Provision of Software Services/Products to Home Users

Feasibility Study
Muhammad Kashif Arslan E/M-SPR10-014

1 EXECUTIVE SUMMARY ................................ ................................ ................................ .... 1 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 61 . 6.2 MARKET DEMAND................................ ................................ ................................ ................................ ................................ .................... 9 OPPORTUNITIES IN MARKET ................................ ................................ ................................ ................................ 10 ......

7 QUALITY MANAGEMENT ................................ ................................ ............................... 11 71 . MANAGERIAL BEST PRACTICES ................................ ................................ ................................ .............. 11 7.2 OBJECT ORIENTED DESIGN AND QUALITY ASSURANCE ................................ ................................ ..............11 7.3 MARKETING STRATEGY................................ ................................ ................................ ................................ ...............12 8 PRODUCT/SERVICE ................................ ................................ ................................ ......... 12 8.1 S ERVICES ................................ ................................ ................................ ................................ ....................... 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 12.2 12.3 12.4 PROJECT COST ................................ ................................ ................................ ................................ ................................ ......................... 18 PROJECT FINANCING ................................ ................................ ................................ ................................ ..................... 19 PROJECT VIABILITY ................................ ................................ ................................ ................................ .... 19 PROPOSED BUSINESS LEGAL STATUS ................................ ................................ ................................ ................... 19

13 ASSUMPTIONS ................................ ................................ ................................ ............................. 19 13.1 R EVENUE ASSUMPTIONS................................ ................................ ................................ ................................ ............. 19 13.2 OPERATING E XPENSES ASSUMPTIONS ................................ ................................ ................................ .................... 19 13.2.1 Working Capital Assumptions ................................ ................................ ................................ .......... 20 13.2.2 Accounting Depreciation on Assets ................................ ................................ ...................... 20

i ii

13.2.3 Debt Assumptions ................................ ................................ ................................ ............................... 20 13.2.4 Miscellaneous Assumptions ................................ ................................ ................................ .. 20 14 FINANCIAL PROJECTIONS ................................ ................................ ................................ ...... 21 14.1 PROJECTED INCOME STATEMENT ................................ ................................ ................................ ................................ ................21 14.2 P ROJECTED B ALANCE S HEET ................................ ................................ ................................ ........................ 22 14.3 P ROJECTED C ASH FLOW STATEMENT................................ ................................ ................................ .......... 23 15 ANNEXURE ................................ ................................ ................................ ................................ ... 24 15.1 A NNEXURE 1 PROJECT COST AND MEANS OF FINANCING ................................ ................................ .............24 15.2 A NNEXURE 2 REVENUE GENERATION ................................ ................................ ................................ ........ 25 15.3 A NNEXURE 3 LIST OF FIXED ASSETS ................................ ................................ ................................ ................................ .........26 15.4 A NNEXURE 4 S TAFF S ALARIES ................................ ................................ ................................ .................... 27 15.5 A NNEXURE 5 IMPORTANT C ONTACTS ................................ ................................ ................................ ......... 28 15.6 A NNEXURE 6 T AX DEDUCTION INCOME SLABS................................ ................................ ......................... 30

DISCLAIMER
T h e p u r p o se a n d sc o p e o f t h is in fo r ma t io n me mo r a n d u m is t o in t ro d u c e t h e su b je c t ma t t e r a n d p ro v id e a g e n e r a l id e a a n d in fo r ma t io n o n t h e sa id a r e a . A ll t he ma t e r ia l in c lu d e d in t h i s d o c u me nt is b a se d o n d a t a / in fo r m a t io n g a t h e r e d fr o m v a r io u s

so u r c e s a n d is b a se d o n c e rt a in a s su mp t io n s. A lt h o u g h , d u e c a r e and d il ig e n c e ha s been taken to c o mp ile t h is d o c u me n t , t h e

c o nt a in e d in fo r ma t io n ma y v a r y d u e t o a n y c h a n g e in a n y o f t h e c o n c e r n e d fa c t o r s, a n d t h e a c t u a l r e su lt s ma y d if fe r su b st a nt ia ll y fr o m t h e p r e se nt e d in fo r ma t io n . M K A d o e s n o t a s su me a n y l ia b i l it y fo r a n y f in a n c ia l o r o t h e r lo s s r e su lt in g fr o m t h is me mo r a n d u m i n c o n se q u e n c e o f u n d e rt a k in g t h is a c t iv it y. T h e p ro sp e c t iv e u se r o f t h is me mo r a n d u m is e n c o u ra g e d t o c a r r y o u t a d d it io n a l d il ig e n c e a n d g a t h e r a n y in fo r ma t io n h e / s h e fe e ls n e c e s sa r y fo r ma k in g a n in fo r me d d e c is io n .

1 INTRODUCTION F o r e ig n- b a se d c o mp a n ie s h a v e e nt e r e d a r e c o v e r y p h a se a n d st a rt e d o u t so u r c in g t h e ir mu lt ip le se r v ic e s t o the IT and I T-e n a b le d

c o mp a n ie s o f v a r io u s c o u nt r ie s. P a k ist a n h a s p o t e n t ia l t o g r a b it s s h a r e in I T -e n a b le d se r v ic e s ma r k e t a s w e ll a s c o n t r ib u t e t o w a r d s p ro v id in g so ft w a r e a p p lic a t io n s t o v a r io u s d e v e lo p e d c o u nt r ie s. T h e d e ma n d is e x p e c t e d t o flo u r is h in t h e u p c o m in g ye a r s. M a n y c o u nt r ie s p r e fe r o u t so u r c in g fr o m P a k ist a n b e c a u se o f t h e lo w e r c o st o f ma n p o w e r a n d a d v a n c e d t e c h n o lo g ic a l in fr a st r u c t u r e . T h i s e n a b le s t h e I T se c t o r t o b r in g in g o o d in v e st me n t o p p o rt u n it ie s in t he c o u nt r y. T h is w i ll a lso be he lp fu l in ma k in g mo r e jo b

