The import of used IT equipment has played a vital role in the nation’s development. The imported used and low cost computers are used by   IT educational institutions, middle class and lower middle class students and families. Likewise, hospitals, clinics, departmental stores and all types of small and medium size business enterprises, even all types of schools, even madrisas depend on used computers due to affordability for the middle and lower middle class.

By Abdullah Malik

The IT and Computer industry in Pakistan, despite having immense potential to grow, has been forced to struggle for its very survival due to ill-conceived and hostile official policies. Had the genuine issues of the industry would have been resolved; the country could have reap tremendous benefits, especially in regard with earning precious foreign exchange.     

It’s ironic that whenever, industry raises the genuine concerns at top decision making levels, some vested interest group derail the process by floating issues based on their vested interest. One of such issue has been raised by insensitive proposal to ban used IT equipment in Pakistan. The vested interest groups could not comprehend the fact that there are hundred of thousands of people are involved in used computer business.

Similarly, majority of people belongs to middle class and lower strata of the society can not afford a new computer at a price of 25,000 to 45,000/ and they opt for a used desktop PC at an average price of 5,000 to 10,000/-. The laptops market presents similar picture where  average price of a Dual Core new laptop in HP/Dell/Acer is around 45,000 to 55,000/- whereas the same in used is available at a price of 27,000 to 30,000/- and in Centrino technology even more cheaper upto 22,000/-.

We simply cannot ignore the fact that Pakistan is a third world poor country and majority of the people are living below the poverty line and it is not possible for them to afford a new PC. It has been observed that a great number of students and professionals are using these used computers and laptops. The initial users and beginners don’t need a hi-fi computer rather a normal low-end PC works fine for this purpose.

The import of used IT equipment has played a vital role in the nation’s development. The imported used and low cost computers are used by   IT educational institutions, middle class and lower middle class students and families. Likewise, hospitals, clinics, departmental stores and all types of small and medium size business enterprises, even all types of schools, even madrisas depend on used computers due to affordability for the middle and lower middle class.

The industry is aware of the fact that the used IT equipment is not more than three years old and it still have a functional life of 5+ years and all available software can be operated on these machines and fulfills business and education needs at a very low cost. Thus, resale of used/Refurbished PCs is not only popular in developing countries like Pakistan but also in the developed nations like USA, England, Europe, Canada and Australia are widely using these computers.

According to a conservative estimate, Pakistan can save a huge foreign exchange by encouraging used computers and IT equipment as used computer cost on an average is less than $40 as compare to the cost of new ranges from $300 to $600. Currently there is no indigenous production of IT equipment and its parts in the country. Therefore, import of such equipment by no means is threat to any local industry. As said earlier there are only assemblers, some are small one having one shop and some have big installation, but both are assemblers and nothing is produced in our country.

Not withstanding national needs and aspirations, some multinational firms engaged in computer hardware manufacturing are trying to get import of used IT equipment banned to make quick and big money. However, the sitting government ought to consider that any such ill-advised step would result in large public outcry and loss of precious foreign exchange.

The proposal of imposing any type of ban on used IT equipments is absolutely unnecessary as Pakistan is not producing / manufacturing any computer then what industry we are talking about:  there are only assemblers. As a matter of policy we should not look at someone's personal business or cartel of few companies, rather we should think about the wellness of majority, people at large and national interest.

--The writer is President of Pakistan Computer Association (PCA) Islamabad Chapter, a countrywide representative body of computer industry in Pakistan.

In a sharp reversal to extensive cutbacks in their U.S. workforces, Hewlett-Packard and IBM are opening service and support centers in three small towns across the U.S. that are expected to employ about 4,000 people in total.

State and local officials are ecstatic, the three communities are excited about the extended economic impacts of the sprawling new facilities and their skilled IT workforces, and both HP and IBM deserve the positive buzz surrounding these new facilities.

