Lots of stuff will happen in 2012, but the world will not end. Sorry Mayans! (Image credit: TheAtlanticWire)

2012 is going to be a very interesting year. Elections are coming up in two very important countries, Pakistan (in early 2013) and the United States (2012). The US’ confrontation with Iran has both countries making threats and accusations and heading in a direction that seems to be escalatory. Further, the US has retreated from Iraq and violence there seems to be at an upswing. As someone said, the US-Iraq war is over. Iran won. Then, we also have the NATO drawdown in Afghanistan which has led to much drama and desperation on the part of the ISAF and NATO forces; as we predicted last year, the US is now openly saying that the Taliban are not a US enemy, the Taliban leader, Mullah Omar, has been removed from the FBI’s most wanted list and US diplomats are now negotiating with the Taliban with no preconditions. In that the Taliban have not laid down their weapons and continue to control over 75% of Afghan territory, these negotiations appear to be more about NATO giving in to the Taliban position and figuring out how to withdraw in haste than the opposite.

And that’s just the geo-strategic picture. Lots of exciting technology is going to be introduced also this year, and all eyes are on Europe and America as the economic troubles enter their fifth year. Will this finally be the bottom and will we start heading in the right direction? I thought this would have happened in 2011, but I was wrong. So, what happens in 2012? Read on to find out.

Political and Geo-strategic Predictions

1. The PPP government in Pakistan will not be removed. They may choose to go for early elections once the Senate elections are completed, but no other force (Army, PTI etc.) will compel them to leave office. This will be good as it sets the tone for a long running democratic dispensation which self-adjusts to find a workable solution to governance in Pakistan.

2. The PPP will pull off a successful senate election, strengthening the President.

3. Memogate will not lead to Asif Zardari’s resignation.

4. Mitt Romney will win the Republican nomination.

5. Romney will come pretty close to removing Obama, but Obama will scrape through. Personally, with all of Obama’s broken promises and false mantras of change, we would rather Romney win in his stead, not because we support Romney, but simply because we feel there should be some accountability for such a disastrous and damaging run in office.

6. The PTI will emerge as a political force post the next election, but nowhere near the numbers being claimed by Imran Khan who has suggested that it will be a Tsunami and will take an outright majority. Not even close.

7. 2012 will mark Pakistan’s strategic goodbye to America. There is still lots of discussion about whether regular business-as-usual relations between Pakistan and the US will resume, but we don’t think they will in the foreseeable future. In fact, the NATO massacre of Pakistani troops precipitated what had to happen anyway. Pakistan has simply had enough of the US pushing it around and asking for “more” when the US themselves, along with all their other allies, have done far less than Pakistan in prosecuting the WoT. The absolutely false claims of $20B in “aid”, which have been made repeatedly, have done nothing other than simply insult, irritate and anger both the Pakistani establishment and its populace. First off, it’s not as if this $20B was the figure of assistance for any single year. This paltry sum, which pales in comparison to the $600+B annual US defence budget, and the $1T+ spent on the lost war in Afghanistan, covers TEN years of supposed (and imaginary) assistance to Pakistan. Second, $20B have not actually been transferred, so the figure itself is nonsense. Third, the bulk of the money actually dispensed by the US has been for reimbursements, i.e. money ALREADY SPENT by Pakistan which the US OWES it. Fourth, the rest of this money has been spent through US agencies, contractors and mostly, on US goods. This means the effective value of every $1 spent by US AID is probably less than 25c of benefit to Pakistan. With the hefty, fees due to overpaid American consultants and vendors along with the unnecessary spending on transportation, very little actual benefit is accrued. In a nutshell, the real value of all US “AID” to Pakistan stands probably at 2-3% of the $80+Billion Pakistan has lost in the WoT. To top off the monetary exploitation, Pakistan has been bullied, the US press and media have been used as a veritable weapon in an unrelenting disinformation war against Pakistan and Pakistan’s interests (e.g. the IP(C) pipeline with Iran), on fundamental issues unrelated to the US or the WoT, have been repeatedly threatened. This simply cannot go on. We also believe that the death of this last US-Pakistan alliance will lead to Pakistan’s migration into the Asian camp, where it will work increasingly in concert with Russia and China in future, and will never again (at least for the next 30-50 years) consider an alliance with America.

8. Despite rumours, Gen. Pasha and Gen. Kiyani will not secure further extensions.

9. The bluster doesn’t past muster. The US will not attack Iran in 2012.

Technology Predictions

1. Windows 8 will be a significant force this year. It will rekindle interest in Windows as a consumer OS as a large number of tablets and phones will support it. 2012 is when Microsoft will really launch its counterattack against Apple, but unlike in the past, this will not be based on stealing marketshare from the iPhone, but grabbing as much interest from non-Smartphone and Blackberry users as possible. Windows Phone applications will touch 100,000 by the end of the year.

2. Microsoft will buy Nokia’s Smartphone division.

3. RIM had a terrible year, but the new Blackberry 10 products will begin to stop the bleeding. RIM still provides the most secure solution, and it is generating north of $5B in revenue every quarter, so it is a force to be reckoned with. There will be a lot of discussion around a RIM acquisition in 2012, but it will not happen.

