Object Oriented Design and Quality Assurance

Quality design is the foundation of a quality product. The assurance of software

quality
should start from the design phase. Formal object-oriented design methodology sh
ould be
followed to ensure code understandability, reusability, extensibility, and maint
ainability,
The quality assurance process has a lifecycle of its own, which runs parallel wi
th the
design/development process, it begins when the specifications are delivered, and
continues
for the entire life of the project.
7.3 Marketing Strategy

If we look the software industry and its various marketing approaches used by so
ftware
houses and their perception of successfulness . The following seven successes of ma
rketing
strategies are used by them;
Word of Mouth Approach (Client referrals etc)
Advertising in trade local/foreign journals
Attending local/foreign trade conferences
Initiate 1-to-1 communication with potential clients
Use pre established networks/personal relationships
Alliances and agreements with channel partners
Depend on a Captive client since formation

88 PPRROODDUUCCTT//SSEERRVVIICCEE

The project concept is of a software development house, catering to both local a

nd export
markets, with corporate presence in Lahore, Pakistan. The company will offer a f
ull range of
business application solutions for the corporate, financial and industrial secto
rs and its
international target market will be USA and UK. The project's strategic vision w
ill provide
the clients with quality systems to stimulate their growth in the existing compe
titive markets.
Three important aspects are being considered while developing the project:
1. Robust, and extensible architecture and design
2. Good software quality
3. On-time delivery

The strategies required to achieve these objectives are:

Employing a highly professional and experienced staff in all aspects project man
agement,
architecture, design, development and Quality Assurance
Ensuring continuous personal and professional growth through on-going training
Having a well-developed organization structure, and well-defined responsibilitie
s within
the company in order to ensure good teamwork, coordination, and timely product d
elivery
Providing good customer support and services

8.1 Services
The main technological services that will be offered, by category, include:
8.1.1 Systems Integration

Due to the dynamic nature of the business environment and the increasing demand
for
efficiency in today s world, expertise is required in systems integration at enter
prise wide
scale.
Systems integration capabilities are required to help minimize risk and maximize
security,
interoperability and compatibility. For any organization to make the best possib
le decisions
the existing systems should be well-integrated with the new technologies; new te
chnologies
that provide the best possible platform to suit any organizations business needs
.
The services will include helping organizations successfully plan, customize, im
plement and
deploy the Oracle Applications suites that include Financials, Supply Chain Mana
gement,
Manufacturing and Inventory. Other offerings specific to the financial industry,
include Risk
Management, Asset Liability Management and Treasury Management solutions.
8.1.2 Technology Outsourcing

Technology Outsourcing solutions will be offered to clients all across the globe
by providing
technology, processes, domain, resources and management experience and expertise
that are
crucial to navigate various business environments. There is a high level of comp
etition in the
fast-paced IT industry; Technology Outsourcing is a necessity to maximize a comp
any s
potential by outsourcing resource-consuming processes and controllable costs.
However, understandably there are numerous risks associated with this. Using exp
erience and
management skills one should ensure that the offshore solution is predictable an
d cost-
effective by successfully managing and mitigating risks associated with outsourc
ing and
hence, enabling the customers greater profitability by extracting maximum reward
with
minimal risk. Consistent and reliable communication channels aid in virtually el
iminating the
risk of an off-shore partner by use of state of the art video conferencing equip
ment and a
dedicated high speed fibre optic connection.
8.1.3 Business Process Outsourcing (BPO)

The most successful businesses of today have outsourced their processes and save
d time and
money to focus on customers and marketplaces. Companies are looking for ways to
reduce
overheads and focus on their core business, thus outsourcing is the best solutio
n available to
them. In most countries, the acute shortage of qualified personnel combined with
the ever
increasing salary levels has placed an enormous burden on firms and businesses a
like.
In a recent Accenture survey of more than 800 companies, in the US and Europe, 8
6% of the
companies said outsourcing gives them more control over business results in a va
riety of
critical areas, the most important being the ability to plan. While cost savings
are an
important consideration the executives also reported a number of other benefits
such as
reliability and the effective implementation of ideas. Pakistan has an abundant
supply of
qualified accountants at all levels to undertake the necessary work for clients.

