SMEDA Software House

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 REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH KHYBER PAKTUNKHWA BALOCHISTAN
8th Floor LDA Plaza, 5TH Floor, Bahria Complex II, Ground Floor Bungalow No. 15-A Chamn
Egerton Road, M.T. Khan Road, State Life Building The Mall, Housing Scheme Airport Road,
Lahore. Karachi. Peshawar. Quetta.
Tel: (042) 111 111 456, Tel: (021) 111-111-456 Tel: (091)111 111 456, 9213046-7 Tel: (081) 2831623, 2831702
Fax: (042) 36370474 Fax: (021) 35610572 Fax: (091) 286908 Fax: (081) 2831922
helpdesk.punjab@smeda.org.pk helpdesk.sindh@smeda.org.pk helpdesk.NWFP@smeda.org.pk helpdesk.balochistan@smeda.org.pk
June, 2010
Pre-feasibility Study Software House
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
i
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
ii
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 included 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 document, 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 does not
assume any liability for any financial or other loss resulting from this memorandum in
consequence of undertaking this activity. The prospective user of this memorandum is
encouraged to carry out additional diligence and gather any information he/she feels
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
PREF-93/June, 2010/ Rev 2 iii

1 EXECUTIVE SUMMARY
This project entails opening up a Software House that will cater to both local and export
markets in the Middle East, USA and UK. The company’s corporate office will be opened in
Lahore, Pakistan. The Software House will provide automated and Information Technology
(IT) enabled solutions catering to businesses across various verticals in Pakistan, Middle
East, UK and USA.
The Software House will have IT specialists with vast industry experience and knowledge.
The company will offer a wide range of consulting services and cost-effective development
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 satisfaction
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 Consulting among
others.
Foreign-based companies have entered a recovery phase and started outsourcing their
multiple services to the IT and IT-enabled companies of various countries. Pakistan 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 expected to
flourish in the upcoming years. Many countries prefer outsourcing from Pakistan because of
the lower cost of manpower and advanced technological infrastructure. This enables 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 to be financed
through 50% debt and 50% equity. The project NPV is around Rs. 19.89 million, with 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 Proprietorship’.
PREF-93/June, 2010/ Rev 2 1

2 INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established with
the objective to provide fresh impetus to the economy through the launch of an aggressive
SME support program.
Since its inception in October 1998, SMEDA had adopted a sectoral SME development
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 development
strategy involved recommending changes in the regulatory environment by taking into
consideration other important aspects including finance, marketing, technology and human
resource development.
SMEDA has so far successfully formulated strategies for industries such as horticulture,
including export of fruits and vegetables, marble and granite, gems and jewellery, marine
fisheries, leather and footwear, textiles, surgical instruments, transport, dairy etc. Whereas the
task of SME development at a broader scale still requires more coverage and enhanced 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 business
opportunities for potential SME investors. In order to facilitate these investors, 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 development are
some of the services provided to enhance the capacity of individual SMEs to exploit viable
business opportunities in a better way.
This document is in the continuation of this effort to enable potential investors to make well-
informed investment decisions.
3 PURPOSE OF THE DOCUMENT

This particular pre-feasibility comes under the ‘Information Technology’ sector, a sub-sector
of ‘Information and Communication Technology’ and is in regard to setting up a “Software
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 basis 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, finance and
business management.