4. Android will continue to grow at the expense of the iPhone and most of all, Symbian and RIM. In the end, though, we don’t quite understand what Android does for Google. In many respects, the fundamental desire Google had of owning the endpoint to ensure that access to its services would be smooth and uninterrupted, seems premised on the assumption that non-Google OSs somehow wouldn’t allow access (or at least, fair, open access) to Google. I am not sure this makes much sense, since Google services are available and used on all non-Android OSs. Either way, Android is definitely going to grow market share in 2012, probably by another 5-10 points.

5. Ultrabooks are going to be BIG this year. They will also, in concert with Windows 8, lead a PC renaissance which should stem Apple’s growth on the PC/Laptop side of the house. My gut tells me that Apple’s desktop/laptop marketshare will grow at 60-70% the rate at which it grew in 2011. Ultrabooks will put a dent…

6. The next iPad will come out with a) 2-3MP display resolution b) reduced entry level model price c) Siri integration d) dual core 1.2+Ghz processor. However, momentum for non iPad tablets will continue, especially with the advent of Windows 8 slabs. By the end of 2012, less than half of all tablets sold will be Apple iPads.

Financial Predictions

1. The KSE will post 10% growth this year. First, as explained below, the favourable USD-Rs. exchange ratio will make Pakistani stocks cheaper for foreign investors, and second, the continued reduction of WoT related violence inside the country will bring the stability necessary for growth in investor confidence. If it weren’t for 2012 being the run-up to an election and numerous political events punctuating the year (Musharraf’s return, court proceedings, PTI “jalsas”, Senate elections, pre-election politics and so on), this number would have been higher. In part, growth will also be helped by the beginnings of a global recovery in 2012.

2. The Pakistani Rs. will touch an exchange rate of Rs. 95 to $1 USD during the year. It may go as high as Rs. 100, but 95 is within reason. Some repayments to the IMF are coming up which will pressure the foreign reserve. We’ll get through it without all that much trouble, but a rise in the exchange rate can be safely assumed.

3. The Dow will show modest growth, around 5% for the year. The early part of 2012 will be marked with some optimism, with a dip hitting the middle of the year. The last few months of the year will show a recovery powered by fundamental improvements in economic indicators such as the unemployment rate, and some control over federal spending finally kicking in. The huge amounts of cash on corporate balance sheets also need to be spent at some stage and if 2012 looks safe, CFOs will let go of the purse strings, kicking off M&A and spurring some market growth.

4. Pakistan’s GDP will grow at about 4% during 2012.

5. There will be a reduction in the unemployment rate in the US, probably by about .3-.5%, ending at about 8.2% or so in December 2012.

6. Netsol touched a peak in 2011 and then fell to the ground in terms of stock value. 2012 will see improvement, but a peak of $1 is probably optimistic. Nonetheless, some money can be made on Netsol if it is bought around 40c and sold when it approaches 60-65c during 2012.

[Techlahore takes no responsibility for any financial projections or stock predictions. We are not advocating the purchase or sale of any security and are providing our opinions purely for general interest purposes. The reader assumes all responsibility for all his/her financial decisions, including the sale or purchase of any security.]

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TechLahore's 2011 predictions turned out to be the least accurate EVER! Hmph!

We’ve been publishing since 2007 and TechLahore is hence not exactly a “new” blog. As institutions age, they accrue tradition, and TechLahore is no different. Our December evaluations of the past year’s predictions have been happening now for the past several years. In January, we’ll follow-up with a new set of predictions for 2012.

Here are the past evaluations, in case you’re interested:

1. Evaluating TechLahore’s predictions for 2010
2. Evaluating TechLahore’s predictions for 2009
3. Evaluating TechLahore’s predictions for 2008

So, without further ado, let’s see how we fared this year:

Political Predictions

The parliament is not going anywhere. This PM may or may not last, but the Parliament is well on its way to completing its 5 years. I think it will navigate 2011 in tact. And if that happens, with less than a year to go in 2012, term completion will be well within sight and all but certain.

Spot on. The parliament is here and if the Army Chief’s recent statements are to be believed, no coup is in the offing.

The Congress Government in India will continue to get less popular and Mr. Manmohan Singh’s “clean” image will become a thing of the past. Corruption is going to be a massive story for India in 2011.

The Congress government has become a symbol of inefficiency and corruption in India. India has actually fallen further on the Transparency corruption index. Manmohan has lost the Mr. Clean image for sure. I’ll claim full credit here.

Mr. Obama will see an increase in his popularity rating. It currently stands at -12 according to the Rasmussen Reports. We’ll see how he ends the year up in 2011, but my guess is he could be close to neutral territory. This improvement will come from the improvement in economic conditions in 2011, as well as a greater willingness to work with the Republicans in the House.

Well, I was wrong on this one. Despite the fact that the Republicans were busy ripping each other apart, the Congress being a veritable ball and chain around the Presidency has resulted in a low approval rating. We said we’d use the Rasmussen Reports as our measure, and as per the latest poll in December 2011, Obama is still roughly where he started the year (-13).

Security and the situation in Northwest Pakistan

2010 saw a 35% reduction in the number of terror attacks. 2011 will continue that trend. There will be a close to 25% further reduction in the number of terror attacks. The reach of these attacks will, for the most part, stay limited to the Northwest. The Pakistan Army will make moves in the NWA region, but these will not be in the form of a full-fledged onslaught at the scale of the Swat operation.