8.1.4 Customized Application Development

This service should include creating customized e-business software solutions ba

sed on
unique specifications to give the competitive edge in an increasingly competitiv
e market. The
company's core business principles should include a methodical, solutions-based
approach to
developing software applications.
8.1.5 IT and Business Processes Consultancy

Information technology services are valuable only if they fulfil the business st
rategy and
project objectives set forth. The company's expert consultants should have the t
echnical
knowledge and business experience to ensure the optimization of the development
process in
alignment with basic business principles. The consultants will aim at maximizing
organizational efficiencies through enhanced business processes and cost savings
measures
that cater, not only to the clients immediate needs but also to the long-term goa
ls. The
company will provide the streamlining, realignment and restructuring of the busi
ness
processes of an organization that help gain meaningful business value from plann
ed IT
implementations.
As the state of affairs of businesses change, organizations feel the need of mov
ing to state-of-
the-art IT enabled solutions to survive and participate in the competitive marke
t. This
particular service will help organizations to do just that virtually trouble-fre
e.
The company will undertake the following tasks to make software technology work
for its
clients:
1. Check commercial viability of client's existing technology
2. Determine new technology outside of the client's industry
3. Compare client's technology with the best in its industry
4. Suggest, develop and implement the best solution
5. Integrate and automate client's work flows and business processes
8.1.6 Information Security

Information is the lifeblood of all organizations be it written, printed, electr

onically stored,
transmitted or communicated verbally. In today s global economy, the success or fa
ilure of
an organization, from SMEs and large corporations, depends upon the confidential
ity,
integrity and availability of corporate information. As a result, Information Se
curity has
become one of the most important topics for modern organizations.
The information security services will be designed to ensure protection from thr
eats and
vulnerabilities while ensuring seamless operations for organizations.
Professional Services:
1. Security Policy Development
2. ISO 27001 ISMS Life Cycle Consulting
3. Penetration Testing and Vulnerability Assessment
4. Business Continuity Planning / Disaster Recovery
5. Secure Network Architecture Design and Deployment

Benefits:
1. Lower operating costs
2. Better regulatory compliance
3. Dedicated expertise allow focus on core business
4. Professional processes
5. Continuous management and support
6. Network and System integrity
8.1.7 Products Based Solutions

The company will provide a number of mature and comprehensive IT solutions succe
ssfully
implemented. These products extend to various domains; standing out in which is
LeaseSoft,
a comprehensive end-to-end product for the lease and finance industry.
The major products are:
1. LeaseSoft - a suite of four software applications, an end-to-end solution for
 the lease and
finance industry
2. Motor Transport Management Information System - a distributed database system
for the
complete automation of motor transport information
3. iBanking - A fully integrated solution for the Wholesale & Finance industry
4. KB Vault - A Knowledge Base Management System
8.2 Industries

A wide range of potential industries that can be catered include:

8.2.1 Leasing and Finance

The constituent software applications are:

i) Credit Application Processing System (CAP)
Automated robust credit application processing: The system is equipped with stro
ng
workflow management, integrated link to credit rating agencies, automated point
scoring
strategy for automatic approval/rejection/referral. Moreover, it can be customiz
ed for linking
with any point of sale system.
ii) Contract Activation & Management System (CMS)
Automated comprehensive contract management throughout the life of the loan / le
ase:
System provides comprehensive business functionality that enables its users to e
ffectively
and smoothly manage and maintain a contract with the most comprehensive details
throughout its life cycle. It also provides interfaces with the company s banks an
d accounting
systems. System also effectively maintains details of all business stakeholders,
e.g.,
customers, dealers, debtors, guarantors, insurance companies, banks, etc.
iii) Wholesale Finance System (WFS)
Automate and manage wholesale finance activities: The system covers credit limit
requests,
payment of loan, billing, settlement, auditing of stocks, agent/dealer informati
on and
ultimately the pay-off function. A Dealer Access System enables dealers/agents a
nd auditors
to connect with the system, see relevant information and carry out transactions.

8.2.2 Insurance

The services for the insurance industry include business analysis, software qual
ity assurance,
configuration expertise, technical publication and analysis & reporting.
8.2.3 Banking

The products and services in the banking sector include:

1. iBanking
2. Business Intelligence
3. Electronic Credit Information Bureau (e-CIB)
8.2.4 Government

With the help of advanced hardware and technology turnkey solutions can be provi
ded to
various government and semi-government organizations. This includes services ran
ging from
software development, data entry, project management, training, implementation,
maintenance and support to provision of hardware and network infrastructure.
8.2.5 Defence

The domains that can be catered to in the Defence sector are:

1. Command & Control Systems
2. Office Automation Applications
3. Education & Training Institutions
4. Statistical & Analytical Applications
5. Computer Based Training (CBT) Applications
6. Processes Analyses & Reengineering consulting
8.2.6 Manufacturing