4 OPPORTUNITY RATIONALE
Competing in a worldwide scale, Pakistan’s IT industry has experienced massive growth in
IT exports. With the fast paced industry growth rate and government’s investor friendly
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 Pakistan has
allowed 100% ownership of equity and 100% repatriation of profits for foreign investors.
Major tax incentives for companies have been allowed till 2016. Also, the Government has
given tax exemption on the income from export of computer software and related services.
5 INDUSTRY STRUCTURE
Information technology (IT) with its revolutionary power as a critical enabler of 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 continue innovating in
their processes and products and to maintain their competitive advantage. Equally
importantly, IT has proven instrumental for enabling developing and middle-income
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 information
technology is showing the way to recovery of the businesses and economies through
innovative and smarter solutions. Pakistan’s economy has been under tremendous pressure
during the period. This has also adversely affected the IT Sector. The growth has 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 envisaged 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 approximately
against a target of US$ 280 million. This under-achieved status is mainly attributed to the
overall uncertain situation that prevailed during the year 2009-10, which made the
international investors reluctant to invest and undertake business in Pakistan and 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 most to the
IT sector are Netsol Technologies, Ovex Technologies, TRG Private Ltd, Systems Private
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 certified while
over 25 companies are undergoing Capability Maturity Model Integration (CMMI)3
assessment currently. The country has 110,000 IT professionals including expatriates from
North America and Europe.4
Several global IT companies such as NCR, IBM and Oracle use Pakistan as a regional hub
for South Asia and Middle East. The year 2009-10 saw slight improvement in the network
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 offers 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 still ranks much
lower than its regional competitors.
The Government of Pakistan has been proactively taking measures to develop the IT 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 technology.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 profit 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 information
technology. Pakistan has to equip not only its educational institutions at all levels with the
information technology facilities but also it has to establish new vocational training centres
throughout the country which focus on providing training to convert the latent human
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 the
international markets, following projects were executed during the year 2009-10:
• Purchase of Land in Karachi and Lahore for Establishment of IT Parks was approved for
capacity building of IT industry. This project will boost the information technology
infrastructure and facilitate more companies to establish their business in Pakistan.
• IT Parks Construction projects’ consultancy for both Karachi and Lahore airports was
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 number of
Capability Maturity Model Integration (CMMI) assessed companies has increased.
Currently CMMI certified companies according to their level include, two CMMI Level-5,
three CMMI Level-3 and sixteen CMMI Level-2 companies. Also, now there are 110 ISO-
9000 certified. ISO 27001 consultancy and audit of ten IT companies has been completed
this year.
• Automation of Domestic Industry on Open Source Systems. This project was initiated 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 follow:
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.planningcommission.gov.pk/)

5.1.1 Product/Service Based Classification

In terms of product/service strategy there are product focused or packaged software
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 this 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 provided 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 there 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 orientation 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 not have
been aided/encouraged by a group of expatriates), but with an explicit purpose of exporting
software products or services. Majority of firms are targeting on offshore programming 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 expatriate
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 of business
model has been adopted by services and product-focused companies alike. Within both
services and products domains, this type of model has been more valuable than Export-
Focused Local Firm model. Some salient examples of companies following this business
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” projects
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 quality
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 market 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 companies that
either serve the local—the prime example being SI3 whose expressed purpose is to work on
the domestic front—or the export market but who end up doing quite a fair bit of work 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” to 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 vision and strategic
direction of its parent. Some salient examples of this type of business model are:
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 Export-Focused Export-Focused Dedicated
Local Firms Local Firm Foreign Firm 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
6 MARKET ANALYSIS
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. Pakistan has
potential to grab its share in IT-enabled services market although it is also competent in
providing software applications to various developed countries, demand will be flourishing in
the upcoming years.
United States of America is the largest buyer of Pakistan IT-enabled services with the share
of 58 percent in the overall country’s exports. It is followed by UK, where the exports are
hovering around 10 percent. The pie of total exports shows 16 percent share to the other
countries including Australia, Canada, Thailand, UAE and others.
Companies such as IBM, Microsoft, Cisco Systems, Hewlett Packard, and Novell choose to
get services from sub-contractors in low cost countries with strong IT capability, HR capital
and infrastructure and low risk. These companies are also moving many development and
support jobs to such locations.
Ratios of revenue generation from export and domestic market are approximately 60:40. In
export, revenues generate from products and services are 22.55% and 38.55% respectively.
Majority of the product-exports are “customized” rather than “shrink-wrapped” products.
Exporters are optimistic on the sustainability of export growth gradually in tandem with the
recovery of developed economies where country has good markets. The demand of local 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 revenue 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 relatively 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 increasing
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, computer has become a
significant part of every walk of our lives and many processes have become automatic now.
All the big shopping malls have computerized billing system now. Almost every organization
keeps its data in computerized form. Computer and internet awareness is also increasing 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, automobile, 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 • Softech Systems–Financial & Trading
Solutions 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 • AppXS – Financial & Trading
Transport/SCM Systems
• 2B Technologies – Call Center Solutions • Oratech – Oracle-based Applications
• SI3– System Integration & Back-Office • Askari Info Systems – ERP,
Outsourcing Financials-Accounting
• Acrologix – ERP, Archiving, foreign- • Concept – Communications Systems
language OCR
• LMKR – Large DBs, GIS, Petrochemicals • CARE - Telecom Eqpt., ASICs, EDA
etc. 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 sector
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 resources pool
unlimited e-commerce potential
• Global and domestic Internet explosion
• World-wide growth and lowering of cultural barriers due to the use of the internet and
globalization will drive IT usage
• Government drive for documentation will provide growth opportunities
• Entertainment potential of IT and the internet
PREF-93/June, 2010/ Rev 2 10