According to the Pakistan Institute of Peace Studies, the number of deaths in 2011 fell by almost 40%! This was good news for Pakistanis, and in fact, the last half of the year saw an almost complete halt in terror attacks throughout the country. The few instances that did occur were limited to checkposts near or in the FATA areas.

NATO will begin to significantly ease up on operations in Afghanistan. They will still be there at the end of 2011, but will no longer be looking to aggressively take on the Taliban. Most of the fights between the two parties will occur as the Taliban attack NATO convoys, posts or bases. NATO may retaliate, but will not run a strategic campaign of any significance. 2011 is the year that will see an increase in outreach to Taliban and the beginnings of negotiating at a post-NATO agreement. The biggest priority for the US will now be negotiating an exit for themselves and NATO which will allow them to claim a victory, even though the reality will be far from it.

NATO has done almost nothing against the Taliban in Afghanistan. A couple of half-hearted thrusts here and there, with no real resolve for meeting any tangible goals. They have also talked about allowing the Taliban to setup an office in a Gulf state and have been engaged with negotiations with the so-called “enemy”. In fact, the only military action NATO engaged in this past year which made waves was an attack on two Pakistani checkposts, resulting in the martyrdom of 24 Pakistani soldiers. Viz the Taliban, the NATO mission in Afghanistan is pretty much finished. What remains is a negotiated settlement that allows the US room to depart without being chased.

2011 will see a reduction in the number of drone strikes in FATA, as compared to 2010.

The number of drone strikes this year was significantly less than last year. Here is the data.

Technology Predictions

Android will end 2011 as the dominant mobile platform. Apple will not be able to reverse the trend that began in 2010. I would predict that Android will go from its current 22.7% of the US smartphone market to close to 33%. Overall, while 30% of the current US population of cell phone users use smartphones, by the end of 2011, this 30% will grow to 45% at least. All these 2010  statistics are based on December estimates from Nielsen.

Hear hear! Android is now the defacto King of the mobile OSs. Android now accounts for 53% of smartphone shipments. I had said the US market share for Android will increase to 33%, and in reality, according to Nielsen it has gone past 42%. So I’ll take this one…

Tablets will be the major consumer device story in 2011. This shouldn’t come as a surprise. But non-Apple tablets will continue to increase their market share. Today, the iPad has 95% market share, but by the end of 2011, this will be reduced to 75%.

Yes and yes. Tablets were THE story of the year and non Apple tablets are now coming out the wazoo. As I had predicted, not only did the iPad’s market share fall, it fell a bit faster than I had predicted. According to IDC, it stands at 68% going into the holidays.

Mobile apps for phones and tablets will continue to attract more and more developer talent. I see 2011 ending with close to 700,000 apps available for all the major platforms. Currently, iOS and Android have about 400,000 apps between them and Blackberry probably another 12,000 or so. Windows Phone7 is so new, it hardly has any. By the end of 2011, you will likely see 400,000 iOS apps, 250,000 Android apps, 20,000 Blackberry apps and about 15,000 Phone7 apps. With tablet apps thrown in, this will get close to 700,000.

Apps grew much faster than even I had predicted. Apple announced that there are 500,000 iOS apps. Android stands at 250,000 apps. And Microsoft Phone7 is at 25,000. Blackberry hasn’t grown as fast, but net-net, the prediction I made of the total number of mobile apps exceeding 700,000 has come true. We are actually probably closer to a million than 750,000.

Pakistan’s software industry will see a good year. The momentum on the mobile development side will continue, and I see most of the established companies growing their teams and bringing on more talent. There are few metrics available to truly judge this, but we’ll pick a few leading illustrative cases in December 2011 and see how we fared.

Measured in almost every way, 2011 was a great year for Pakistani software. At APICTA, Pakistanis won more awards than ever before. Whereas 2010 saw one Pakistani mobile app make it to World #1, in 2011 there were two more. And the growth we are seeing has made many experts very hopeful. Current estimates suggest that we will exceed $10B by 2020.

Apple will launch the iPhone 5 this year, but it will be a defensive, bug fix kind of product rather than anything particularly innovative to help it leapfrog the numerous Windows Phone7 and Android devices hitting the market on a monthly basis. The biggest issue with the iPhone 4 was the antenna, and so the iPhone 5 will revolve around better antenna performance. Apple will do the usual dog and pony and claim that the iPhone 5 has the best designed antenna of any phone ever made etc. But in the end, the iPhone 5 will not succeed in stemming the tide of Android and Windows Phone7 phones. The important thing here is that 2011 will be the year of the commoditization of the Smartphone. There will be so many makes and models, with so many different OS choices that will offer basically equivalent functionality, that the market will start to make a shift towards the less expensive devices (i.e. Android).

I felt a shudder when I read that part about the new iPhone not being particularly “innovative”. Look at the new device. It wasn’t even a significant enough upgrade to merit the iPhone “5″ moniker. Apple stuck with 4S. And rightly so. The antenna issue is fixed, and other than the bundling of Siri, which was available as a free download for older iPhones prior to Apple’s acquisition of the company, there isn’t much to write home about. Android has left the iPhone in the proverbial dust. Yes, the iPhone is very much a market leader from an ease of use and proliferation of apps perspective, but Android phones now have faster radios, better screens, faster processors, more storage, better cameras and pretty much everything else.