The services for a Manufacturing concern include System Integration of Enterpris

e Resource
Planning (ERP) applications catering to the different parts of an organization i
ncluding
Financials, Supply Chain Management, Manufacturing and Inventory, Asset Manageme
nt
Software and Services through the dedicated Enterprise Asset Management Solution
s of Info
Data Stream.
8.2.7 Health

The healthcare industry in Pakistan is growing at a huge rate and is one of the
areas that have
the most urgent need of automation. The requirement is to developed a strategic
collaboration
with hospitals and medical centres as part of a long term commitment for IT deve
lopment in
Pakistan s Health Sector.
8.2.8 Education

Services for automation of the Education sector involve supply and installation
of software
licenses of 3 rd party software applications, systems integration, customized ap
plication
development, deployment, configuration, customization in addition to end user tr
aining and
maintenance services. Diverse range of IT solutions include computer based train
ing, data
management and knowledge sharing, business process reengineering and network
infrastructure development.
8.2.9 Information Technology

Information technology services are valuable only if they fulfil the business st
rategy and
project objectives set forth. Expert consultants having the technical knowledge
and business
experience will ensure the optimization of the development process in alignment
with basic
business principles. IT Consultancy services are extended in domains such as Inf
ormation
Security and Software Process Consultancy.
99 HHUUMMAANN RREESSOOUURRCCEESS

The project should have highly educated and skilled manpower to support its soft
ware
development operations. Success of a software house is mostly dependant on the
qualification, experience and dedication of its staff.
The CEO should have Ph.D. / M.S. degrees from leading foreign universities prefe
rably from
USA and UK, with experience of export software. The CEO will provide the overall
technical
and business direction for software development activities.
The Chief Software Architect - CSA, will have a strong background in software de
sign and
architecture, with special focus on Object-Oriented Design and implementation. H
is role will
be streamlining the software development methodology and life cycle, and softwar
e design
processes. Validating object designs and acting as technical consultant for team
lead and
developers.
The majority of technical team would have full command on methods, tools and tec
hnology
necessary to develop high quality enterprise software systems and would be capab
le to
generate an idea from scratch, analyze it, form a solution, implement it and the
n deploy it.
Staff should be trained and fully equipped with latest technology and advancemen
t.
This software house will require a total of 35 employees, 23 of which is the tec
hnical staff
that will be directly involved in revenue generation. The other 12 non-technical
employees
will be required of office administrative functions.
The details of staff and their salaries for the first year are given in Annexure
4. The annual
salary growth rate is taken to be 10%.
Table 9-1 Monthly Staff Salary
Staff
No of Employees
Salary Per Month (Rs.)
Technical Staff
23
1,205,000
Non Technical
12
262,000
Total Staff
35
1,467,000

1100 MMAACCHHIINNEERRYY && EEQQUUIIPPMMEENNTT

10.1 IT equipment

The IT equipment includes Computers, Laptop PCs, Servers, UPS for PCs and networ
king
equipment. The detail list of Computer and equipment is given in Annexure 3. Thi
s IT
equipment will be re-purchased after every three years.

10.2 Furniture and Fixture

The list of office furniture and fixture is given in Annexure 3.

10.3 Vehicle
The list of vehicles and other conveyance is given in Annexure 3.
1111 IINNFFRRAASSTTRRUUCCTTUURREE

The proposed location in Lahore is Gulberg or Defence Housing Authority and in I

slamabad
highly maintained available infrastructure areas are Sector E, Sector F, Evacuee
Trust
Building, and Software Technology Park etc. An office can be rented out in any o
f these
locations. The rent for an office in the proposed areas is estimated at Rs. 300,
000 per month.
PSEB has established Software Technology Parks (STPs) in Islamabad, Karachi, and
Lahore
to facilitate the IT and IT-enabled Services (ITeS) companies operating in Pakis
tan. Designed
with a view to getting business ventures up and running in the shortest possible
time, these
STPs provide office space with all the modern conveniences in prime business loc
ations in
these major cities. These dedicated premises provide a comfortable working envir
onment,
high-speed international data connectivity, and an uninterrupted power supply, w
ith minimal
regulatory overheads and paperwork, to its registered companies. The STPs in all
these cities
have facilities for conferences/seminars, business centres, adequate security ar
rangements,
and ample parking space. Investors can lease out office space in an existing Sof
tware
Technology Park (STP). The contact information for details on leasing office spa
ce is given
below:

Contact Information:
Mr. Nasir Khan Afridi
Director Infrastructure
Pakistan Software Export Board (G) Limited
2nd Floor Evacuee Trust Complex
F-5, Aga Khan Road
Islamabad - 44000
Telephone: 92-51-9204074 Extension 115, 92-51-9220813
Fax: 92-51-9204075
E-mail:nafridi@pseb.org.pk
1122 PPRROOJJEECCTT DDEETTAAIILL