Like most people, I'd really like to see these new tech hubs work out beautifully for all involved, becoming economic-development magnets for the three communities, providing good wages for the few thousand workers who'll be hired, and sparking confidence within HP and IBM that each company could benefit greatly from opening more of these centers around the U.S.

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But. Is it really a good deal for everyone involved? And if it is, then how good: okay, solid, great, wonderful, or stupendous? After the ceremonial shovels have been put away and the ribbons have been cut and the paper-pushers go back to wherever they came from, will the local taxpayers see a real return on their investments? Will the employees find themselves doing challenging and valuable work? Will HP and IBM regard these facilities as potential incubators for bigger and better things to come, or will they turn out being largely symbolic sops to some P.R. strategy?

As I mentioned in a blog post last week about IBM's new center in Dubuque, Iowa, the new facilities appear to be great deals for everyone involved, at least judging by public comments. And IBM and HP have every conceivable right—indeed, to stockholders, the obligation—to negotiate aggressively with state, county, and local officials to win the most favorable terms they can get. In this seller's market, they'd be crazy not to: can you imagine any state or community around this country that wouldn't make every effort possible to land big, clean, snazzy new facilities housing high-tech workers and bearing the logos of two of the biggest and most-powerful and best-regarded companies in the world?

But let's step back a moment and take a less-frothy look at a few numbers:

IBM's Dubuque IT services center: It's expected to ultimately have almost 1,300 employees, with 600 to be hired by the end of this year and about the same number in 2010. A local report from IBM's announcement 17 months ago said IBM plans to invest $100 million in the facility, but offered no details on that investment. In return, IBM is expected to receive incentives from state and local governments in the range of $50 million. So, 1,200 jobs for $50 million—a good deal for all? We should all hope so. But if it's too much for Iowa and Dubuque taxpayers to expect their elected officials to come clean about the details, shouldn't they expect that a great company like IBM would be willing to be quite transparent about what it's giving and what it's getting? HP's Conway, Ark. center: This facility, scheduled to open December 20, is also expected to eventually create 1,200 jobs, but those will be phased in over four years with most jobs paying more than $40,000, according to comments officials have made. Hey, in this economy, every new job is precious, so I'm not knocking the HP plan. But as with IBM, HP could have gained a lot more public credit by being more forthcoming about what financial incentives it's getting from Arkansas and from Conway, and in return what commitment it's making to that community. Here's what I was able to learn from published reports: --The new 150,000-square-foot HP facility in Conway will be built by the Conway Development Corp. at a cost of $28 million, and will then be leased back to HP for an undisclosed amount. --$10 million more will come from Arkansas governor Mike Beebe's "Quick Action Closing Fund" and will be applied to "infrastructure." --The city of Conway committed to spend $2.2 million to "prepare" the site.

That's $40 million for 1,200 jobs phased in over four years—is that a good investment? Like the good people of Conway, I surely hope so. One person who definitely thinks it's an outstanding investment is HP vice president of government affairs Gary Fazzino, who said this in an ArkansasBusiness.com article:

"It is very clear why Arkansas is such a great place to do business: Business environment, skilled work force, outstanding educational system, high quality of life and a commitment by the state's political, business and educational leadership to aggressively seek out opportunities for economic growth," Fazzino said during the announcement. "These factors helped Arkansas earn its way to the top of the list of U.S. states for HP investment."

HP's Rio Rancho, New Mexico center: This 200,000-square-foot facility, slated to open in Spring 2010, is expected to eventually employ 1,300 workers, again phased in over a few years. And with all due respect to the wonderful people of Rio Rancho and the surrounding areas, everyone should be crystal clear in understanding why HP chose it for this new facility: in a January 7, 2009 article about HP officials coming to down for the ceremonial ground-breaking, KRQE.com wrote, "The Fortune 500 company said it chose Rio Rancho because of the tax incentives offered by the state."