o p p o rt u n it ie s in P a k ist a n . H i s t o ry T h e w o r d " so ft w a r e " h a d b e e n c o in e d a s a p r a n k b y a t le a st 1 9 5 3 , b u t d id n o t a p p e a r in p r int u n t il t he 1 9 6 0 s. Be fo r e t h is t i me , c o mp u t e r s w e r e p ro g r a m me d e it h e r b y c u st o me r s, o r t h e fe w c o m me r c ia l c o mp u t e r v e n d o r s o f t h e t i me , su c h a s U N I V A C a n d I B M . T h e fir st c o mp a n y fo u n d e d t o p ro v id e so ft w a r e p ro d u c t s a n d se r v ic e s w a s Co mp u t e r U sa g e Co m p a n y in 1 9 5 5 . T h e so ft w a r e in d u st r y e x p a n d e d in t h e e a r ly 1 9 6 0 s, a l mo st im m e d ia t e ly a ft e r c o mp u t e r s w e r e fir st so ld in ma s s -p r o d u c e d q u a n t it ie s. U n iv e r s it ie s, g o v e r n me n t , a n d b u s in e s s c u st o me r s c r e a t e d a d e ma n d fo r so ft w a r e . M a n y o f t h e se p ro g r a m s w e r e w r it t e n in - h o u se b y fu l l-t i me st a f f p ro g r a m me r s. S o me w e r e d ist r ib u t e d fr e e ly b e t w e e n u se r s o f a p a rt ic u la r ma c h in e fo r no charge. Ot hers were do ne on a c o m me r c ia l b a s is , a n d o t h e r fir m s su c h a s Co mp u t e r S c ie n c e s

Co r p o ra t io n ( fo u n d e d in 1 9 5 9 ) st a rt e d t o g ro w . T h e c o mp u t e rma kers st a rt e d b u n d l in g o p e r a t in g s y st e m s so ft w a r e and p ro g r a m m i n g e n v ir o n me n t s w it h t h e ir ma c h in e s. W h e n D ig it a l E q u ip me n t Co r p o r a t io n b r o u g h t a re la t iv e ly lo w p r ic e d m ic r o - c o mp u t e r t o ma r k e t , it b r o u g ht c o mp u t in g w it h in r e a c h o f ma n y mo r e c o mp a n ie s a n d u n iv e r s it ie s w o r ld w id e , a n d it sp a w n e d g r e a t in n o v a t io n in t e r m s o f n e w , p o w e r fu l p r o g r a m m in g la n g u a g e s a n d me t h o d o lo g ie s. N e w so ft w a r e w a s b u ilt fo r m ic r o c o mp u t e r s, a n d o t h e r s, in c lu d in g I B M , fo llo w e d D E C s e x a mp le q u ic k ly, r e su lt in g in t h e I B M A S 4 0 0 a mo n g st o t h e r s. T he in d u st r y e x p a n d e d in t h e g r e a t ly w it h t h e r ise o f the c o mp u t in g p e r so n a l to the

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d e sk t o p o f t h e o ff ic e w o r k e r. I n su b se q u e n t ye a r s, it a lso c r e a t e d a g ro w in g ma r k e t fir st fo r g a me s, a p p lic a t io n s, pro duct, and u t il it ie s. DOS,

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o p e ra t in g s y st e m a t t h e t i me . I n t h e e a r ly ye a r s o f t h e 2 1 st c e n t u r y, a n o t h e r su c c e s s fu l b u s in e s s mo d e l h a s a r ise n fo r h o st e d so ft w a r e , c a lle d so ft w a r e a s a se r v ic e , o r S a a S ; t h is w a s a t le a st t he t h ir d t i me t h is mo d e l h a d b e e n a t t e mp t e d . S a a S r e d u c e s t h e c o n c e r n s a b o u t so ft w a r e p ir a c y, s in c e it c a n o n l y b e a c c e s se d t h ro u g h t h e W e b , a n d b y d e fin it io n n o c lie nt so ft w a r e is lo a d e d o nt o t h e e n d u se r 's P C S o ft w a re se c t o rs T h e r e a r e se v e r a l t yp e s o f b u s ine s se s in t h e so ft w a r e in d u st r y. I n fr a st r u c t u r e so ft w a re , in c lu d in g o p e ra t in g s y st e m s, m id d le w a r e

a n d d a t a b a se s, is ma d e b y c o mp a n ie s a n d o r g a n iz a t io n s su c h a s L in u x , G o o g le , M ic r o so ft , IBM, S y b a se , E M C, O r a c le and V M W a r e . E n t e r p r ise so ft w a r e , t h e s o ft w a r e t h a t a u t o ma t e s b u s in e s s p ro c e s se s in fin a n c e , p ro d u c t io n , lo g ist ic s, sa le s a n d ma r k e t in g , is m a d e b y O r a c le , S A P A G , S a g e a n d I n fo r . S e c u r it y so ft w a r e i s m a d e b y t h e lik e s o f S y ma n t e c , T r e n d M ic r o a n d K a sp e r sk y. S e v e r a l in d u st r y- s p e c ific so ft w a r e ma k e r s a r e a lso a mo n g t h e