12.1 Project Cost

The detail of the project cost is as follows. There is an initial licensing fee
of US$ 1,900,
which is a one time fee.
Table 12-1 Project Cost

Rupees
Capital Investment Requirement
9,520,000
Working Capital Requirements
6,724,670
Total Project Investment Requirement
16,244,670

Table 12-2 Project cost break down

Project Cost

Rs.
Rs.
Land

Project Development cost

Equipment
3,332,500
Furniture & Fixture
1,887,000
 Motor Vehicles
3,265,000
8,484,500
Preliminary Expenses

Copy rights-Licensing & Trade Marks

161,500
Other Expenses
874,000
1,035,500
Working Capital

6,724,670
Intangible Assets

Total Assets

16,244,670
Total Capital Employed By:

Equity Contribution by
Sponsor
50%

Loan
Bank
50%

Total Capital Cost

100%
16,244,670

Table 12-3 Working Capital break down

Year 1
Current Assets
Receivables
5,692,960
Advances to Employees
2,000,455
Total Current Assets
7,693,415
Current Liabilities
Utilities Payable
73,744
Salary Payable
895,000
Total Current Liabilities
968,744
Net Working Capital
6,724,670
12.2 Project Financing

Project financing will be done through 50% equity and 50% debt.
Table 12-4 Project Financing

Rupees
Debt @ 50 %
8,122,335
Equity @ 50 %
8,122,335
Total Project Investment Requirement
16,244,670

12.3 Project Viability

Table 12-5 Project Viability

NPV
Rs. 19,896,000
IRR
43.5 %
Pay Back Period
3.35 Years

12.4 Proposed Business Legal Status

The legal structure of the business entity can either be sole proprietorship or
partnership.
Although the selection totally depends upon the choice of the entrepreneur, this
particular
feasibility is based on a Sole Proprietorship.
1133 AASSSSUUMMPPTTIIOONNSS
13.1 Revenue Assumptions

The potential of each employee for revenue generation is around US$ 19,200 based
on 50%
capacity utilization during Year-1. This capacity utilization goes up to 95% in
Year-10. The
project is based on 8 working hours in a day, with revenue generation of US$ 26
per hour.
The annual increase in this rate is 5%. 264 days in a year are assumed to be wor
king days.
The export vs. local sales ratio is as follows:
Table 13-1 Export-Local Sales Ratio
Year 1
Year 2
Year 3
Year 4
Year 5
0% : 100%
10% : 90%
15%: 85%
20%: 80%
25% : 75%
Year 6
Year 7
Year 8
Year 9
Year 10
30% : 70%
30% : 70%
35%: 65%
35%: 65%
35% : 65%
13.2 Operating Expenses Assumptions

Operating Expenses for the project and there basis are taken as follows:
Table 13-2 Operating Expenses

YEAR 1
Description
Basis
(Rs.)
Staff Benefit
5%
of Payroll
880,200
Bonuses and other Allowances
5%
of Payroll
880,200
Repair & Maintenance
2%
of Equipment
2,036,280
Insurance
5%
ofEquipmentCost
166,625
Foreign Traveling (a year)
4
trips @ 550,000
2,200,000
Traveling & Conveyance
4500
Per person
1,890,000
Entertainment
300
Per person
126,000
Printing & Stationary
500
Per person
210,000
Books & Periodicals
10
Magazines @ 900
108,000
General and Administration
300
Per person
126,000
Communications
Fixed
1,200,000
Rent
Fixed
3,600,000
Utilities
Elec. & Dieselexpense
884,933
Advertising
Fixed
60,000
Total
14,368,238
13.2.1 Working Capital Assumptions

Our working capital for the first year is Rs. 6,724,670 which is also initial wo
rking capital.
Working capital is calculated on the basis of following assumptions:
Table 13-3 Working Capital
Description
Days
Basis
No of Working days
264
Days
Accounts Receivable
40
Sales
Advance to Employee
30
Payroll Benefits
Utility Payable
22
One Month Bill
Salary Payable
30
One Month Salary

13.2.2 Accounting Depreciation on Assets

Table 13-4 Depreciation Assumptions

IT equipment depreciation rate
33%
Machinery & Equipment depreciation rate
10%
Vehicles depreciation rate
10%
Furniture & Fixtures depreciation rate
10%