7 QUALITY MANAGEMENT
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 strong
expatriate connection (e.g. a founder or co-founder either based abroad or operating
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 marketing
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 focus.
Develop a domain expertise by learning to take the big-picture view of the client’s
business operations and look for opportunities to sell business rather than technology
solutions. Get domain experts involved, if need be. Avoid the temptation of “on-today-
off-tomorrow” type of contracts.
• Focus on better-developed segments of market. Understand requirements and difficulties
in “creating” a market single-handedly and plan accordingly.
• Price innovatively.
• Use the financial clout, domain knowledge, and regional network of locally operative
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. Persuade
your customers and foreign partners to visit Pakistan and see for themselves.
• Develop strong domain expertise to lock in customers, move towards value addition to
avoid being pressed by the pressures of the commodity business, or continually cut costs
by automating your own processes.
• Counter the shortage of quality labour by hiring expatriate or returning Pakistanis. 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 agencies 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 should be
followed to ensure code understandability, reusability, extensibility, and maintainability,
The quality assurance process has a lifecycle of its own, which runs parallel with the
design/development process, it begins when the specifications are delivered, and continues
for the entire life of the project.
PREF-93/June, 2010/ Rev 2 11

7.3 Marketing Strategy

If we look the software industry and its various marketing approaches used by software
houses and their perception of “successfulness”. The following seven successes of marketing
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
8 PRODUCT/SERVICE
The project concept is of a software development house, catering to both local and export
markets, with corporate presence in Lahore, Pakistan. The company will offer a full range of
business application solutions for the corporate, financial and industrial sectors and its
international target market will be USA and UK. The project's strategic vision will provide
the clients with quality systems to stimulate their growth in the existing competitive 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 management,
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 responsibilities within
the company in order to ensure good teamwork, coordination, and timely product delivery
• 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 enterprise wide
scale.
Systems integration capabilities are required to help minimize risk and maximize security,
interoperability and compatibility. For any organization to make the best possible decisions
the existing systems should be well-integrated with the new technologies; new technologies
that provide the best possible platform to suit any organizations business needs.
PREF-93/June, 2010/ Rev 2 12