la r g e st so ft w a r e c o mp a n ie s in t h e w or ld : S u n G a r d , ma k in g so ft w a r e fo r b a n k s, B la c k Bo a r d ma k in g so ft w a r e fo r sc h o o ls, a n d c o mp a n ie s lik e Q u a lc o m m or C y b e r V is io n m a k in g so ft w a r e fo r t e le c o m c o mp a n ie s. O t h e r c o mp a n ie s d o c o n t ra c t p ro g ra m m i n g t o d e v e lo p u n iq u e so ft w a r e fo r o n e p a rt ic u la r c lie nt c o mp a n y, o r fo c u s o n c o n fig u r in g a n d c u st o m iz in g su it e s fr o m la r g e v e n d o r s su c h a s S A P o r O r a c le . T h is se c t io n d o e s n o t c it e a n y r e fe re n c e s o r so u rc e s. P le a se h e lp i mp r o v e t h is se c t io n by a d d in g c it a t io n s t o re lia b le so u r c e s. U n so u r c e d ma t e r ia l ma y b e c h a l l e n g e d a n d r e mo v e d . ( Ja n u a r y 2011) Le a d i n g c o m p a n i e s: m i n d s h a re a n d m a rk e t sh a re I n t e r m s o f t e c h n o lo g y le a d e r s h ip , t he so ft w a r e in d u st r y h a s lo n g b e e n le d b y I B M . H o w e v e r , M ic r o so ft b e c a me t h e d o m in a n t P C o p e ra t in g s y st e m s u p p lie r . O t h e r c o mp a n ie s t h a t h a ve su b st a nt ia l m i n d s h a r e ( n o t : ma r k e t s h a r e ) in t h e so ft w a r e in d u st r y a r e S U N M ic r o s y st e m s, t h e d e v e lo p e r o f t h e Ja v a p la t fo r m ( p u r c h a se d b y O r a c le in 2 0 0 9 ), Re d H a t , fo r it s o p e n so u r c e mo me n t u m, a n d G o o g le fo r it s G o o g le D o c s. H o w e v e r in t e r m s o f r e v e n u e s c o m in g fr o m so ft w a r e sa le s, t h e so ft w a r e in d u st r y is c le a r ly d o m in a t e d b y

M ic r o so ft , s in c e in c e p t io n . M ic r o so ft p ro d u c t s a re st ill so ld in la r g e st n u m b e r a c ro s s t h e g lo b e . S i ze o f t h e i n d u st ry A c c o r d in g t o ma r k e t r e se a r c h e r D a t a M o n it o r, t h e s iz e o f t h e

w o r ld w id e so ft w a r e in d u st r y in 2 0 0 8 w a s U S $ 3 0 3 . 8 b il l io n , a n in c r e a se o f 6 . 5 % c o mp a r e d t o 2 0 0 7 . A me r ic a s a c c o u nt fo r 4 2 . 6 % o f t he g lo b a l so ft w a r e ma r k e t 's v a lu e . D a t a M o n it o r fo r e c a st s t h a t in 2 0 1 3 , t h e g lo b a l so ft w a r e ma r k e t w i ll h a v e a v a lu e o f U S $ 4 5 7 b il lio n , a n in c r e a se o f 5 0 . 5 % s in c e 2 0 0 8 . M e rg e rs & A c q u i si t i o n s T h e so ft w a r e in d u st r y h a s b e e n su b je c t t o a h ig h d e g r e e o f

c o n so lid a t io n o v e r t h e p a st c o u p le o f d e c a d e s. F r o m 1 9 8 8 t o 2 0 1 0 , 4 1 '1 3 6 me r g e r s a n d a c q u is it io n s h a v e b e e n a n no u n c e d w it h a t o t a l k n o w n v a lu e o f 1 '4 5 1 b i l. U S D . T h e h ig h e st n u m b e r a n d v a lu e o f d e a ls w a s se t in 2 0 0 0 d u r in g t h e h i g h t i me s o f t h e in t e r n e t b u b b le w it h 6 '7 5 7 t r a n sa c t io n s v a lu e d a t 4 4 7 b i l. U S D . I n 2 0 1 0 , 1 '6 2 8 d e a ls w e r e a n n o u n c e d v a lu e d a t 4 9 b il. U S D . B u si n e s s m o d e l s t h e so ft w a re i n d u st ry B u s in e s s mo d e ls of so ft w a r e c o mp a n ie s h a ve been w id e l y

d isc u s se d . N e t w o r k e ffe c t s in so ft w a r e e c o s y st e m s n e t w o r k s o f c o mp a n ie s a n d t h e ir c u st o me r s a r e a n i mp o r t a n t e le me n t in t h e st r a t e g y o f so ft w a r e c o mp a n ie s.

1E E

E SUMMARY

Thi th l

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that

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at

a l a n d e x p o r t ma r k e t

T h e c o mp a n y s c o r p o r a t e o ff ic e w il l

b e o p e n e d in C a nt t L a h o re , P a k is t a n. T h e S o ft w a r e H o u s e w il l p ro v id e a u t o ma t e d and I n fo r ma t io n T e c h n o lo g y (IT) e n a b le d

s o lu t io n s c a t e r in g t o b u s in e s s e s a c ro s s v a r io u s v e r t ic a ls in P a k is t a n , M id d le E a st , U K a n d U S A. T h e S o ft w a r e H o u s e w i ll h a v e I T s p e c ia lis t s w it h r e la t iv e ly le s s in d u s t r y e x p e r ie n c e a n d k n o w le d g e . T h e c o mp a n y w il l o f fe r a w id e r a n g e o f c o s t e f fe c t iv e d e v e lo p m e nt o f c u s t o m i e d a p p lic a t io n s o ft w a r e s . I n a d d it io n t o t h is , t h e fo c u s o f t h e fir m w i ll b e t o b e c o me a mu lt i d i me n s io n a l t e c h n o lo g y c o mp a n y d e r iv in g r e v e n u e a n d c u s t o me r s a t is fa c t io n fr o m a v a r ie t y o f I n fo r ma t io n T e c h n o lo g y s e r v ic e s and custo m S yst e ms s o ft w a r e B u s in e s s o ffe r in g s in c lu d in g T e c h n o lo g y D e v e lo p me n t , and O u t s o u r c in g , P ro c e s s e s I n t e g r a t io n , Ap p l ic a t io n