13.2.3 Debt Assumptions

Table 13-5 Debt Assumptions

Debt Tenure
5 Years
Interest Rate on Long Term Debt
16%
Debt Payments
Semi Annually
Working Capital Loan
14%
Debt Payment
Monthly

13.2.4 Miscellaneous Assumptions

Table 13-6 Miscellaneous Assumptions

Inflation Rate
10%
Tax rate
25%7
Salaries growth rate
10%
Repair and Maintenance growth rate
5%
Utilities expense growth rate
10%

7 This tax rate is fixed through out since the income falls in 25% tax deduction
slab.
1144
FFIINNAANNCCIIAALL
PPRROOJJEECCTTIIOONNSS

14.1
Projected Income Statement Year
1

Year 2Year
3Year 4Year
5Year
6Year 7Year
8Year 9Year
10RevenueExport-
4,339,743
7,456,468
11,308,977
16,679,795
23,455,962
26,270,677
34,192,929
38,014,491
42,132,728
Local37,573,536
39,057,691
42,253,320
45,235,907
50,039,386
54,730,578
61,298,247
63,501,153
70,598,341
78,246,494
Total
Revenue37,573,536
43,397,434
49,709,788
56,544,884
66,719,181
78,186,540
87,568,925
97,694,082
108,612,832
120,379,222
Operating
Expenses31,972,238
35,655,986
36,402,742
44,564,784
50,544,066
60,066,012
67,172,783
74,760,215
83,206,749
92,996,198
Depriciation1,614,925
1,200,496
915,516
2,174,155
1,562,608
1,146,000
2,786,781
1,955,560
1,394,752
3,573,694
Amortization
of
Deferred Cost207,100
207,100
207,100
207,100
207,100
-
-
-
-
-
33,794,263
37,063,581
37,525,358
46,946,039
52,313,774
61,212,012
69,959,564
76,715,775
84,601,501
96,569,893
Profit
before
Tax
and
Interest3,779,273
6,333,853
12,184,430
9,598,845
14,405,407
16,974,529
17,609,361
20,978,306
24,011,331
23,809,330
Interest
on
Long
term
Loan1,288,744
1,245,425
1,202,106
1,158,786
1,115,467
1,072,148
1,028,829
985,510
942,191
898,872
Interest
on
short
term
Loan941,454
941,454
Profit
/
(Loss)
before
Tax1,549,075
4,146,974
10,982,325
8,440,058
13,289,940
15,902,380
16,580,532
19,992,796
23,069,141
22,910,458
Taxation187,868
1,291,703
2,712,506
2,111,832
2,827,792
3,156,667
3,066,114
4,789,581
7,373,461
5,678,774
Profit after Tax1,361,207
2,855,271
8,269,818
6,328,226
10,462,148
12,745,714
13,514,418
15,203,216
15,695,680
17,231,684
14.2
Projected Balance Sheet