The services will include helping organizations successfully plan, customize, implement and
deploy the Oracle Applications suites that include Financials, Supply Chain Management,
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 competition in the
fast-paced IT industry; Technology Outsourcing is a necessity to maximize a company’s
potential by outsourcing resource-consuming processes and controllable costs.
However, understandably there are numerous risks associated with this. Using experience and
management skills one should ensure that the offshore solution is predictable and cost-
effective by successfully managing and mitigating risks associated with outsourcing and
hence, enabling the customers greater profitability by extracting maximum reward with
minimal risk. Consistent and reliable communication channels aid in virtually eliminating the
risk of an off-shore partner by use of state of the art video conferencing equipment 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 saved 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 solution 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 alike.
In a recent Accenture survey of more than 800 companies, in the US and Europe, 86% of the
companies said outsourcing gives them more control over business results in a variety 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 based on
unique specifications to give the competitive edge in an increasingly competitive 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 strategy and
project objectives set forth. The company's expert consultants should have the technical
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 goals. The
company will provide the streamlining, realignment and restructuring of the business
processes of an organization that help gain meaningful business value from planned IT
implementations.
As the state of affairs of businesses change, organizations feel the need of moving to state-of-
the-art IT enabled solutions to survive and participate in the competitive market. This
particular service will help organizations to do just that virtually trouble-free.
PREF-93/June, 2010/ Rev 2 13

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, electronically stored,
transmitted or communicated verbally. In today’s global economy, the success or failure of
an organization, from SMEs and large corporations, depends upon the confidentiality,
integrity and availability of corporate information. As a result, Information Security has
become one of the most important topics for modern organizations.
The information security services will be designed to ensure protection from threats 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 successfully
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
PREF-93/June, 2010/ Rev 2 14

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 strong
workflow management, integrated link to credit rating agencies, automated point scoring
strategy for automatic approval/rejection/referral. Moreover, it can be customized for linking
with any point of sale system.
ii) Contract Activation & Management System (CMS)
Automated comprehensive contract management throughout the life of the loan / lease:
System provides comprehensive business functionality that enables its users to effectively
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 and 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 information and
ultimately the pay-off function. A Dealer Access System enables dealers/agents and 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 quality 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 provided to
various government and semi-government organizations. This includes services ranging 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
PREF-93/June, 2010/ Rev 2 15

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 Enterprise Resource
Planning (ERP) applications catering to the different parts of an organization including
Financials, Supply Chain Management, Manufacturing and Inventory, Asset Management
Software and Services through the dedicated Enterprise Asset Management Solutions 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 development 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 application
development, deployment, configuration, customization in addition to end user training and
maintenance services. Diverse range of IT solutions include computer based training, 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 strategy 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 Information
Security and Software Process Consultancy.
9 HUMAN RESOURCES
The project should have highly educated and skilled manpower to support its software
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 preferably 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 design and
architecture, with special focus on Object-Oriented Design and implementation. His role will
be streamlining the software development methodology and life cycle, and software 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 technology
necessary to develop high quality enterprise software systems and would be capable to
generate an idea from scratch, analyze it, form a solution, implement it and then deploy it.
Staff should be trained and fully equipped with latest technology and advancement.
This software house will require a total of 35 employees, 23 of which is the technical staff
that will be directly involved in revenue generation. The other 12 non-technical employees
will be required of office administrative functions.
PREF-93/June, 2010/ Rev 2 16

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
10 MACHINERY & EQUIPMENT
10.1 IT equipment
The IT equipment includes Computers, Laptop PCs, Servers, UPS for PCs and networking
equipment. The detail list of Computer and equipment is given in Annexure 3. This 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.
11 INFRASTRUCTURE
The proposed location in Lahore is Gulberg or Defence Housing Authority and in Islamabad
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 of 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 Pakistan. 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 locations in
these major cities. These dedicated premises provide a comfortable working environment,
high-speed international data connectivity, and an uninterrupted power supply, with minimal
regulatory overheads and paperwork, to its registered companies. The STPs in all these cities
have facilities for conferences/seminars, business centres, adequate security arrangements,
and ample parking space. Investors can lease out office space in an existing Software
Technology Park (STP). The contact information for details on leasing office space 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
PREF-93/June, 2010/ Rev 2 17