C o n s u lt in g ,

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I n fo r ma t io n S e c u r it y Co n s u lt in g a m o n g o t h e r s . T h e e st i ma t e d c o s t o f t h e p ro je c t is R s .2 . 3 m i l lio n . T h e p ro je c t is p ro p o s e d t o b e f in a n c e d t h r o u g h 5 0 % d e bt a n d 5 0 % e q u it y. T h e p ro je c t N P V is a ro u n d R s . 2 . 8 2 m i l lio n , w it h a n I R R o f 4 3 . 5 % a n d p a y b a c k p e r io d o f 3 . 3 5 ye a r s fo r a w o r s t c a s e s c e n a r io. T h e p ro je c t w i ll b e r u n b y q u a li f ie d p ro fe s s io n a ls . T h e le g a l b u s in es s st a t u s o f t h is p r o je c t is p r o p o s e d a s S o le P r o p r ie t o r s h ip .

I I. P R O J E C T B A C K G R O U N D A N D B A S I C I D E A

T h e r e a re q u it e a fe w h u n d r e d s o f so ft w a r e h o u se s in P a k ist a n a n d t he c o u n t is in c r e a s in g r a p id l y. T h e se so ft w a r e h o u se s a r e w o r k in g t o ma k e P a k ist a n a b r ig h t ma r k in t h e w o r ld o f I T . T h e y a r e p ro d u c in g p ro c e s se s ma n y of u se fu l pro ducts w h ic h and ha ve a lso mo d e r n iz e d in c r e a se d the t h e ir

t ra d it io n a l

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p ro d u c t iv it y. A s w e se e , c o mp u t e r h a s b e c o me a s ig n i f ic a n t p a rt o f e v e r y w a lk o f o u r liv e s a n d ma n y p ro c e s se s h a v e b e c o me a u t o ma t ic n o w . A ll t h e b ig s h o p p in g ma ll s h a v e c o mp u t e r iz e d b i ll in g s y st e m n o w . A l mo st e v e r y o r g a n iz a t io n k e e p s it s d a t a in c o mp u t e r iz e d fo r m. Co mp u t e r a n d in t e r n e t a w a r e n e s s is a lso in c r e a s in g a n d t h e t re n d o f e -c o m me r c e is e me r g in g f a st . P e o p le , w h a t e v e r fie ld t h e y b e lo n g t o , c o n su lt in t e r n e t fo r a n y q u e r ie s w h ic h c o me in t o m in d .

Substantial IT companies region-wise: Karachi Islamabad/Rawalpindi Lahore Other regions Foreign IT and telecommunication companies Number of CMMI-assessed companies: CMM Level 5

611

479 544 105 60

CMMI Level 5 CMMI Level 3 CMMI Level 2 Total industry size IT and IT-enabled services exports Percentage growth in exports (2009-2010) IT graduates produced per year Export targets for fiscal year 2010-2011 Number of institutes offering IT/CS programs IT professionals in export-oriented activities IT professionals employed in Pakistan Space utilized in IT & Software Technology parks

2 3 16 US$ 2.8 billion US$ 1.4 billion 19% Approx. 20,000 US$ 350 million 110 More than 15,000 110,000 11 parks covering 750,000 sq ft

B a s ic id e a b e h in d t h is p r o je c t is t o d e v e lo p s ma l l a p p lic a t io n s t h a t h a v e b ig g e r ma r k e t s a n d mo st ly ig n o r e d b y mo st o f t h e so ft w a r e h o u se s. V e r y s ma l l a p p lic a t io n s w il l b e d e v e lo p e d t h a t re q u ir e n o t m u c h e ffo r t . S o me a p p lic a t io n s w i ll o n ly r e q u ir e 2 -3 d a y s t o d e v e lo p b u t a re in r e g u la r d e ma n d . F o r e x a mp le. mo st o f t h e e ma i l se r v e r s d o n o t a llo w e ma il a t t a c h m e n t s h a v in g mo r e t h a n 2 0 M B s iz e . A n a p p lic a t io n c a n b e e a s i l y d e v e lo p e d t o sp l it a fi le a n d t o r e jo in a g a in .

T h e se a p p lic a t io n s w i l l n o t re q u ir e e x t r a-o r d in a r y sk i l l le v e l t o d e v e lo p . A p p l ic a t io n s w i l l b e d e v e l o p e d o n t h e b a s is o f d e ma n d . F u r t h e r mo r e , a ft e r su c c e s s fu ll y r u n n in g the in it ia l target the

b u s in e s s w i l l b e e x p a n d e d t o t a r g e t t h e r e t a il st o re s a n d b ig g e r c u st o me r s b u t t h e a p p lic a t io n s w i l l n o t b e b ig g e r in s iz e i. e . t o a t t r a c t t h e c u st o me r s w it h le s se r a mo u n t . A s it is b e lie v e d t h a t b ig g e r a p p lic a t io n s re q u ir e h e a v y in v e st me nt , h ig h e r sk il l le v e l a n d lo t s o f t i me a n d e ffo r t . 1 5 -2 0 d o lla r a v e r a g e p r ic e w i l l b e m a in t a in e d fo r t h e so ft w a r e s a n d it w i l l n o t b e in c r e a se d v e r y so o n . A 2 t o 1 0 d o lla r e x t ra w i l l b e c h a r g e d if t h e u se r w o u ld r e q u ir e t o p u r c h a se t h e so ft w a r e fo r mo r e t ha n 1 8 mo n t h s o r so me e x t r a fe a t u r e s. I n it ia ll y t h e so ft w a r e s w i l l b e d e v e lo p e d fo r s in g le u se r lic e n se w h ic h w il l b e mo d i f ie d la t t e r fo r 5 u se r p a c k a g e , 1 0 u se r p a c k a g e a n d 2 0 u se r p a c k a g e . A se r ia l, a lso k n o w n a s a p ro d u c t k e y, is a se r ie s o f a lp h a n u me r ic c h a r a c t e r s ( n u m b e r s a n d le t t e r s) t h a t in d ic a t e t h e p u rc h a se o f t h a t sp e c if ic so ft w a r e . S e r ia ls fo r v e r y p o p u la r so ft w a r e c a n so me t i me s be fo u n d o n l in e and mo st so ft w a r e p ir a t e s u se t h e se se r ia l s

