Back in early 2020, the share of the technology and communication index in the KSE-100 market capitalisation used to be under one per cent. Today, it accounts for almost 9.47pc. But the story of tech’s rise from being a nobody to becoming a major market mover wasn’t broad-based. Instead, it was crafted almost entirely by one company: Systems Ltd — the largest IT services firm in Pakistan.

Founded in 1977 by Syed Babar Ali and Aezaz Husain, the company has been one of the pioneers of IT services in the country. But it took its sweet time to finally have a moment, which came right at the turn of the pandemic. Since 2020, Systems Ltd has witnessed great investor interest and at one point was trading in excess of 40x earnings. In 9MFY22, it posted a return of 40.1pc against KSE-100’s negative 3.71pc.

And it’s quite understandable why. The company’s revenues of Rs20.1 billion during 9MCY22 are more than the previous two full years combined. All the while, its gross margin is north of 30pc. To top it off, it’s an export-driven entity that provides some hedge against Pakistan’s perennial macroeconomic woes.

“After the acquisition [of NDC Tech], about 85pc of our topline is export-driven, so it’s dollar-based,” says Asif Peer, the CEO of Systems Ltd, who joined the company as a programmer in 1996 right after graduating from FAST. At the same time, the organisation has benefitted from the rupee devaluation.

Systems Ltd plans to buy tech companies, regardless of their size, if the business brings in the required skill set

“Our key point indicators are dollar-based so even if our rupee top line rose 91pc, our growth in dollar terms was 53pc during 9MCY22. Exchange gain or loss, and anything below the operating level, is beyond our control, so we don’t fret about it,” says Mr Peer.

As the global economy reels from inflationary pressures and the resulting slowdown, technology has seen its fortunes change. Some of the biggest companies, including Meta and Netflix, have seen their shares plunge. And now even the IT services players are feeling the heat, with Indian giants cutting their growth forecast. Could such an environment spell some trouble for Pakistan?

“They have a bigness problem: their order sizes run into billions of dollars, which naturally become burdensome when there is a recession. However, we are still too small to be affected,” he says.

Then why are telecom, computer and information exports tapering off after posting high double-digit growth every month and peaking in March 2022?

“I think people are misreading the situation: the volume has definitely grown across the industry. It’s visible when you go to the market to hire a resource. But what’s happening is that a lot of companies aren’t remitting back their proceeds.

We are a listed entity and do everything by the book, but smaller players don’t have a lot of incentive to bring the money to Pakistan. It’s a temporary blip and will take a few months of stability to restore their confidence.“

While organic growth has come in abundance, Systems is now spreading its wings and looking to grow inorganically as well by acquiring other IT services players.

“What’s important to us is the skill set they bring, especially the leadership: value alignment, culture, cross and upselling opportunities. Anything that complements our business. Size doesn’t really matter: we can digest a $50 million or go for a $5m company.”

Recently, they bought out NDC Tech, a major player in the financial services space and a partner of Swiss giant Temenos. Apart from that, the company has also made three passive investments into startups — Jugnu, Jomo and OneLoad — but according to Mr Peer, in the near future, the focus of Systems Ventures will be towards finding acquisition targets.

One impediment to Pakistan’s tech sector has traditionally been the constraints on the supply of talent. This peaked in 2021 when startups were raising money left, right and centre, often poaching resources from traditional services companies and messing up their retention rates. Has the downturn in VC helped cool that off?

“So far, the supply hasn’t been an issue for us because, again, we are too small. Adding 2,000 people a year as a big company is not a challenge. But yes, if you want to grow exponentially, or, say, increase the headcount by 10,000, that’s going to be difficult.”

To solve for that — or future-proof the business in tech jargon — Systems is amping up its effort by investing heavily in its supply chain, i.e. talent.

“We have started an IT Mustaqbil programme, fresh grad schemes and resource development initiatives initially, so when we reach that threshold, our growth is not choked.”

“We saw that computer science people are not going to be enough if you are to grow sustainably since there are only a few universities producing good graduates. Now with changes in technology, you don’t really need a four-year programme if you have good IQ, critical thinking and analytical capabilities. If you can train them on specific skill sets — such as no and low code, configurations, and e-commerce — it doesn’t take them two years.

“It’s not an alternative, but this opens up the talent pool. We train them in specific areas based on our business requirements, say customer relationship management or e-commerce, assign them mentors and deploy them on practical projects. This can prepare a good resource in one year and is a win-win for both the employee and us.”

Published in Dawn, The Business and Finance Weekly, April 3rd, 2023