Pakistan can tap $15bn revenue opportunity amid Russia crisis

March 11, 2022 (MLN): Pakistan can tap $15bn revenue opportunity of technology outsourced to US and European technology companies amid Ukraine-Russia crisis.

For the unversed, Ukraine, Belarus, and Russia are key markets for outsourced technology talent. Ukraine was rated as one of the top three markets for outsourced technology. These three markets provided around 800,000 IT developers to US and European technology companies. The Ukraine-Russia crisis has caused a major disruption.

According to a flash note by KASB Securities, “Systems, along with other technology companies in Pakistan who provide outsourced technology resources could be a major beneficiary. This is potentially a $15bn revenue opportunity.”

The domestic market has not fully priced this new revenue opportunity and is only looking at the FX benefits to the sector due to potential PKR depreciation, it said.

The technology sector in general and Systems, in particular, is an attractive hedge to protect against the economic shocks generated from the Russian crisis. In addition, Coeus Solutions, a preeminent software development company, (listing planned for May) could also gain new clients, note added.

Ukraine has been a top-three market for global IT outsourcing. Some rankings rated it even ahead of India due to its geographical proximity to key markets. Ukraine was particularly strong in supporting banking and financial services industry. In 2021, Ukraine generated IT exports of close to $6.8bn (4% of its GDP). Exports grew by 36%. According to estimates, Ukraine has more than 200,000 IT developers who are particularly strong in C++, Unity3D and PHP development.

Belarus was also fast emerging as a global leader for IT outsourcing due to its low cost and geographic proximity. It generated IT exports of over $3bn (7% of GDP) with over 100,000 IT developers catering to the global market. Despite being a small country, it has the fourth-highest number of companies for IT outsourcing in Eastern Europe (Ukraine is at number one).

Russian IT exports are estimated to be over $5bn per annum. Russia has more than 400,000 IT developers. The primary areas of strength of the Russian developers are in areas of cybersecurity and digital marketing areas. Many German companies such as SAP had moved their IT development to Russia over the past few years.

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