We’ll learn a lot more about Windows 8 this year. While the central themes will be integration with the Cloud, make no mistake, this will be an honest-to-goodness PC operating system. It will showcase better visualization, add support for bigger, faster GPUs and will standardize 64-bit. We may see the first 128-bit mainstream OS among Windows 8′s several SKUs. No release in 2011 though, just more specificity on what the product will be and perhaps an alpha/CTP.

Windows 8 not only provides better visualization, it has an entirely reinvented Metro based UI for tablets. It does in fact standardize 64 bit and yes, there isn’t going to be a 2011 release. However, as predicted the CTP was launched this year. I’ll take this one… I was even right about it being an honest to goodness PC OS – one click and you’re back to the traditional Windows desktop.

Virtualization, which has commanded the enterprise IT airwaves since 2007-8, will begin to take a back seat to other trends. As services that were once virtualized start to migrate to the cloud and outsource PaaS infrastructures, the value of virtualization in the enterprise will diminish somewhat. Obviously, the level of adoption is tremendous so it will take some time to happen, but 2011 will be the turning point and this will become evident with the decreased “cool” factor and reduced coverage. On the desktop side, inexpensive PCs, numerous new form factors like tablets with native apps and cell phones equipped with projectors etc. will begin to chip away at the desktop virtualization value proposition. I don’t think this shift will be visible enough to most to cause a major reduction in, say, VMware’s stock price (hovering around $90 right now).

Cloud has overtaken the IT airwaves and while Virtualization remains a persistent meme, it is getting less airplay because it is becoming part of the “assumed” stack of capabilities. PaaS infrastructure has definitely grown, along with IaaS ala Amazon. Inexpensive PCs and tablets have been a core IT story throughout 2011, whether it be the Indian Akaash tablet, the Ainovo novo 7, the Amazon Kindle Fire or the about to be released Raspberry Pi. It’s all about sub-hundred dollar price points… So now let’s look at my VMware stock price prediction. I said there won’t be a huge increase because virtualization’s cool-factor will start to subside, but it won’t be significant enough to warrant a big price drop. Well, VMware stands at around $84 right now. A little less than last year, but just a little, as predicted.

Wateen and/or Warid will cease to be an independent operation in Pakistan. Their poor execution has cost them dearly. If it weren’t for the seemingly limitless capital available to them, they wouldn’t have survived as long as they have. They will likely be acquired by another major operator in the Pakistani market.

Wrong. Wateen is around. Crippled and in need of direction. But around.

Netsol stock on the NASDAQ (NTWK) will have a good year, with at least one close above $2.25 during the year.

Wrong. Netsol didn’t have a good year. I was right that it would close about $2.25, because it touched $2.39 in February. But it’s been a slide since then. So even though I was half right at least about the annual high, I won’t take this one.

Financial and Economic Predictions

Pakistan’s GDP will grow by at least 4%, likely 4.3%. The current estimates of two point some are utter nonsense.

Wrong. GDP was actually 2.37%, below what I had expected. Shucks.

The KSE will continue to rise. I expect it to benefit from the improvement in the global economic environment and the greater clarity in the regional strategic equation. I’m projecting an at-least 15% rise, but it could be as high as 25%. If it comes close to the latter, then we may approach KSE’s all-time highs in the 16K range!

Wrong. The KSE, along with world markets, declined. There was a high around 12,700 in January 2011, but the market trended southward given everything that has happened in the world from an economic standpoint this year. It ended the year about 4% in the red.

The US markets, the Dow and Nasdaq, will see an increase of about 8-10%.

Half right. The Dow went up by about 6%, but the Nasdaq declined by slightly less than 2%.

Job data will be watched super closely in the US. There will be some improvement this year, but I don’t think it will be very rapid. My estimate would say a .4-.6% reduction in the unemployment rate by the end of 2011.

Absolutely spot on. In Jan, unemployment was at 9%. By Nov 2011 it had declined by .4% to 8.6%.

The housing market in the US will begin a tedious, painful and slow journey to recovery. With properties having dropped anywhere from 30-70% over the last couple of years, this year will probably see a 5% increase in average home prices.

Wrong. While the housing market does appear to be turning around, it didn’t happen in 2011. There was probably a roughly 3% decline in average home prices across the US.

The Pakistani Rs. will see some weakening this year. It fought off pessimistic estimates of a drop to 100/$ but in 2011 we may see a 5% or so weakening with respect to the US$.

That’s just how it happened. Didn’t touch Rs. 100 to the dollar, but we’re at 90. So that does translate into a little over 5% weakening through the year.

Real estate prices will start to improve in Pakistan in 2011. More importantly, the number of deals being done will go up. I will use the index price of a 1 kanal plot in Gulberg, Lahore as an index when we revisit this in December 2011. The market price is currently at 1 crore 50 lacs.

This one is really hard to call. I have done a few informal tests with a few plots throughout the city and while there hasn’t been a decline, it’s not clear to me whether the asking price is something that is attracting buyers readily. I just don’t have enough data on this one to make a call. If you look at the lahorerealestate.com data for plots in Defence etc. the prices have risen just slightly.