12 PROJECT DETAIL
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
PREF-93/June, 2010/ Rev 2 18

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.
13 ASSUMPTIONS
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 working 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% of Equipment Cost 166,625
Foreign Traveling (a year) 4 trips @ 550,000 2,200,000
Traveling & Conveyance 4500 Per person 1,890,000
PREF-93/June, 2010/ Rev 2 19

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. & Diesel expense 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 working 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.
PREF-93/June, 2010/ Rev 2 20

14 FINANCIAL PROJECTIONS
14.1 Projected Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue
Export - 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
Local 37,573,536 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 Revenue 37,573,536 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 Expenses 31,972,238 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
Depriciation 1,614,925 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 Cost 207,100 207,100 207,100 207,100 207,100 - - - - -
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 Interest 3,779,273 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 Loan 1,288,744 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 Loan 941,454 941,454
Profit / (Loss) before Tax 1,549,075 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
Taxation 187,868 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 Tax 1,361,207 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
PREF-93/June, 2010/ Rev 2 21

14.2 Projected Balance Sheet
YEAR Start up Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
FIXED ASSETS
Tangible 8,484,500 6,869,575 5,669,079 4,798,938 7,060,341 5,554,100 4,470,105 7,587,051 5,706,517 4,394,293 8,661,953
Intangible
8,484,500 6,869,575 5,669,079 4,798,938 7,060,341 5,554,100 4,470,105 7,587,051 5,706,517 4,394,293 8,661,953
DEFERRED COST
Project development expenditure 161,500 129,200 96,900 64,600 32,300 - - - - - -
Preliminary Expenses 874,000 699,200 524,400 349,600 174,800 - - - - - -
9,520,000 7,697,975 6,290,379 5,213,138 7,267,441 5,554,100 4,470,105 7,587,051 5,706,517 4,394,293 8,661,953
CURRENT ASSETS
Accounts Recb. 5,692,960 6,575,369 7,531,786 8,567,407 10,108,967 11,846,445 13,268,019 14,802,134 16,456,490 18,239,276
Advances to Employees 2,000,455 2,200,500 2,073,363 2,662,605 3,008,726 3,419,406 3,761,346 4,137,481 4,551,229 5,006,352
Cash & Bank Balances 6,724,670 9,637,158 19,368,371 20,997,298 23,492,832 33,638,835 45,191,474 53,710,706 68,785,081 83,642,917 94,305,945
6,724,670 17,330,573 28,144,240 30,602,446 34,722,844 46,756,528 60,457,325 70,740,071 87,724,695 104,650,635 117,551,573
LESS: CURRENT LIABILITIES
Short Term Borrowings 6,724,670 6,724,670.1 - - - - - - - -
Utilities Payable 73,744 81,119 89,231 98,154 107,969 118,766 130,643 143,707 158,078 173,886
Salary Payable 895,000 984,500 1,082,950 1,191,245 1,310,370 1,441,406 1,585,547 1,744,102 1,918,512 2,110,363
Dividend Payable - - - - - - - - - - -
0 7,693,415 7,790,289 1,172,181 1,289,399 1,418,339 1,560,173 1,716,190 1,887,809 2,076,590 2,284,249
Working Capital 6,724,670 9,637,158 20,353,951 29,430,266 33,433,445 45,338,189 58,897,153 69,023,881 85,836,886 102,574,046 115,267,325
TOTAL CAPITAL EMPLOYED 16,244,670 17,335,133 26,644,330 34,643,404 40,700,885 50,892,289 63,367,258 76,610,932 91,543,403 106,968,338 123,929,278
- - - - - - - - - - -
CAPITAL EMPLOYED REPRESENTED BY:
SHARE CAPITAL
812,234 Shares @ Rs.10/- each 8,122,335 8,122,335 8,122,335 8,122,335 8,122,335 8,122,335 8,122,335 8,122,335 8,122,335 8,122,335 8,122,335
UNAPP. PROFIT/(LOSS) - 1,361,207 4,216,479 12,486,297 18,814,523 29,276,671 42,022,385 55,536,803 70,740,019 86,435,699 103,667,383
8,122,335 9,483,542 12,338,814 20,608,632 26,936,858 37,399,006 50,144,720 63,659,138 78,862,354 94,558,034 111,789,718
LONG TERM LOANS 8,122,335 7,851,591 14,305,516 14,034,772 13,764,027 13,493,283 13,222,538 12,951,794 12,681,049 12,410,305 12,139,560
8,122,335 7,851,591 14,305,516 14,034,772 13,764,027 13,493,283 13,222,538 12,951,794 12,681,049 12,410,305 12,139,560
TOTAL 16,244,670 17,335,133 26,644,330 34,643,404 40,700,885 50,892,289 63,367,258 76,610,932 91,543,403 106,968,338 123,929,278
PREF-93/June, 2010/ Rev 2 22