d ist r ib u t e p ir a t e d c o p ie s t h a t c a n b e u n lo c k e d . A c r a c k is a mo r e so p h ist ic a t e d w a y o f b y p a s s in g t h e se c u r it y me a su r e s o f c e rt a in so ft w a r e . It is a n a p p lic a t io n t h a t t o t a ll y r e mo v es t h e a u t h e n t ic a t io n m e c h a n is m t h a t s b e e n e m b e d d e d in t o t h e so ft w a r e . T h e u se o f se r ia l k e y s w a s st a rt e d b y so ft w a r e c o mp a n ie s t o c o m b a t t he q u ic k a n d w id e sp r e a d o f so ft w a re p ir a c y. E v e n if yo u h a v e a

c o p y o f t h e so ft w a r e , yo u w o u ld n o t b e a b le t o u se it w it h o u t a se r ia l. S in c e it s advent, s h a r in g se r ia l k e y s ha ve been very

p r e v a le n t a s t h e mo st so ft w a r e a r e n o t a b le t o c o n fir m w h e t h e r o r n o t t h e se r ia l h a s b e e n u se d b y a n o t he r u se r o n a n o t h e r c o mp u t e r. S o me so ft w a r e ma k e r s a re b e g in n in g t o r e q u ir e o n lin e r e g ist r a t io n t o m it ig a t e t h is p r o b le m. A c r a c k is a n a p p lic a t io n t h a t b r e a k s a u t h e nt ic a t io n me c h a n i s m s o f c o m me r c ia l a p p lic a t io n w h i le a se r ia l is a p ro o f o f p u r c h a se t h a t w o u ld u n lo c k a n a p p lic a t io n

C r a c k s a r e b in a r y in n a t u r e w h i le se r ia ls a r e o ft e n e nc o d e d a s a t e x t f ile S o ft w a r e c ra c k in g is a n is s u e a n d t h r e a t t o t h e d e v e lo p e r s a s it d e st ro y s t h e w h o le e ffo r t o f t h e c o mp a n y. F o r t h is t w o id e a s a r e b e in g r e v ie w e d . 1 . F o r e v e r y t ra n sa c t io n t h e a p p lic a t io n w il l c o m m u n ic a t e w it h t he o n l in e se r v e r t h a t w i l l c h e c k it s lic e n se in fo r ma t io n a s w e ll t h e la t e st a lg o r it h m t o c o mp le t e t h e r e q u e st e d t a sk . A ll t he se t r a n sa c t io n s w il l b e in e n c o d e d a n d d e c o d e d a t t h e c lie n t e n d . E a c h t ra n sa c t io n w i ll b e p ro v id e d sp e c ia l e n c o d e d k e y s c o n s ist s o f D a t e , lic e n se in fo r ma t i o n, D a t e o f e x p ir y , C lie n t m a c h in e in fo r ma t io n , la t e st a lg o r it h m v e r s io n a n d d e t a ils. S t a t e o f t h e a rt me t h o d w i ll b e u se d t o c o n su me m i n i m u m b a n d w id t h a n d ma x i mu m s e c u r it y.

2 . E v e r y a p p lic a t io n w il l c o n n e c t t o t h e in t e r n e t w it h in a mo n t h t o c h e c k lic e n se in fo r ma t io n fr o m o u r se r v e r . T h is c h e c k w i l l u p d a t e t h e so ft w a r e a n d st a t u s o f a n y i lle g a l c h a n g e ma d e in t he a p p lic a t io n . Bo t h t h e t a sk s w il l r e su lt e it h e r su c c e s s fu l r u n n in g o f t h e so ft w a r e o r w il l b lo c k t h e a p p lic a t io n t o w o r k . N e c e s sa r y c h a n g e s a n d u p d a t e s p ro c e d u r e s w il l b e in v o k e d i f t h e so ft w a r e is fo u n d c r a c k e d o r c h a n g e d . T h e se p ro c e s se s w il l b e i mp le me n t e d in a n a u t o ma t e d a rt if ic ia ll y in t e llig e n t a p p lic a t io n t h a t w i l l c o n t ro l t h e m is u se o f t h e d e liv e r ie s. B a c k u p p ro g r a m w i ll a lso b e i mp le m e n t e d in t h e a p p lic a t io n s t h a t w i ll i mp lic it ly v e r i f y t h e p ro c e d u r e . N o C D K e y w i l l b e p ro v id e d t o t h e u se r s t o a v o id a n y m i s u se . T r ia l v e r s io n s fo r a l mo st a ll a p p li c a t io n s i. e . fo r 1 0 d a y s w il l b e a v a ila b le fo r a ll w it h li m it e d le v e l o f fe a t u r e s. lic e n se s w it h d if fe r e nt t i m in g s a n d

III. Market analysis and marketing concept

A.