So, where did we end up? 15 right (I’ll claim half credit for a couple) and 7 wrong. I think that might be the worst I’ve ever done. Most of where I fell short had to do with the economy in the US and Pakistan. Essentially, I was expecting a faster recovery than what has materialized. So what do I think will happen in 2012? Well, stay tuned for that post in January! Till then, HAPPY NEW YEAR!

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The best startup ideas from 2011 (Image credit: Blogsaays.com)

Rafe Needleman at C|net just published an interesting piece on the best startup ideas from 2011. Net-net, he says the following trends made it big through a variety of startups:

1) A focus on bringing technology to the physical world: Products that reach outside the digital realm and enable interactions with the physical world in interesting ways. Augmented reality anyone? Location awareness to tie the information experience with the physical? What about devices like medical monitors and other real world sensors that augment the digital experience?

2) Excellent design: This one is a no brainer. If Apple and Steve Jobs taught us anything it is that well designed trumps not well designed even if the more aesthetically appealing product lags behind on speeds and feeds. In 2012, we remain excited to see how some of Apple’s design philosophy gets “embraced and extended” with PC Ultrabooks. But Rafe’s point is not just about computer hardware. He makes a broader and completely accurate point about design now being super important for the success of a product – hardware or software.

3) Mining data: Both in the consumer and enterprise worlds, data is growing at unfathomable rates. On the consumer end, we have things like photographs, notes, documents, music and videos all moving into the cloud, needing to be searched and organized. And on the business side we have ever-increasing digitization of records and transactions, a larger number of surveillance cameras providing higher quality digital footage than ever before, automated supply chains, enterprise application integration, ERP implementations moving down the chain and into the cloud and so on. There is LOTS of opportunity to mine data and make sense of it.

4) Platforms: True, the platform concept is a tough sell as either a new idea or something that too many people can get off the ground. But if you can build a platform and make it succesful by developing a consumption and supply ecosystem around it, it sure as heck makes for a killer business model with lots of inherent barriers to competitive entry. Facebook, after all, is not necessarily the finest implementation of a social network – just the most powerful and adopted platform of all social networking properties. That’s why Google and others can’t unseat it so easily. Building platforms is IN fo’ sho’.

5) Putting people/consumers in touch with each other: A central theme in the information revolution is breaking down barriers to communication. Theoretically, the Internet puts everyone on earth in touch with any other fellow earthling. In reality, the contact needs to be brokered within a particular context (i.e. education, social networking, commerce and so on). Properties that put people in touch with others and create some value from that contact – whether by enabling consumer to consumer commerce, or learner to learner education – are hot.

What do you think are some additional hot idea memes that took off in 2011? What do you think will stay hot through 2012? We’d love to hear your views.

For more on this, directly from the horse’s mouth, visit C|Net.

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Whacksy Taxi is fun, well designed and another entrant in a growing line of successful apps made in Pakistan

Mindstorm Studios is a Lahore based gaming studio which rose to fame a couple of years ago with their brilliant Cricketing title for the PC, called “Cricket Revolution”. Their game, which we covered here at TechLahore, was so detailed and well crafted that they scored a contract with the International Cricket Council (ICC) to develop the official World Cup 2011 title. After these wins, Mindstorm decided to diversify beyond sports oriented games and launched some casual gaming apps for the Android and iOS platforms. Their current best seller is a well designed, fun to play title called “Whacksy Taxi”. This is a Breakout style game which plays at a dizzyingly fast pace and takes the gamer through a tour of various US cities, trying to avoid congested traffic in three lanes.

Here’s a video review by the popular gaming site, AppSpy:

www.youtube.com/watch?v=KKmkDlnBr-c

For more information on Mindstorm and their other exciting gaming titles, visit their website here.

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Hazardous Highway for Android by Pepper.pk has clocked more than 50,000 downloads in under 30 days

After their numerous BlackBerry successes, Pepper.Pk is now in the process of scoring another hit with their Android game, “Hazardous Highway“. The app just won a “Best App Award” from the Android review site, BestAppsMarket, and installs are rocketing. Here’s the install graph from the Android marketplace, which shows adoption over the past month, since the app was released, and presents a very pretty picture:

The download graph from the Android Marketplace shows that adoption has hit the "knee of the curve"

In response to Pepper.pk’s previous mobile application successes, they got a lot of feedback and requests to start developing more aggressively for the Android platform. Hazardous Highway is one of about a half dozen applications they currently sell on the Android marketplace. In comparison to their overall portfolio of 150+ applications, this is not all that significant, but hopefully over time, they’ll build out their Android portfolio further.