YEARStart
upYear
1Year 2Year
3Year 4Year
5Year
6Year 7Year
8Year 9Year 10FIXED
ASSETSTangible8,484,5006,869,5755,669,0794,798,9387,060,3415,554,1004,470,1057,5
87,0515,706,5174,394,2938,661,953Intangible8,484,5006,869,5755,669,0794,798,9387
,060,3415,554,1004,470,1057,587,0515,706,5174,394,2938,661,953DEFERRED
COSTProject
development
expenditure161,500129,20096,90064,60032,300-
-
-
-
-
-
Preliminary
Expenses874,000699,200524,400349,600174,800-
-
-
-
-
-
9,520,0007,697,9756,290,3795,213,1387,267,4415,554,1004,470,1057,587,0515,706,51
74,394,2938,661,953CURRENT
ASSETSAccounts
Recb.
5,692,9606,575,3697,531,7868,567,40710,108,96711,846,44513,268,01914,802,13416,4
56,49018,239,276Advances
to
Employees2,000,4552,200,5002,073,3632,662,6053,008,7263,419,4063,761,3464,137,48
14,551,2295,006,352Cash
&
Bank
Balances6,724,6709,637,15819,368,37120,997,29823,492,83233,638,83545,191,47453,7
10,70668,785,08183,642,91794,305,9456,724,67017
,330,57328,144,24030,602,44634,722,84446,756,52860,457,32570,740,07187,724,69510
4,650,635117,551,573LESS:
CURRENT
LIABILITIESShort
Term
Borrowings6,724,6706,724,670.1
-
-
-
-
-
-
-
-
Utilities Payable73,74481,11989,23198,154107,969118,766130,643143,707158,078173,
886Salary
Payable895,000984,5001,082,9501,191,2451,310,3701,441,4061,585,5471,744,1021,918
,5122,110,363Dividend
Payable-
-
-
-
-
-
-
-
-
-
-
07,693,4157,790,2891,172,1811,289,3991,418,3391,560,1731,716,1901,887,8092,076,5
902,284,249Working
Capital6,724,6709,637,15820,353,95129,430,26633,433,44545,338,18958,897,15369,02
3,88185,836,886102,574,046115,267,325TOTAL
CAPITAL
EMPLOYED16,244,67017,335,13326,644,33034,643,40440,700,88550,892,28963,367,25876
,610,93291,543,403106,968,338123,929,278-
-
-
-
-
-
-
-
-
-
-
CAPITAL EMPLOYED
REPRESENTED
BY:
SHARE CAPITAL812,234 Shares
@
Rs.10/-
each8,122,3358,122,3358,122,3358,122,3358,122,3358,122,3358,122,3358,122,3358,12
2,3358,122,3358,122,335UNAPP.
PROFIT/
(LOSS)
-
1,361,2074,216,47912,486,29718,814,52329,276,67142,022,38555,536,80370,740,01986
,435,699103,667,3838,122,3359,483,54212,338,814
20,608,63226,936,85837,399,00650,144,72063,659,13878,862,35494,558,034111,789,71
8LONG
TERM LOANS8,122,3357,851,59114,305,51614,034,77213,764,02713,493,28313,222,53812
,951,79412,681,04912,410,30512,139,5608,122,3357,851,59114,305,51614,034,77213,7
64,02713,493,28313,222,53812,951,79412,681,04912,410,30512,139,560TOTAL16,244,67
017,335,13326,644,3
3034,643,40440,700,88550,892,28963,367,25876,610,93291,543,403106,968,338123,929
,278
14.3
Projected Cash Flow
Statement

YEARYear 1Year
2Year
3Year 4Year 5Year
6Year
7Year
8Year 9Year
10SOURCESFROM
OPERATIONProfit
Before
Tax1,549,0754,146,97410,982,3258,440,05813,289,94015,902,38016,580,53219,992,796
23,069,14122,910,458Add:
Depreciation1,614,9251,200,496915,5162,174,1551,562,6081,146,0002,786,7811,955,5
601,394,7523,573,694
Amortization207,100207,100207,100207,100207,100-
-
-
-
-
3,371,1005,554,57012,104,94110,821,31315,059,64817,048,38019,367,31321,948,35724
,463,89326,484,152OTHER SOURCESShort
Term
Borrowings6,724,670
6,724,670
-
-
-
-
-
-
-
-
Sponsor's
Loan-
6,724,670
6,724,670
-
-
-
-
-
-
-
-
10,095,77012,279,24012,104,94110,821,31315,059,64817,048,38019,367,31321,948,357
24,463,89326,484,152APPLICATIONCapital
Expenditure0045,3754,435,55856,36862,0055,903,72775,02682,5287,841,355Repayments
-
Long
term
Loan270,745270,745270,745270,745270,745270,745270,745270,745270,745270,745Tax
Paid187,8681,291,7032,712,5062,111,8322,827,7923,156,6673,066,1144,789,5817,373,
4615,678,774Repayments
-
Short Term
Loan-
6,724,670Dividend
Paid
-
Cash-
-
-
-
-
-
-
-
-
-
458,6121,562,4479,753,2966,818,1343,154,9043,489,4169,240,5855,135,3517,726,7331
3,790,873SURPLUS
/
(
DEFICIT)
9,637,15810,716,7932,351,6454,003,17911,904,74413,558,96410,126,72816,813,00616,
737,15912,693,279INCREASE/(
DECREASE)
IN
WORKING
CAPITAL6,724,670985,580722,7181,507,6451,758,7412,006,3251,607,4971,738,6301,879
,3232,030,250NET
INCREASE/(DECREASE)
2,912,4889,731,2131,628,9272,495,53410,146,00311,552,6398,519,23115,074,37514,85
7,83610,663,029OPENING BANK BALANCES6,724,670
9,637,15819,368,37120,997,29823,492,83233,638,83545,191,47453,710,70668,785,0818
3,642,917CLOSING
CASH
BALANCE9,637,15819,368,37120,997,29823,492,83233,638,83545,191,47453,710,70668,7
85,08183,642,91794,305,945
1155
AANNNNEEXXUURREE