Mark et ing

T h e a p p lic a t io n s t h a t w i l l b e d e v e lo p e d a r e a v a ila b le o n t h e in t e r n e t b u t e it h e r t h e y a re e x p e n s iv e o r t h e y c o me a s a p a rt o f a b ig g e r a p p lic a t io n su it w h ic h c o st s a lo t fo r t h e s ma l l c u st o me r s. A lso so me o f t h e a p p lic a t io n s a r e a v a ila b le in t h e m a r k e t ( in t e r n e t ) b u t a r e d if fic u lt t o f in d . M a r k e t in g w il l b e ma d e p r i ma r il y f ro m in t e r n e t a n d re st w il l b e ma d e t h r o u g h in- h o u se re so u rc e s a n d c o n t a c t s. I n it ia ll y L o c a l w e b s it e s lik e ro z e e . p k , h a fe e z c e n t re . o r g e t c w i ll b e t h e c h a n n e ls t o p u b l is h c o m m e r c ia ls a n d t o r u n t h e p ro mo t io n s. C n e t ( D o w n lo a d . c o m) w i ll b e u se d p r i ma r i l y t o ma rket the a p p lic a t io n s in t e r n a t io n a ll y. A lso t h e se a p p lic a t io n s w il l b e re s id in g o n C n e t . c o m a s w e ll a s so me o t he r d o u n lo a d se r v e r s a v a ila b le . 5 % o f t h e d e v e lo p me n t c o st w il l b e re se r v e d fo r ma r k e t in g t he se a p p lic a t io n s. O n lin e c r e d it / d e b it c a r d p a y me n t s w il l b e t he p r i ma r y so u r c e to re c e iv e cash. It is a s su me d that

m a x i mu m n u m b e r o f c lie n t s w i l l b e fr o m o v e r se a s a s in t h e P a k ist a n i c u lt u r e, a u t o ma t io n a n d o n lin e p a y me n t s is no t p r e fe r r e d u su a ll y. T he t re n d is c o n st a n t ly c h a n g in g but in it ia l l y o v e r se a s u se r s w il l b e fo c u se d mo r e t h r o u g h o n lin e p ro mo t io n s S k yp e h e lp l in e a n d o n l i n e fe e d b a c k p o rt a l. Co mp e t it io n in t h e t a r g e t ma r k e t is le s s a s in d u st r ia l g ia nt s d o n o t h a v e t h e ir p ro d u c t s fo r t h e s ma ll u se r s. Co r p o r a t e c lie n t s a re n o t fo c u se d in t h e 4- 5 q u a rt e r s.

R a t io s o f r e v e n u e g e n e r a t io n fr o m e x p o rt a n d d o me st ic ma r k e t a re se t a t a p p ro x i ma t e ly 6 0 : 4 0 . M a jo r it y o f t h e p ro d u c t e x p o rt s p ro d u c t s. a re c u st o m iz e d rather than s h r in k - w r a p p e d

I I I a . M a rk e t i n g S t ra t e g y I f w e lo o k t h e so ft w a r e in d u st r y a n d it s v a r io u s ma r k e t in g a p p ro a c h e s u se d b y so ft w a r e h o u se s a n d t h e ir p e r c e p t io n o f s u c c e s s fu ln e s s . T h e fo llo w in g se v e n su c c e s se s o f ma r k e t in g st r a t e g ie s a r e u se d b y t h e m ;
y y y y y y y

W o r d o f M o u t h A p p ro a c h ( C lie nt re fe r r a ls e t c ) A d v e rt is in g in t ra d e lo c a l/ fo r e ig n jo u r n a ls A t t e n d in g lo c a l/ fo r e ig n t r a d e c o n fe r e n c e s I n it ia t e 1 -t o -1 c o m m u n ic a t io n w it h p o t e n t ia l c lie nt s U se p r e e st a b l is h e d n e t w o r k s/ p e r so n a l r e la t io n s h ip s A l l ia n c e s a n d a g re e me n t s w it h c h a n n e l p a rt n e r s W it h every so ft w a r e t r ia l v e r s io n s of o ne or t wo

a p p lic a t io n s w il l a lso b e d is p a t c h e d t o k e e p c lie n t in t e r e st e d in o t h e r a p p lic a t io n s a lso . D e p e n d o n a Ca p t iv e c lie nt s in c e fo r ma t io n M a r k e t in g w il l p r i ma r i l y b e d o n e o n t he in t e r n e t

I V . R a w m a t e ri a l s a n d su p p li e s F o r so ft w a r e h o u se s le s s n u m b e r a n d q u a n t it y o f su p p l ie s a n d m a t e r ia ls a r e r e q u ir e d . A r o u g h e st im a t e o f r e q u ir e d it e m s a r e li st e d b e lo w :

EQUIPMENT Title PCs

YEAR 1 Total Cost

214,320 Laptop PCs 140,000 Server UPS for PCs Network Equipment Printer (LASER) Power Generator Backup 47,722 40,000 15,394 5,542 50,031

Total

513,008

FURNITURE & FIXTURE Items Computer furniture Office furniture Furniture senior staff Total Cost 84,667 10,776 23,091

Furniture reception area Furniture conference room A/Cs Split Telephone exchange/phones Facsimile Photo Copier Library (Books) Miscellaneous Total

7,697 18,473 66,502 7,697 2,309 15,394 23,091 15,394 275,092

V I. En g i n e e ri n g a n d t e c h n o lo g y L a t e st d e v e lo p me n t t o o ls a n d t e c h n iq u e s w i ll b e u se d t o h a v e m a x i mu m c o mp a t ib i l it y le v e l w it h fa st e r a n d la t e st a p p ro a c h . M ic r o so ft b a se d t e c h n o lo g y w i l l b e u se d p r i ma r il y. Ja v a w i l l b e t h e se c o n d t o o l t o d e v e lo p a p p lic a t io n s a s p e r r e q u ir e me n t a n d d e ma n d . O n e r e a so n t o u se t h e la t e st t e c h n o lo g y is t h a t le s s a mo u nt o f w o r k is r e q u ir e d in t h e n e w v e r s io n s w it h fa st e r sp e e d . M o st o f t h e d e v e lo p me n t t o o ls a r e fr e e a n d d o n o t r e q u ir e a n y lic e n se fe e .