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Iran is now in possession of the most advanced US drone, the RQ-170 "Beast of Kandahar"

It seems to be drone season here at TechLahore! Right after we wrote about Pakistan’s Burraq UCAV, one of the hottest pieces of news that came out revolved around the downing or “forced landing” of a top secret US drone in Iran. The RQ-170, also known as “The Beast of Kandahar” was only deployed in late 2009 and represents the absolute cutting edge in American reconnaissance and autonomous drone/UAV technology. Early reports about the incident revolved around the debate of whether the drone had in fact been downed, what kind of drone it was, how it was downed and so on. It took several days for the facts to come to light. Initially, the US had declared via ISAF, that a drone “may” have “strayed” into Iran as a consequence of loss of control during a mission over eastern Afghanistan. On the face of it, this was a ridiculous position to take because it wouldn’t make sense for the US to use a stealth drone for missions over Afghanistan, a country over which it has complete airspace control. Following this, a US spokesperson explicitly confirmed that satellite pictures had shown the drone lay utterly destroyed and was hence not going to be useful to the Iranians. Then further tidbits of information started to come out. That in fact the drone was not operated by ISAF, but by the CIA. That in fact it was conducting a spy mission over Iran. And yes, that the drone was in tip-top shape and was, rather unfortunately, the vaunted RQ-170.

All this was rather embarrassing and quite reminscent of the May Day incident in 1960 when Nikita Khruschev’s Soviet Union shot down Francis Gary Powers’ U2 spy-plane. Interestingly, the Soviets held on to the wreckage for a day or so and let the Americans proclaim that the aircraft downed over the USSR was in fact a “weather balloon”. Once the U2 wreckage was shown, President Eisenhower had to back down from this position. But confidence was high in the US that Gary Powers would have either died, or would have taken the poison pill was he supplied with. Neither happened, and three days into the incident, Gary Powers was paraded in Moscow, leading to a very unfortunate situation for the US State Dept. By the way, if you are interested in learning more about the U2 incident, you should read Michael Beschloss’ excellent book on the subject, titled “May Day”.

But let us come to the topic we are exploring here today. Now that Iran has this drone, what US tech has possibly been compromised? What could the Iranians learn from this and what areas should the US now be super-careful about? Here’s what we think:

1. Airframe and low-observable design: While this is by no means the most important piece of information that can be gleaned from this drone, being in possession of a confirmed LO platform does allow someone to analyze it completely and replicate it. As far as the physical elements of design which contribute to stealth go, Iran should be able to get 100% of that information simply by observing, measuring and modeling this aircraft.

2. Materials: Reverse engineering many materials is entirely possible by studying their chemical composition. For example, RAM coatings. If the RQ-170 employs these, they should be analyzable and replicable given a reasonably advanced chemical industry, which Iran certainly has. It is not unreasonable to expect that Iran will be able to reverse engineer any chemical RAM coatings/”paint” used on the RQ-170.

3. Propulsion: There are two elements involved here; the engine itself, and the techniques used to reduce the engine’s heat/sound signature. Let me start by tackling the first. We don’t know how advanced the power plant in the RQ-170 is, but reverse engineering a complex jet engine may not be possible in a short timeframe. Would it be particularly important? Probably not, because the RQ-170 is not known for its high performance in terms of power or speed. Could Iran pass on information about the engine to the Russians and Chinese and let them study it for what that’s worth? Sure. But this should not be a particularly interesting subject for the Iranians in the RQ-170 context… to our minds, at least.

4. Techniques used for signature reduction: The RQ-170 design will likely employ numerous techniques to reduce the heat (IR) signature emanating from the engine or other active sources in the aircraft. It would also likely use techniques to reduce audio signature. Iran can definitely get a lot of value by studying the design, materials used and techniques employed to achieve this signature reduction. The Iranians have their own stealth project, the “Sofre Mahi”. This analysis could help them advance that stealth fighter development effort.

5. The actual audio signature of the RQ-170: This speaks more to detecting the presence of aircraft like the RQ-170 in future. For example, does the powerplant in the ’170 give off a particular “whine”, i.e. does it have a distinct audio signature? Depending on whether this is a high frequency, it could be possible to deploy audio sensors particularly tuned to listen for this pitch as a means for detection.

6. The all-aspect radar signature of the RQ-170: No design is perfect. There may be certain aspects which produce a higher signature than others. Now that Iran can study the full response profile of an RQ-170, it may learn more about how to detect these aircraft in future using radar configurations.

7. The cameras and sensors: This would be a huge asset for the Iranians in two ways. First, they will now know the exact capabilities of this surveillance platform in terms of resolution, light spectrum performance and numerous other aspects. This means they could plan on how to evade such surveillance. Because it takes a long time to develop new cameras which provide a quantum leap in capability, for some time, the Iranians will now know and understand the US state of the art. This might help them work around these capabilities for the foreseeable future. Second, if not in all respects, at least some pieces of the camera will be useful to Iran from a reverse engineering perspective. High quality optics and CCD sensors may be replicable only with assistance from China, but given the political realities of today, We can safely assume the Chinese will be leveraged in this case. The sensors are not just limited to cameras; legend has it that the RQ-170 can pick up chemical traces and can also intercept electronic communication. All these sensors would be a windfall not only because Iran can now learn how to avoid detection, but also due to the reverse engineering possibilities.