15.1
Annexure 1
Project Cost and Means of Financing

Project
Cost
RupeesRupeesLandLand
considered on
Rent-
Project
Development costEquipment3,332,500
Furniture &
Fixture1,887,000
Motor Vehicles3,265,000
8,484,500
Preliminary ExpensesCopy
rights-Licensing
&
Trade Marks161,500
Other Expenses874,000
1,035,500
Working Capital6,724,670
Intangible AssetsCapital Work
in
ProgressInterest
during DevelopmentTotal
Assets
16,244,670Rs.
Total Capital
Employed By:
%
RupeesEquity
Contribution
bySponsor50%
8,122,335
LoanBank50%
8,122,335
Total Capital
including
land100%
16,244,670Rs.
15.2
Annexure 2
Revenue Generation

Revenue GenerationNo. of
days
in year264
Working
Hrs.
per day8
Hourly
US
$
Rate26
US Dollar
Rate85.00
As
per
SBP on
May
24,
2010Increase in
Conversion
Rate0%
Growth rate
in Sales
Price5%
Year 1Year
2Year 3Year 4Year 5Year 6Year
7Year
8Year
9Year
10Technical StaffNumber of
Employees23232323242525252525Total
Hours
Worked:
Increase in Employees23000110000Increased hrs.
48,5760002,1122,1120000Average
Employed70%
70%
70%
70%
70%
70%
70%
70%
70%
70%
Increased Hours34,0030001,4781,4780000Total Hrs.
34,00334,00334,00334,00335,48236,96036,96036,96036,96036,960Utilization
in
Percentage
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
Hours
Used17,002
18,702
20,402
22,102
24,837
27,720
29,568
31,416
33,264
35,112
Hourly
Rate
USD $
26
27
29
30
32
33
35
37
38
40
Revenue
in
US
$
442,042
510,558
584,821
665,234
784,932
919,842
1,030,223
1,149,342
1,277,798
1,416,226
Conversion
Rs=US
D85
85
85
85
85
85
85
85
85
85
Total
Revenue37,573,536
43,397,434 49,709,788
56,544,884
66,719,181
78,186,540
87,568,925
97,694,082
108,612,832 120,379,222
Export Selling Ratio-Export-
10%
15%
20%
25%
30%
30%
35%
35%
35%
Local100%
90%
85%
80%
75%
70%
70%
65%
65%
65%
Revenue in
Break
UpExport-
4,339,743
7,456,468
11,308,977
16,679,795
23,455,962
26,270,677
34,192,929
38,014,491
42,132,728
Local37,573,536
39,057,691
42,253,320
45,235,907
50,039,386
54,730,578
61,298,247
63,501,153
70,598,341
78,246,494
Total
Revenue37,573,536
43,397,434 49,709,788
56,544,884
66,719,181
78,186,540
87,568,925
97,694,082
108,612,832 120,379,222
Per employee
Earning
in
PKR.
1,633,6321,886,8452,161,2952,458,4732,779,9663,127,4623,502,7573,907,7634,344,51
34,815,169Per employee
Earning
in
US$
19,21922,19825,42728,92332,70536,79441,20945,97451,11256,649
15.3 Annexure 3 List of Fixed Assets

EQUIPMENTYEAR 1TitleUnitsUnit CostTotal CostPCs2930,000870,000Laptop PCs260,0001

20,000Servers2155,000310,000UPS for PCs318,500263,500UPS for Servers/Network Equ
ipment210,50021,000Network Equipment1100,000100,000Printer (LASER)218,00036,000P
rinter (dot matrix wide carriage)215,00030,000Printer-Ink Jet23,5007,000Software
(Servers/PCs Development Tools,
Office and Project Management Tools, Database Tools)11,000,0001,000,000Modems070
00Data Show for On-site Presentations/Multimedia1150,000150,000Power Generator B
ackup1325,000325,000Miscellaneous 1100,000100,000Total 3,332,500FURNITURE & FIXT
URE
ItemsNumberUnit CostTotal CostComputer furniture2225,000550,000Office furniture2
35,00070,000Furniture CEO1100,000100,000Furniture senior staff530,000150,000Furn
iture reception area 150,00050,000Furniture conference room1120,000120,000A/Cs S
plit1236,000432,000Telephone exchange/phones150,00050,000Facsimile115,00015,000P
hoto Copier1100,000100,000Library (Books) 1150,000150,000Miscellaneous1100,00010
0,000Total 1,887,000MOTOR VEHICLES
ItemsNumberUnit CostTotal CostCEO11,350,0001,350,000Chief Software Architect1850
,000850,000Office Vahicle11,000,0001,000,000Motor Cycle165,00065,000Total3,265,0
00GRAND TOTAL8,484,500
15.4 Annexure 4 Staff Salaries

Technical Staff YEAR 1PersonnelNo.