14.3 Projected Cash Flow Statement
YEAR Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
SOURCES
FROM OPERATION
Profit Before Tax 1,549,075 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
Add: Depreciation 1,614,925 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 207,100 207,100 207,100 207,100 207,100 - - - - -
3,371,100 5,554,570 12,104,941 10,821,313 15,059,648 17,048,380 19,367,313 21,948,357 24,463,893 26,484,152
OTHER SOURCES
Short Term Borrowings 6,724,670 6,724,670 - - - - - - - -
Sponsor's Loan -
6,724,670 6,724,670 - - - - - - - -
10,095,770 12,279,240 12,104,941 10,821,313 15,059,648 17,048,380 19,367,313 21,948,357 24,463,893 26,484,152
APPLICATION
Capital Expenditure 0 0 45,375 4,435,558 56,368 62,005 5,903,727 75,026 82,528 7,841,355
Repayments - Long term Loan 270,745 270,745 270,745 270,745 270,745 270,745 270,745 270,745 270,745 270,745
Tax Paid 187,868 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
Repayments - Short Term Loan - 6,724,670
Dividend Paid
- Cash - - - - - - - - - -
458,612 1,562,447 9,753,296 6,818,134 3,154,904 3,489,416 9,240,585 5,135,351 7,726,733 13,790,873
SURPLUS / (DEFICIT) 9,637,158 10,716,793 2,351,645 4,003,179 11,904,744 13,558,964 10,126,728 16,813,006 16,737,159 12,693,279
INCREASE/(DECREASE) IN WORKING CAPITAL 6,724,670 985,580 722,718 1,507,645 1,758,741 2,006,325 1,607,497 1,738,630 1,879,323 2,030,250
NET INCREASE/(DECREASE) 2,912,488 9,731,213 1,628,927 2,495,534 10,146,003 11,552,639 8,519,231 15,074,375 14,857,836 10,663,029
OPENING BANK BALANCES 6,724,670 9,637,158 19,368,371 20,997,298 23,492,832 33,638,835 45,191,474 53,710,706 68,785,081 83,642,917
CLOSING CASH BALANCE 9,637,158 19,368,371 20,997,298 23,492,832 33,638,835 45,191,474 53,710,706 68,785,081 83,642,917 94,305,945
PREF-93/June, 2010/ Rev 2 23

15 ANNEXURE
15.1 Annexure 1 Project Cost and Means of Financing
Project Cost
Rupees Rupees
Land
Land considered on Rent -
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
Capital Work in Progress
Interest during Development
Total Assets Rs. 16,244,670
Total Capital Employed By:
% Rupees
Equity Contribution by Sponsor 50% 8,122,335
Loan Bank 50% 8,122,335
Total Capital including land 100% Rs. 16,244,670
PREF-93/June, 2010/ Rev 2 24