Again, there's not a darned thing wrong about that—I'm not sure about you, but when I'm buying something of significant value, I tend to make the final price a very high priority. But what's the value of the incentives the state and city are giving HP, and what in return is the value of the investment HP is making in Rio Rancho with this beautiful new facility? Some details on Rio Rancho:

--Most of the 1,300 jobs will pay $45,000 and up, says the state Economic Development Dept. And the department knows that because the state is offering HP between $20 million and $30 million in "high-wage tax credits," according to a New Mexico Business Weekly article. Salaries must be at least $40,000 to qualify for the "high-wage tax credit, a state official said.

--In addition, the new HP facility will qualify for funds under the state's Job Training Incentive Program, which offers two juicy benefits to prospective employers: first, it provides classroom or on-the-job training for new employees; and second, it reimburses the employer up to 80% of trainees' wages for up to six months.

--New Mexico's governor originally pledged $12 million in "capital outlay" funds for the project, but a later report boosted that figure to $16 million.

So what's the upshot here? Within the next 12 months, more than 1,000 people will be hired by two of the world's most-admired companies to support global clients of HP and IBM. Over the next few years, that figure could approach a total of about 4,000 new jobs in the communities of Dubuque, Iowa; Conway, Arkansas; and Rio Rancho, New Mexico. That is fabulous news, and we can all hope that a couple years from now HP and IBM will be so impressed by the work being done in those locations that they decide to open several more around the U.S.

And if they do, I hope those two great companies will practice more vigorously the transparency they strive to provide for their global clients, and offer detailed breakdowns of the tradeoffs between communities desperate for jobs and private enterprises looking to provide the highest possible services at competitive costs.

In the meantime, here's a sampling of comments from officials in Dubuque, Conway, and Rio Rancho. And while I care a whole lot more about the individuals who will be competing for these jobs than I do for the bureaucrats working the levers, it's just about impossible not to be touched by the empassioned intensity in these voices so eager to bring jobs and stability and perhaps even prosperity to their communities.

And that, I think, is why I'm a bit ambivalent about what could be viewed as unconditionally wonderful news: because at stake here is more than just some haggling over price, or the specs of a product, or the elements of a business process. No, what is at play here is the livelihood and the dignity and the desperate hopes of individuals—4,000 of them—who deserve better than to be deployed as front-line players in a game in which neither they nor we know what the real score is. Have a look for yourself:

Iowa Governor Chet Culver: "I want to welcome IBM to Iowa, and thank them for bringing these 1,300 high-quality, good-paying jobs to our state. Today's announcement is one more sign that people around the country are discovering what we have known all along — that with our highly skilled workforce, inviting business climate, and quality of life, Iowa is a great place for business."

Arkansas Governor Mike Beebe: These are "the kind of jobs that represent increased earning capacity and wages for the needs and demands of families in today's society. It represents all those obvious tangible monetary benefits and all the surrounding corollary expansions that go along with it.

Maria Haley, executive director of the Arkansas Economic Development Commission: "It will bring high-tech, high-paying jobs to the state. And hopefully, it will bring back some of the people who left the state because they couldn't find quality jobs."

Mike Williams, deputy mayor of Rio Rancho: "I'm ecstatic. It is going to kick start the economy like nothing you would not believe. This is going to snowball the downtown area."

Congresswoman Heather Wilson, Rep-N.M., whose district includes a little of Rio Rancho: "This is a great fit. New Mexico and Rio Rancho are both leaders in technology. These are great jobs for the City of Vision and I look forward to welcoming HP to New Mexico."

"City of Vision"—I like that. May it turn out to be the whole truth?

Industry Outlook:  By Zahid Mahmood, Country Sales Manager, Pakistan for Acer Computers Middle East

The global financial crisis has had its impact on all industries, and hardware multinationals have certainly not been exempt. If anything, such companies can potentially be even more severely hit as they are viewed as a major cost investment during any solution. But the fact of the matter is this: any business that relies on a large network of channel partners and distributors can potentially be effective in enabling hundreds of job opportunities. And there’s more – you need hardware in order to be able to enable businesses to run. It wouldn’t be far from the mark claim that hardware has become part of the economic fabric that empowers people.