8. The transceivers: There will be numerous transceivers on board and each of these will give the Iranians lots of information that can be used to develop cyber warfare capabilities to neutralize US drones, and also the means to eavesdrop on US communications. For example, the satellite transponder will tell the Iranians exactly which frequencies are used by US drones for sat link-up. Could the Iranians develop balloon-based transmitters that “jam” or “spoof” these frequencies and deploy these over their own country, thus making it difficult for these drones to have a clean sat linkup? The Iranians will also discover the frequencies and methods used for line-of-sight control of these drones – these can similarly be useful to jam, confuse or otherwise take control of the drone. If the Iranians are to be believed, they have already mastered the art of the forced drone takeover, but being in physical possession of the transponders can only help them more. But what about encryption, you might ask. Hang on… I’ll get to that.

9. The algorithms: This is a tough one. One line of thought says that it would be impossible to extract any “code” from this platform. Perhaps. But another line of thinking says that the processors and controllers employed in military projects are not much different to those available commercially. Yes, they have much higher tolerances and quality standards, but a lot of the basic technology is the same. The RQ-170 would likely be full of programmed controllers which carry “firmware” or code that encapsulates various algorithms employed by the aircraft. For example, what does the aircraft do when sat link up is lost? Knowing these behaviours can help Iran advance their own drone and stealth programs, as well as understand how to foil the functioning of the RQ-170 and other US drones (it is likely that many of these control algorithms and “protocols” would be similar for many US drone types). But can the Iranians get to the “code”? Wouldn’t it be encrypted? Yes. It would be. But blackbox reverse engineering techniques can still be used where a certain set of inputs are applied and the output behaviour studied. You may not see the code, but you know what it does.

10. Encryption: This would apply both to the radio/satellite transceiver links as well as to any data or code stored on the RQ-170′s own systems. It is important to point out that just knowing specifically what kind of encryption is being employed, and being in possession of a “decoder”, i.e. the RQ-170, is going to help the Iranians, and possibly the Chinese. Recall that a big effort during WW-II involved the allies just getting their hands on an Enigma machine, the German encryption device. Will the RQ-170 be an “Enigma” for Iran or China? Obviously, the state of the art in encryption has advanced and it won’t be quite that simple. However, it is also important to point out that the Chinese are definitely in possession of equipment that poses a significant decryption threat. Take a look at the top 10 super computers and you’ll find that China was #1 until just a few months ago, and will be #1 again soon. The massive computational power required to decrypt at least some of the information assets aboard the RQ-170 might well be within China’s reach. Quantum computing, in particular, has shown that encryption is not as strong as once thought.

There are probably many more hidden secrets aboard the ’170, but in the interest of keeping this a “Top 10″ list, we’ll take a breather here and see how events unfold.

At the end of the day, we all just want peace and calm in the world. It’s not clear what man has ever achieved by going at his fellow man’s throat. Let’s hope things calm down globally and we can finally live in a peaceful world where Veena Malik’s antics are the only polarizing issue!

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Ally China is pursuing a number of UCAV projects. So is Pakistan...

Since the war on terror started in Afghanistan back in 2001, the United States Air Force has employed various different UAV platforms to target insurgents and the Taliban. Both on Afghan soil as well as in Pakistani territory, with the covert approval of the Pakistan government. Observing the efficacy of UAV platforms like the Predator, the Pakistani military establishment requested the United States to equip it with UAVs so that the war on terror could be prosecuted with more efficacy on the part of the Pakistani military. However these requests were denied repeatedly and America cited the potential use of these UAV platforms in military theaters outside the Afghan Pakistan border (i.e. India) as a flimsy excuse. Faced with these denials, but unwavering in its resolve to achieve its objectives, Pakistan undertook a domestic UAV development program. Even prior to Predator requisition requests being turned down, the Pakistani military had already invested in various autonomous target drones, built both by the private and public sectors. Here at TechLahore, we covered Pakistani drone developments a couple of years ago. In fact, we pointed out that the level of sophistication was such that – in a rather ironic twist -private Pakistani drone  manufacturers were exporting UAVs even to the United States homeland security department for oversight applications on the US-Mexico border.

Since then, much has happened. Pakistan entered into a deal with the Italian firm, Selex-Galileo, for the licensed production of fairly capable UAV aircraft at the Kamra Aeronautical facilities. In addition, the Pakistan Navy also acquired rotorcraft drones from foreign sources. Separately, the Pakistan Army has pursued partnerships with China and has incented local manufacturers to continue to develop more advanced platforms within the country. One of the more promising UCAV projects currently in progress in Pakistan is the Burraq armed drone. Burraq is envisioned as a high endurance, long-range, over the horizon, armed UAV aircraft. For the last four years it has been under development and rumors are now surfacing that it may be ready for deployment. At the recent Zhuhai airshow in China, in which the Pakistan Air Force participated with its JF-17 Thunder fighter aircraft, Chinese manufacturers also displayed miniaturized lightweight missiles that were particularly suited for carriage on a drone. Various parts of this sprawling Pakistani drone development program are coming together, in partnership with China – weapons development, control systems development, propulsion, airframe, ground stations and much else. The Burraq will only the first in a line of capable, armed Pakistani drones.

And soon. The Burraq, it seems, will be flying in early 2012.

Pakistan's locally produced Falco UAV was built in collaboration with Italy's Selex-Galileo. The Air Force is now looking to arm it with miniaturized missiles.