15.2 Annexure 2 Revenue Generation

Revenue Generation
No. of days in year 264

Working Hrs. per day 8
Hourly US $ Rate 26
US Dollar Rate 85.00 As per SBP on May 24, 2010
Increase in Conversion Rate 0%
Growth rate in Sales Price 5%
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Technical Staff
Number of Employees 23 23 23 23 24 25 25 25 25 25
Total Hours Worked:
Increase in Employees 23 0 0 0 1 1 0 0 0 0
Increased hrs. 48,576 0 0 0 2,112 2,112 0 0 0 0
Average Employed 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%
Increased Hours 34,003 0 0 0 1,478 1,478 0 0 0 0

Total Hrs. 34,003 34,003 34,003 34,003 35,482 36,960 36,960 36,960 36,960 36,960
Utilization in Percentage 50% 55% 60% 65% 70% 75% 80% 85% 90% 95%
Hours Used 17,002 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 D 85 85 85 85 85 85 85 85 85 85
Total Revenue 37,573,536 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%
Local 100% 90% 85% 80% 75% 70% 70% 65% 65% 65%
Revenue in Break Up
Export - 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
Local 37,573,536 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 Revenue 37,573,536 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. 1,633,632 1,886,845 2,161,295 2,458,473 2,779,966 3,127,462 3,502,757 3,907,763 4,344,513 4,815,169
Per employee Earning in US$ 19,219 22,198 25,427 28,923 32,705 36,794 41,209 45,974 51,112 56,649
PREF-93/June, 2010/ Rev 2 25

15.3 Annexure 3 List of Fixed Assets
EQUIPMENT YEAR 1
Title Units Unit Cost Total Cost

PCs 29 30,000 870,000
Laptop PCs 2 60,000 120,000
Servers 2 155,000 310,000
UPS for PCs 31 8,500 263,500
UPS for Servers/Network Equipment 2 10,500 21,000
Network Equipment 1 100,000 100,000
Printer (LASER) 2 18,000 36,000
Printer (dot matrix – wide carriage) 2 15,000 30,000
Printer-Ink Jet 2 3,500 7,000
Software (Servers/PCs – Development Tools,
Office and Project Management Tools, Database Tools) 1 1,000,000 1,000,000
Modems 0 700 0
Data Show for On-site Presentations/Multimedia 1 150,000 150,000
Power Generator Backup 1 325,000 325,000
Miscellaneous 1 100,000 100,000
Total 3,332,500
FURNITURE & FIXTURE

Items Number Unit Cost Total Cost
Computer furniture 22 25,000 550,000
Office furniture 2 35,000 70,000
Furniture CEO 1 100,000 100,000
Furniture senior staff 5 30,000 150,000
Furniture reception area 1 50,000 50,000
Furniture conference room 1 120,000 120,000
A/Cs Split 12 36,000 432,000
Telephone exchange/phones 1 50,000 50,000
Facsimile 1 15,000 15,000
Photo Copier 1 100,000 100,000
Library (Books) 1 150,000 150,000
Miscellaneous 1 100,000 100,000
Total 1,887,000
MOTOR VEHICLES
Items Number Unit Cost Total Cost
CEO 1 1,350,000 1,350,000
Chief Software Architect 1 850,000 850,000
Office Vahicle 1 1,000,000 1,000,000
Motor Cycle 1 65,000 65,000
Total 3,265,000
GRAND TOTAL 8,484,500
PREF-93/June, 2010/ Rev 2 26

Pre-feasibility Study
15.4 Annexure 4 Staff Salaries
Technical Staff YEAR 1

Monthly Annaul
Personnel No. Salary Salary
Chief Executive Officer 1 150,000 150,000 1,800,000
Chief Software Architect 1 100,000 100,000 1,200,000
Senior Software Architect 1 75,000 75,000 900,000
Senior Analyst 2 55,000 110,000 1,320,000
Analyst 4 40,000 160,000 1,920,000
Database Administrator 2 50,000 100,000 1,200,000
Senior Software Engineer 2 55,000 110,000 1,320,000
Software Engineers 8 40,000 320,000 3,840,000
System Administrator (facility management) 2 40,000 80,000 960,000
Total 23 645,000 14,460,000
Non-Technical Staff YEAR 1