So when we spoke with Zahid Mahmood, Country Sales Manager of Acer in Pakistan, we were curious as to how the market conditions were influencing sales for such a strong brand. “Of course it is difficult, but these are tough times for everyone, everywhere. The frequently fluctuating dollar prices in the last quarter of 2008, followed by restricted IT budgets have made managing sales a serious challenge.”

But regardless of how unstable a market is, every company works through forecasts and market analysis based on past results. Pakistan’s buying trends have been on the rise in the past several years. The situation now, however, is extremely unpredictable. What can any company do with such unpredictable circumstances? “Well they will all sit down and analyze the results and indications, and then figure out how to shuffle things in order to get better results. In this scenario, of course we see where our resources are placed currently, how we can reshuffle them in order to get better results, and how we can ‘right-size’ the organizations in different territories to achieve the best outcome.”

Pakistan has been a very bullish market for technology growth over the course of the past 8 years. Zahid recalls that when he joined Acer, market trends in Pakistan were very positive. “Things were extremely encouraging,” he says. “Had they continued, I had every plan of bringing my management here by 2008 and having them open up a local entity. Pakistan makes a great hub for the region and setting up an assembly plant made sense.” Access into Afghanistan and Iran coupled with the low labor costs comparable to any other in the region made the country very attractive, but a bad 2008 created problems.

According to Zahid, challenges have to consistently be fought on ground and assurances need to be given to the international management consistently so to convince them that the potential in the Pakistani markets is great because other markets have already reached to the saturation. “You need to keep selling in the US or Europe but the potential to make a bigger impact is different here,” he says. Like a lot of the other company heads, Zahid shares the opinion that the dismal political and unstable security situation is the only two elements creating problems.

The Supply Chain
The exact areas where hardware solutions create the biggest impact can be pointed out by tracking sales and through analysis of newly created jobs. “When I joined Acer, there was no robust supply chain in place to facilitate customers, which impacted prices,” recalls Zahid. “I installed that supply chain in place for Acer and we brought down laptop prices to below the Rs.100,000 mark.” Using the regional expertise and supply chain management experience that Acer had, Zahid was able to ensure that the right products would be available at the right time to the customers. “We had a strategy of quick ordering and quick selling and we were able to bring the best products which made the dealers very happy to sell our quality at good prices.”

Affordability is a major issue identified by hardware distributors. If the consumer’s need can be matched with the price, he/she will become loyal to the brand.

Zahid was also able to bring in other changes within the Acer distributor network he set up. “There is a lot of competition and profit margins are usually the first thing that is cut by a store in order to make the sale,” he points out. “We helped our channel to grow by bringing in special incentive programs,” he goes on. The stock program for dealers throughout Pakistan was established from 2004, and this allowed Acer to rise in Pakistan. “Before that the buyers use to go to Dubai or Singapore to import a good product at reasonable prices,” Zahid says. But like everyone else, the recent 16% add-on GST on computer imports has put one more hindrance in a task which should have produced even more benefit for the local economy. “It hasn’t helped at all. And it isn’t about lesser sales,” he laments. “It’s about our local dealers. These are Pakistani businesses that are partnering with us. It is their sale and well being that is more at risk than ours.”

According to Zahid, the middle-man is very important in terms of keeping the channels healthy. “In Acer, we work very closely with both our distributors, and secondary channels,” he says. This results in ensuring stocks availability, and also ensuring that the prices remain inline with the regional costing and the cash flows. “A dealer wants a product that he can sell easily, and this is something that we need to arrange,” he says. “Also, in the second tier channel, we need people who can explain the features of our product and sell it at a premium price,” he adds.

In addition to making sure that stocks are available and making sure that pricing is available other in-sales and after sales support is something that the brand needs to supply to its channel partners in order to assure benefits for all stakeholders.