I f a n y e x p e n s iv e d e v e lo p me n t t o o l w o u ld b e re q u ir e d it w il l o n ly b e p u rc h a se d a c o mp a r a t iv e ly b ig g e r o rd e r & p a y me n t i s r e c e iv e d fr o m a c u st o me r .

V I I. O rg a n i za t i o n a n d o v e rh e a d c o st s O v e rh e a d c o st s O p e r a t in g a n d o v e r h e a d E x p e n se s fo r t h e p ro je c t a n d t h e r e b a s is a r e t a k e n a s fo llo w s :

Description Staff Benefit Bonuses and other Allowances Repair & Maintenance Insurance Foreign Traveling (a year) Traveling & Conveyance Entertainment Printing & Stationary Books & Periodicals General and Administration Communications

(Rs.) 135,499 135,499 313,467 25,650 338,670 290,948 19,397 32,328 16,626 19,397 184,729

Rent Utilities Advertising Total

554,187 136,227 9,236 2,211,859

VIII. Human resources

Technical Staff YEAR 1 Annual Salary 1,200,000 400,000 345,000 280,985 2,225,985

Person Developers Interns Markeking Analyst Lower Staff Total

Dirrector

Team Lead

Team Lead

Developer

Developer

Intern

Intern

Intern

Intern

Intern

Intern

Companys Organogram

A v a ila b il it y a n d r e c r u it me n t I X . I m p le m e n t a t i o n p la n n i n g a n d b u d g e t i n g

T h e p ot ent i al of ea c h e mp l o ye e f or r ev e n u e g en er at i o n i s ar o u n d U S $ 1 9 , 2 0 0 b as ed o n 5 0 % ca p a ci t y ut i l i zat i o n d u r i n g Y ear - 1 . T hi s ca p a ci t y ut il i zat i o n g o es up t o 9 5 % i n Y ea r - 1 0 . T h e p r oj ect i s b as ed o n 8 w o r k i n g h o u r s i n a da y, w i t h r ev e n u e g en er at i o n of U S $ 2 6 p er h o ur . T h e a n n u al i n cr eas e i n t hi s r at e i s 5 %. 2 6 4 da ys i n a y ear ar e as s u m ed t o b e w or k i n g d a ys . T h e ex p or t vs . l o cal s al es r at i o i s as f ol l o w s :

Project Cost Capital Investment Requirement Working Capital Requirements

1,465,517 1,035,202

Total Project Investment Requirement Rupees

2,500,719

X. Financial analysis and investment appraisal

Project Cost Project Development cost Equipment Furniture & Fixture Motor Vehicles Preliminary Expenses Copy rights-Licensing & Trade Marks Other Expenses Working Capital Intangible Assets 24,861 513,008 290,486 Rs.

1,306,111

159,406 1,035,202

Total Assets Total Capital Employed By: Total Capital Cost 100%

2,500,719

2,500,719

Table 12-3 Working Capital break down Current Assets Receivables 876,379 Advances to Employees Total Current Assets Current Liabilities Utilities Payable 11,352 Salary Payable 137,777 307,952 1,184,331

Total Current Liabilities Net Working Capital

149,129 1,035,202

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
668,064 1,147,855 1,740,914 2,567,702 3,610,832 4,044,131 5,263,690 5,851,984 6,485,950

Local
5,784,103 6,012,576 6,504,514 6,963,656 7,703,107 8,425,274 9,436,306 9,775,424 10,867,971 12,045,335

Total Revenue
5,784,103 Operating Expenses 4,921,835 Depreciation 248,603 Amortization of Deferred Cost 184,805 140,935 334,691 240,549 176,416 429,000 301,041 214,709 550,138 5,488,914 5,603,870 6,860,342 7,780,798 9,246,615 10,340,638 11,508,654 12,808,921 14,315,917 6,680,639 7,652,369 8,704,570 10,270,810 12,036,105 13,480,438 15,039,114 16,719,956 18,531,284

31,881

31,881

31,881

31,881

31,881

5,202,319

5,705,601

5,776,687

7,226,915

8,053,229

9,423,031

10,769,637

11,809,694

13,023,630

14,866,055

Profit before Tax and Interest Long term liabilities

581,785

975,039

1,875,682

1,477,655

2,217,581

2,613,074

2,710,801

3,229,419

3,696,326

3,665,229

198,390 Short Term Liabilities 144,928 Profit / (Loss) before Tax Taxation 28,921 Profit after Tax

191,722

185,053

178,385

171,716

165,047

158,379

151,710

145,042

138,373

144,928

238,466

638,389

1,690,629

1,299,270

2,045,865

2,448,026

2,552,422

3,077,709

3,551,284

3,526,856

198,846

417,566

325,097

435,313

485,940

472,000

737,312

1,135,077

874,196

3,566,092

4,144,305

4,776,330

5,410,002

6,391,403

7,486,201

8,373,422

9,374,040

10,470,274

11,545,464

Projected Balance Sheet Year

Startup Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Fixed Assets

Tangible
1,306,111 1,057,508 872,703 738,753 1,086,875 855,003 688,132 1,167,957 878,466 676,461 1,333,429