Monthly Annaul
Personnel No. Salary Salary
Operations Manager 1 50,000 50,000 600,000
Admin & Finance Manager 1 55,000 55,000 660,000
Asstt. Manager Admin 1 30,000 30,000 360,000
Receptionist 1 15,000 15,000 180,000
Asstt. Manager Accounts 1 40,000 40,000 480,000
Accountant 1 25,000 25,000 300,000
Office Boy 2 7,000 14,000 168,000
Driver 1 10,000 10,000 120,000
Security Guard 2 8,000 16,000 192,000
Cleaner 1 7,000 7,000 84,000
Total 12 250,000 3,144,000
Total (Technical + Non Technical) 35 895,000 17,604,000
PREF-93/June, 2010/ Rev 2 27

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, Karachi
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.(Near 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
PREF-93/June, 2010/ Rev 2 28

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
PREF-93/June, 2010/ Rev 2 29

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%
PREF-93/June, 2010/ Rev 2 30

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Pre-Feasibility Study

Small and Medium Enterprises Development Authority

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

Document No. PREF-93

Issue Date May 2006

Revision Date June 2010

Issued by Library Officer

PREF-93/June, 2010/ Rev 2 iii

PREF-93/June, 2010/ Rev 2 1

3 PURPOSE OF THE DOCUMENT

PREF-93/June, 2010/ Rev 2 2

PREF-93/June, 2010/ Rev 2 3

PREF-93/June, 2010/ Rev 2 4

The major achievements for 2009-10 are delineated below: 6

5.1 Classification of Industry

PREF-93/June, 2010/ Rev 2 5

5.1.1 Product/Service Based Classification

5.1.1.2 Service Focused

5.1.1.3 Hybrid operations-Changes in Existing Product

PREF-93/June, 2010/ Rev 2 6

5.1.2 Market Based Classification

5.1.2.1 The Export-Focused Local Firm

5.1.2.2 The Export-Focused Foreign (Expatriate) Firm

5.1.2.3 The Domestic-Focused Local Firm

PREF-93/June, 2010/ Rev 2 7

ii) ZRG (Karachi)

5.1.2.4 The Domestic-Focused Foreign Firm

5.1.2.5 Dedicated Offshore Development Centre

PREF-93/June, 2010/ Rev 2 8

Askari Info System Secure network

6.1 Market Demand

PREF-93/June, 2010/ Rev 2 9

Table 6-1 Market Demand

Table 6-2 Services Available in the Market

6.2 Opportunities in Market

PREF-93/June, 2010/ Rev 2 10

7.1 Managerial Best Practices

PREF-93/June, 2010/ Rev 2 11

7.3 Marketing Strategy

PREF-93/June, 2010/ Rev 2 12

PREF-93/June, 2010/ Rev 2 13

PREF-93/June, 2010/ Rev 2 14

PREF-93/June, 2010/ Rev 2 15

5. Computer Based Training (CBT) Applications

PREF-93/June, 2010/ Rev 2 16

10 MACHINERY & EQUIPMENT

10.2 Furniture and Fixture

PREF-93/June, 2010/ Rev 2 17

12.1 Project Cost

Table 12-2 Project cost break down

Table 12-3 Working Capital break down

PREF-93/June, 2010/ Rev 2 18

12.2 Project Financing

12.3 Project Viability

12.4 Proposed Business Legal Status

13.1 Revenue Assumptions

13.2 Operating Expenses Assumptions

PREF-93/June, 2010/ Rev 2 19

Entertainment 300 Per person 126,000

PREF-93/June, 2010/ Rev 2 20

14.1 Projected Income Statement

PREF-93/June, 2010/ Rev 2 21

14.2 Projected Balance Sheet