The Pakistani UAV program is a wonderful example of the breadth of technological capability that exists in the country, its ability to collaborate internationally without relying on problem-ridden dealings with America, and the benefits of investing in local development and local manufacturing as opposed to wiring a ton of money to a foreign country and importing somebody else’s equipment (Saudi Arabia style). As with the JF-17 Thunder fighter aircraft, Pakistan will discover that the flexibility of owning and running a domestically developed military platform allows unending customization, full control of capabilities, and absolutely no worries with regards to security or someone else knowing its true performance, or even inhibiting the capabilities by doctoring the IFF system or other internal electronics. Not only that, but for private technological firms based in Pakistan a program of this nature creates tremendous economic opportunity. A variety of different inputs, ranging from materials to software to optics to electronics and propulsion technologies are required to build a high-tech UAV. A sophisticated military program such as the Burraq will lead not only to an improvement in Pakistan’s defensive and offensive military capabilities, but also in significant benefits for the economy and local industry.

We hope that in future, with military programs such as Burraq, the continued development of the spectacularly successful JF-17 Thunder fighter aircraft and its various space technology ventures, Pakistan will continue to create domestic research and development capabilities which will ensure a brighter future for its people and a credible defense against any would-be aggressor.

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Mr. Bhandari says India's IT outsourcing future is not very bright

I’ve always wondered why India is having such trouble moving from IT enabled services into the product market. It has been obvious to every observer of the BPO ITeS market that wage based differentiation doesn’t amount to a long term, defensible competitive edge. There are two parallel threats – the first being the very high rates of inflation in developing countries such as India, which put strong upward pressure on local wages. And second, the emergence of other geographies that are willing to undercut traditional BPO/IT outsourcing destinations such as India.

Even though Indian IT companies have had more than two decades now to develop and mature, there isn’t really a single Indian product that one could name without delving deep and “discovering” it deliberately. The brand recognition and market presence simply doesn’t exist for Indian products thus far. Then there’s the perception of India being primarily a “body shop”. This may be an unfair description, but as with all brand development challenges, it needs to be addressed. Thus far, I don’t see it happening. Perhaps what is needed is for an Indian IT services giant to acquire a western software company with an already established product brand. Short of this, I don’t see how India stays competitive in the long term.

In his take on the future of India’s ITeS industry future, Mr. Ramesh Bhandari expresses the same view quite strongly. He also cites other emerging destinations that are beginning to have a significant impact on ITeS outsourcing to India. Take a look.

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Bustling cities like Cape Town, South Africa, hold a lot of promise for Pakistani IT companies

Pakistan and South Africa have a connection dating back at least 150 years. During colonial times, a large number of people from the sub continent moved to South Africa to work and find business opportunity. Today, there is a significant presence of Muslim South Africans in the business community in that country and people of Sub-continental decent – including those from modern-day Pakistan – are doing very well socially and economically. Since the end of Apartheid, South Africa has entered the comity of nations and has been welcomed by all. In fact, their post-Apartheid reconciliation process and the peaceful manner in which internal conflict was ended is used as a modern-day example of good sense, peacemaking and humanitarianism.

Along with its newly restored international standing and reputation, South Africa has also emerged as a business destination. There has always been a very strong tradition of technological development in the country. During the period they were under sanctions, South Africans achieved numerous technical feats, including their own nuclear programme, the development of high performance aircraft such as the Cheetah, and the continued growth of impressive R&D firms such as Denel. 

Today, South Africa presents rich opportunities for business-people seeking to expand to international markets or forge partnerships at a global level. With per-capita income at over $10,000, a population of about 50 million and rising HDI indicators, South Africa is definitely going places. While there are some lingering issues with crime in parts of the country, cities like Cape Town are incredibly popular tourist hotspots for people from all over the planet.

Traditionally, IT companies in Pakistan have not really looked at South Africa as a strategic destination. However, this may no longer be the case. In a recent interview, Naseer Akhtar, CEO of Lahore-based InfoTech, shared his experience in the country and encouraged other Pakistani entrepreneurs to consider expanding to South Africa. There has been some technology collaboration between Pakistan and South Africa over the last decade, but this has been limited primarily to the defence sector. It would be great to see the partnership develop further and expand into areas of wider economic importance, such as ICT. For South Africa, this would mean access to Pakistan’s developing market, with 180 million people, and access to some incredible talent. And for Pakistani businessmen such a partnership would provide an entry to a middle-income country with a sizeable population and a strong R&D base.

If you have had experience working with South African IT companies, or serving the South African market, do share in the comments section below. In the meanwhile, we’ll stay tuned on future developments in this area.

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Karachi's beautiful Sheraton hotel was the venue for P@SHA's 2011 Information Technology Awards

A big shout out to Jehanara, President of the Pakistan Software Houses Association (P@SHA), and her management team for organizing a brilliant event last night at Karachi’s gorgeous Sheraton Hotel.

The 8th Annual P@SHA’s ICT (Information and Communication Technology) awards were wonderfully organized, fairly judged and brilliantly presented. The tremendous momentum and growth of Pakistan’s IT industry is plain for all to see and this Awards ceremony is a great showcase. Each year, the entries have been getting more and more sophisticated and wide ranging. A fair number of new companies have been recognized in the 2011 Awards which bodes well for the industry’s future.

If you’d like to check out the list of winners and learn more about the awards, you should click on over to the official P@SHA Awards website.

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