According to Zahid, brand exclusivity should not be something to be strived towards. “I shouldn’t tell the dealer to only sell Acer,” he says. “Customers should have all the brands available for them to choose and decide.” Quality of a product can not be judged unless it can be compared to other available brands.

Many in the industry would contend that Online Buying has not seriously taken off in Pakistan, and consumers in the country would be reluctant to use their credit cards for purchasing through the internet. One reason could be the lack of conviction that consumers have for their credit card information’s security. But according to Zahid, this is not the only reason, and Pakistan is not the only country facing it. “This has also has not taken off in Dubai, where there is no issue of credit card,” says Zahid. “I believe the reason to be more about the hardware consumer’s psyche, which dictates the consumers to not buy anything until that products can be seen, felt and touched,” he adds.

But on the other hand, the Online channel is something that can be aggressively pursued because the overheads are reduced for both the partner and dealers, as well as added simplicity for transactions to take place.

Facilitating to Learn and Teach
Zahid is greatly saddened by the state of the education sector in the country. He contends that despite the fact that a lot of money has gone into the improvement of the IT Education sector, not much of it is visible. “We saw organizations like the EGD and ITD spending money in 2006 in Lahore and Islamabad, but there has not really been much visionary activity,” he says. “ITD in few provinces has spent but they have only spent on locally branded computers, and as a result, the school labs are of no use after two years,” he adds. Without after sales service and support, Zahid contends, money is simply wasted.

Zahid gives the example of an order made out for schools in Peshawar. “I have come to know that there were 40 schools and half of them did not even have computer labs. The computers bought were still wrapped up in their storage, and needless to say, the PCs are now obsolete,” he says. He is more positive about the current decision makers in the government though. However, he still maintains that basic facilities and infrastructure needs to be brought to schools before they can make use of computers. “In the list of 4283 schools that we have in Punjab, there are few locations where electricity has not been provided for,” he points out. Along with the infrastructure, Zahid advocates an improvement of the education syllabi in the institutions.

“Once the basics have been provided for,” he says, “the computers will become increasingly beneficial.” Although the contribution towards improving education needs to come from all stakeholders, the government needs to play the biggest part. “There needs to be consistent monitoring mechanisms and evaluations, so we can be certain we are on the right path,” he says. “Accountability and transparency need to be the order of the day,” he adds.

Zahid maintains that if as Pakistanis we can move towards the achievement of these objectives, we will have done something great. “We can then safely say that we have done some thing for our future generations,” he says. “There has to be an end benefit to all deals made, and that has to be the key to business,” he adds.

Regionally, Acer has made many deals aimed towards improving infrastructure. “There has been work done in Jordon, UAE, Africa and Oman towards helping students,” he says. “As a manufacturer we can go to the cost level and even below cost level for such a beneficial initiative, but the government needs to be onboard,” he adds.

Economic Uncertainty
In the global economic uncertainty, there is definitely some hesitance in going for a project, but according to Zahid, it does not mean that a mutually fruitful venture can not materialize. He maintains though, that the key for a successful outcome needs to be to involve international brands.

An unstable environment though, means that costs need to be monitored. “Yes, when I talk about my cost I will consider the situation of the dollar,” he says. “What makes it interesting is that stakeholders expect that one quotation will stay the same in this environment, and that just can not be so, since the dollar is fluctuating everyday,” he goes on.

The uncertainty has affected the local companies more than their international counterparts. “Indeed, mostly our local companies have suffered. The GST is an added suffering for them,” he says. “They have no support from government. Yet, they are still working in the market and struggling, and that is admirable,” he lauds.

Despite the ongoing recession, Zahid remains hopeful that things will look start to pick up. “We believe that the first quarter of 2009 will certainly see an improvement,” he says. “But we are most hopeful about the final half of the year,” he adds. Let’s hope that Zahid’s positive outlook will indeed turn into reality.

Equivalent of PCA formed in Dubai after efforts of three years. The two-in-one article documents the efforts and the problems. The PCA can learn from this.