Monthly
SalaryAnnaul
SalaryChief Executive Officer1150,000150,0001,800,000Chief Software Architect110
0,000100,0001,200,000Senior Software Architect175,00075,000900,000Senior Analyst
255,000110,0001,320,000Analyst440,000160,0001,920,000Database Administrator250,0
00100,0001,200,000Senior Software Engineer255,000110,0001,320,000Software Engine
ers840,000320,0003,840,000System Administrator (facility management)240,00080,00
0960,000Total23645,00014,460,000
Non-Technical Staff YEAR 1PersonnelNo.
Monthly
SalaryAnnaul
SalaryOperations Manager150,00050,000600,000Admin & Finance Manager155,00055,000
660,000Asstt. Manager Admin130,00030,000360,000Receptionist115,00015,000180,000A
sstt. Manager Accounts140,00040,000480,000Accountant125,00025,000300,000Office B
oy27,00014,000168,000Driver110,00010,000120,000Security Guard28,00016,000192,000
Cleaner17,0007,00084,000Total12250,0003,144,000Total (Technical + Non Technical)
35895,00017,604,000
15.5 Annexure 5 Important Contacts

For Software House Registration:

Pakistan Software Export Board (PSEB)
Ministry of Information Technology, Govt. of Pakistan

Head Office -Islamabad

2nd Floor, Evacuee Trust Building, F-5 Agha Khan Road, Islamabad
Tel.: +92-51-9204074, Fax: +92-51-9204075

Lahore Office
5th floor, Admin Block Awain-e-Iqbal Complex, Egerton Road, Lahore
Tel: +92-42-6307825-6, Fax: +92-42-6307827

Karachi Office
Room 1201, 12th Floor, National IT Park, Ceaser's Tower, Shahrah-e-Faisal, Karac
hi
Tel: +92-21-9217381, Fax: +92-21-9217382
UAN: 111-333-666
E-mail: info@pseb.org.pk, Website: http://www.pseb.org.pk

Pakistan Software Houses Association (P@SHA)

P@SHA Secretariat
172/P Najeeb Corner
4th Floor, Block 2 PECHS
Karachi, Pakistan
Tel: (92 - 21) - 5418121
Email: secretariat@pasha.org.pk
www.pasha.org.pk

IT and office equipment Suppliers:

A-Tech Laptop Gallery
Grind lays Market, Bank Road
Rawalpindi Saddar,
Rawalpindi
051-5581458
www.atechcomputers.com

FAST Technologies
Suit no.4-A, Ist Floor, Mehmood Plaza,Fazal-e-Haq Road, Blue Area,Islamabad.(Nea
r Fresco
sweets)
Ph: 051-2605818-9
http://www.hrbox.net
fasttechnologies1@gmail.com

IK Computers
Fround Floor No 3 Mezzaine No 1087 w, Abbas Center Blue Area, Islamabad
Ph: 051-2875257
Email: ikc@isbn.comsats.net.pk
Hafeez Centre Lahore
Hall Road Lahore
Blue area Islamabad
Saddar Rawalpindi
6th Road - Rawalpindi

Furniture Suppliers:
Decora Furniture Lahore
Address: 47-Ferozpur Road, Lahore, Pakistan
Tel: +92-42-37554862

Interwood Mobel Lahore

Address: 117-E-1,Gulberg-III,Lahore
Tel: +92-42-35870222-6549123-5711117
Fax: +92-42-36549126
Email: sales@interwoodmobel.com
URL: http://www.interwoodmobel.com

Javaid & Co. Lahore

Address: 29130-Nishter Road, Lahore
Tel: +92-42-37653007

Master Fibre Glass Lahore

Address: 47-C,3 Miraj Building, Ferozepur Road, Lahore
Tel: +92-42-35010010

Koncept Furniture - Gujrat

Address: Dheerkay By Pass, G.T. Road, Gujrat, Pakistan
Tel: +92-300-6233455
Nisbat Road Market - Lahore

Ferozepur Road Market Lahore

15.6 Annexure 6 Tax deduction income slabs

Income Slabs
Tax Rate

0.00%
100,000 110,000
0.50%
110,000 125,000
1.00%
125,000 150,000
2.00%
150,000 175,000
3.00%
175,000 200,000
4.00%
200,000 300,000
5.00%
300,000 400,000
7.50%
400,000 500,000
10.00%
500,000 600,000
12.50%
600,000 800,000
15.00%
800,000 1,000,000
17.50%
1,000,000 1,300,000
21.00%
1,300,000 and above
25.00%