Intangible

1,306,111

1,057,508

872,703

738,753

1,086,875

855,003

688,132

1,167,957

878,466

676,461

1,333,429

DEFERRED COST Project development expenditure Preliminary Expenses

134,544 107,635 80,727 53,818 26,909 -

24,861

19,889

14,917

9,945

4,972

1,465,517

1,185,033

968,347

802,515

1,118,756

855,003

688,132

1,167,957

878,466

676,461

1,333,429

CURRENT ASSETS

Accounts Recb.
876,379 1,012,218 1,159,450 1,318,874 1,556,183 1,823,652 2,042,491 2,278,654 2,533,327 2,807,770

Advances to Employees Cash & Bank Balances

307,952

338,747

319,175

409,884

463,166

526,386

579,025

636,927

700,620

770,682

1,035,202

1,483,553

2,981,584

3,232,343

3,616,507

5,178,392

6,956,816

8,268,274

10,588,836

12,876,065

14,517,541

1,035,202

2,667,884

4,332,549

4,710,968

5,345,265

7,197,741

9,306,854

10,889,789

13,504,417

16,110,012

18,095,993

LESS: CURRENT LIABILITIES Short Term Borrowings Utilities Payable

11,352 12,488 13,736 15,110 16,621 18,283 20,111 22,122 24,335 26,768

1,035,202

1,035,202

Salary Payable
137,777 151,555 166,710 183,381 201,720 221,891 244,081 268,489 295,337 324,871

Dividend Payable

1,184,331

1,199,244

180,447

198,491

218,340

240,174

264,192

290,611

319,672

351,639

Working Capital
1,035,202 1,483,553 3,133,305 4,530,521 5,146,774 6,979,401 9,066,680 10,625,597 13,213,806 15,790,340 17,744,354

TOTAL CAPITAL EMPLOYED

2,500,719

2,668,586

4,101,652

5,333,036

6,265,530

7,834,404

9,754,812

11,793,555

14,092,273

16,466,801

19,077,783

CAPITAL EMPLOYED REPRESENTED BY:

SHARE CAPITAL 125,036 Shares @ Rs.10/0 each UNAPP. PROFIT/(LOSS)

1,250,359

1,250,359

1,250,359

1,250,359

1,250,359

1,250,359

1,250,359

1,250,359

1,250,359

1,250,359

1,250,359

209,545

649,089

1,922,152

2,896,324

4,506,877

6,468,963

8,549,385

10,889,781

13,305,988

15,958,649

1,250,359

1,459,905

1,899,448

3,172,511

4,146,684

5,757,236

7,719,323

9,799,744

12,140,141

14,556,348

17,209,008

LONG TERM LAIBILITIES

1,250,359

1,208,681

2,202,204

2,160,525

2,118,847

2,077,168

2,035,489

1,993,811

1,952,132

1,910,453

1,868,775

1,250,359

1,208,681

2,202,204

2,160,525

2,118,847

2,077,168

2,035,489

1,993,811

1,952,132

1,910,453

1,868,775

TOTAL

2,500,719

2,668,586

4,101,652

5,333,036

6,265,530

7,834,404

9,754,812

11,793,555

14,092,273

16,466,801

19,077,783

Projected Cash Flow Statement Year SOURCES FROM OPERATION Profit Before Tax

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

238,503 Add: Depreciation 248,641 Amortization 31,886 519,030 OTHER SOURCES Short Term Borrowings

638,487 1,690,889 1,299,470 2,046,180 2,448,403 2,552,815 184,834 31,886 140,957 31,886 334,743 31,886 240,586 31,886 176,443 429,066 -

3,078,183 301,087 3,379,270

3,551,831 214,742

3,527,399 550,222 -

855,207 1,863,732 1,666,099 2,318,653 2,624,847 2,981,880 -

3,766,573

4,077,622 -

1,035,361 1,035,361 1,035,361 1,035,361

3,379,270

1,554,391 1,890,568 1,863,732 1,666,099 2,318,653 2,624,847 2,981,880 APPLICATION Capital Expenditure Payments - Long term Liabilities Tax Paid Payments - Short Term Liabilities Dividend Paid - Cash

3,766,573

4,077,622

41,685 28,925 -

41,685 198,877 -

6,986 41,685 417,630 1,035,361 -

682,919 41,685 325,147 -

8,679 41,685 435,380 -

9,547 41,685 486,015 -

908,965 41,685 472,073 -

11,551 41,685 737,426 -

12,706 41,685 1,135,252 -

1,207,291 41,685 874,330 -

70,610 SURPLUS / (DEFICIT) INCREASE/(DECREASE) IN WORKING CAPITAL NET INCREASE/(DECREASE) OPENING BANK BALANCES CLOSING CASH BALANCE

240,562 1,501,662 1,049,751 362,070 111,273 250,797

485,743

537,246 1,422,723

790,662 2,588,608 267,687 2,320,920

1,189,643 2,576,930 289,349 2,287,581

2,123,306 1,954,315 312,587 1,641,729

1,483,781 1,650,007 1,035,361 151,744

616,348 1,832,909 2,087,600 1,559,158 232,124 270,784 308,903 247,498

448,420 1,498,262

384,224 1,562,125 1,778,697 1,311,660

1,035,361 1,483,781 2,982,043 3,232,840 3,617,064 5,179,189 6,957,887

8,269,547 10,590,467 12,878,047

1,483,781 2,982,043 3,232,840 3,617,064 5,179,189 6,957,887 8,269,547 10,590,467 12,878,047 14,519,776

Project Cost
Rupees Project Development cost Equipment Furniture & Fixture Motor Vehicles Preliminary Expenses Copy rights-Licensing & Trade Marks Other Expenses Working Capital Intangible Assets Capital Work in Progress Interest during Development Total Assets Total Capital Employed By: Equity Contribution by Sponsor Total Capital 513,087 290,531 502,694 24,865 134,565 1,035,361 159,430

1,306,313

2,501,104 2,501,104 1,250,552 2,501,104