TechLahore

Lahore's under-construction Software Park tower.

Quite possibly. I started thinking along these lines when a hot-shot American investment banker friend mentioned that “70% of the US’ GDP is consumer driven”. That much, huh?! It’s no secret that THE key point of interaction for consumer businesses is now the web. In fact, most Web 2.0 companies are consumer focused, even as Web 2.0 technologies and concepts make inroads into the enterprise (aka Enterprise 2.0). The upshot of all this is that the consumers who drive the vast majority of the US GDP are now accessible by a company in Pakistan about as well as they would be were you based in the Bay Area. Exciting stuff! How meaningless market size calculations by geography have become! My TAM (total available market) is the WORLD.

There are a number of other things that have also happened that make it incredibly easy for a Pakistan  based company to appear to have a US or European identity. And let’s not fool ourselves, the facade of a US identity can be important for the US consumer. With Skype, Vonage or a variety of other VoIP services you can now have local US and European numbers with great call forwarding, IVR and essentially a Fortune 500 level phone interface with your customers. There’s no reason why you can’t sound exactly like Procter & Gamble do on the phone.

Obviously, the actual web presence piece is well understood and borderline easy. As long as you do a stellar job with design – in line or better than the norm that consumers in the US or Europe are used to seeing – visitors will emotionally identify with your product.

If you are delivering a service that’s grown very large or is very resource hungry, for instance audio search, high scalable hosted ERP or some-other-such, you now have access to cloud based infrastructure ala Amazon’s AWS (Amazon Web Services) Elastic Compute Cloud (EC2), GoGrid or Google’s AppEngine. You can build truly scalable, multi-datacenter services and can bring dozens or hundreds of servers online programmatically and instantly using this new cadre of application hosts. The great news is you pay-per-use for compute cycles, bandwidth and storage. Amazon’s rates are listed here, but in general, the point is that you can have an awesome datacenter without paying much at all and grow only on an as-needed basis. What an immense competitive advantage!

Finally, payment processing and even ad-based streams of revenue have become streamlined and incredibly easy to use. You can easily process credit card payments through a number of easy-to-setup gateways, or even services like Paypal. Sign up for Google’s Adsense program and though you won’t get the best CPM rates, there’s at least a scalable, reliable ad engine backed by a gargantuan ad inventory that’s ready to go the day your site is.

These services, cloud based infrastucture, ad engines, VoIP services, IVR systems, cheaper international call rates, less expensive bandwidth etc. all belong to the category of The Great Equalizers. In other words, they make your physical location immaterial. Your customer doesn’t know the difference between you being in San Francisco or Sialkot, Los Angeles or Lahore.

But I wasn’t just talking about “not knowing the difference”. That just means being at par. I want to talk about why it’s so much BETTER to run a Web 2.0 company out of Pakistan. The list of reasons is very long, but I’ll try to hit a few of the top ones.

First – and this is no surprise to any involved – costs. Between the Bay Area and Islamabad, Karachi or Lahore there is pretty much a 4-5X labour cost difference. Rents are around 1/4th. Communication costs are almost negligible; with calling cards and other VoIP services in Pakistan it is now possible to make a call from Lahore to California as if it were a local call.

Second, availability of labour. If you want an embedded systems engineer who can carve machine code onto a stone tablet with no reference manual handy, good luck finding him, whether in Pakistan or the US. If, on the other hand, you want AJAX/LAMP savvy developers with good exposure to App Servers, MVC architectures and databases, you can hire 5 in your first 10 days of recruiting in most Pakistani cities. You would be lucky to find 1 such resource in a month in Austin, San Mateo or Boston. The availability doesn’t absolve you of your leadership responsibilities; motivation, vision, direction, quality etc. but it certainly goes a LONG way in getting your project off the ground, cheaper, faster and with a better shot at “people scalability”.

Third, taxes. In Pakistan, you pay ZERO taxes on income earned from foreign sources as a result of exporting software or a software driven service. That’s right, ZERO taxes. That’s a huge financial incentive when combined with the absolutely free, 100% repatriation of income earned by foreign companies. You could be a Bay Area based company with a center in Pakistan. If the Web service you’ve deployed is being managed and billed-for out of your Pakistan entity then not only is the income going to the Pakistan entity tax exempt, it is also repatriatable at any time with no strings attached.

Lahore's marvellous College of Arts, the NCA

Fourth, AMAZING artistic talent. Pakistani art and artists are one of the country’s best kept secrets. Schools like the National College of Arts in Lahore produce better artists than I have seen in most western countries. I am an art collector and lover and I will boldy claim that Pakistan’s art scene and the talent that drives it are pretty much unparalleled when compared to any other popular offshoring destination. You might be interested in taking a look at this BBC article for more background on the art scene, but suffice it to say, the skillset is not limited to oil on canvas. It extends to Photoshop, Flash, GIMP and Illustrator. Instead of paying a king’s ransom to a California or Texas based identity development company, you can get in on the action for a fraction of the expense. Your logo, UI, look and feel, flash animations and ad creatives are such a key piece for your consumer focused Web 2.0 business. Being in Pakistan means you have a competitive differentiator in this area.

Fifth, a huge, but walled-off beta user pool. Pakistan is a great place to try out a new idea. People are generally comfortable with technology because almost 60% of the population is 18 or younger. We’ve already talked earlier about how cell phones have gone from 300K to over 90 million in just a few years. Inexpensive computers and increasingly ubiquitous connectivity mean that if you’re living in a city and are under 35, you’re pretty much computer savvy. Yet, despite all of this, Pakistan’s 160 million people remain the Internet’s Great Undiscovered Beta Lab. They are relatively walled off from your typical US consumer. If your idea fails in Lahore, you can learn from it before you do your US launch. On the other hand, if your idea bombs in the US, you’ll have to change your name, get a new hairdo, possibly tattoo your right bicep and launch a new company in a completely different industry before you can hope to wash yourself of the stench of a bad first impression. To seal the matter, a focus group in the US managed by a “human factors” company will cost between $25K and $50K whereas you can probably do the same in Pakistan for a fifth the cost and get a professor of psychology to help with the analysis!

Pakistan's youth are tech-savvy and about as "2.0" as you can possibly get.

Six, Seven and Eight. I could go on and on because I haven’t even started talking about my, “an eyeball is an eyeball” rule, or waxed poetic about the importance of family-support for the entrepreneur, or even stated my, “decent-sized-fish-in-a-medium-sized-pond” corollary. I tire myself expounding upon that which should be obvious to my frighteningly smart readership. Suffice it to say, if you are an entrepreneur considering starting a Web 2.0 company in Pakistan, smile. The stars are in alignment and today might just be your lucky day.