Bakhtiar Hameed Wain is an engineer with experience in leading global companies such as Exxon Chemicals, Fauji Fertilizer and ICI Ltd. He founded Avanceon in 1984 and later Octopus in 2019. He currently holds the position of Chief Executive Officer of Avanceon. Under his leadership, Avanceon Limited has moved towards market leadership in Pakistan and beyond. Below are selected excerpts from BR Research’s discussion with the Avanceon CEO, focusing mainly on the potential of industrial automation in Pakistan.

BR Research: Please take us through Avanceon’s business.

Bakhtiar Hameed Wain: The core functions of Avanceon are automation and process optimization. Nowadays, almost all industries are run from a centralized control room that manages the whole process. Previously, companies used to get these platforms from abroad. Three decades ago, we developed a business plan focused on having at least a support structure for such services in Pakistan. And then we started doing smaller projects.

Now whenever there is a large project in Pakistan, we do the whole thing. The client would carve that portion of the industry and give it to us – from sensor, which provides us information on the plant, to the control room and running the whole plant. And then we have a company that services the whole thing. So when companies like Nestle, Pepsi and Coca Cola set up a plant, we do the whole control system and automation of that plant. For older plants, we work towards improving, modifying and upgrading the systems to make production more efficient and optimized.

BRR: What is the scope of automation in Pakistan in the next ten years?

BHW: I don’t have any data on the scope of the real market. But Pakistan, in my opinion, has not even seen sustainable industrial growth for the last 20 years. In Thailand, for instance, there are hundreds of companies like us, thanks to industrial growth. We keep getting growth in Pakistan, but this is mostly because we go back to the existing customers and improve them. When slight industrial growth of 8 to 10 percent comes in, it will be an entirely different thing. So there is a huge potential.

BRR: Working in the market of industrial automation, how have you segmented this market?

BHW: We developed a whole method to the madness in our business, the whole process of how we would implement our projects. This essentially meant that if we documented it very well, we could get it remotely engineered. This was something we first struggled with. People talk a lot about outsourcing, but if you go deep into it, most of the outsourcing, even in Information Technology services, is done for tasks that are repeatable and of low value. Here, we had a challenge of scaling it up and also outsourcing. We did that and then we expanded abroad.

Our whole strategy was that we would expand geographically, which we call horizontally, and to do so with low fixed cost by keeping our engineers in Pakistan. Our target was to have 40 to 50 percent of our billable hours internationally to be clocked in Pakistan. Once we achieved that, it gave us an opportunity to set up an office anywhere only with client facing and thus seamlessly do work abroad from Pakistan’s bench strength. That is when we started expanding horizontally in different markets. And we have been using our International Execution (IX) model.

In terms of verticals, our major sectors in Pakistan are oil and gas, food and beverages, fast moving consumer goods, water and waste water, and specialized infrastructure like metros and tunnels. These are the five verticals that we thrive on and they are our strengths. On top of all these verticals, over the past five years, we have developed a lot of expertise in taking data from customers to do efficiency analysis and then report on real-time basis. That expertise has led to a totally new vertical, which is purely based on data. This is now being carved out into a new company called Octopus Digital.

Currently, 30 to 35 percent of our business originates from Pakistan and the rest from abroad.

BRR: Pakistan faces productivity gaps that affect its companies’ global competitiveness. How can your processes help improve productivity?

BHW: The issue of productivity is very dear to my heart and this is what I speak about all the time with other firms, and even our competitors. We have to focus on improving efficiencies across the board, and this leads to financial gains as well. Our own inventory, for instance, is engineering hours, and if we used them more efficiently, we would get more profits. When our revenue was about half of what we have right now, we had almost the same amount of engineers in our company. To gauge productivity of our employees, we have reached a level of 65 percent to 70 percent “billability” of their working hours.

My experience is that implementing efficiency solutions in an HR-based or production-based organizations is a “human” issue. Nobody in Pakistan wanted to log their hours. It is unbelievable that even high-flying consultants from big firms who charge $5,000 to $10,000 per day tend to fill an hour sheet only at the end of the day, explaining how they spent their hours.

BRR: How can productivity be increased among SMEs?

BHW: For a small to medium-sized production company, whether in Pakistan or abroad, they do not have the bandwidth or the scale to pick up data, to analyze data and then improve their processes. For instance, if you ask small manufacturers about the percentage “up time” of their machines, it is very difficult for them to tell you what it is. For SMEs, our business plan is to go in, put in an appliance, take all the data from the machine, and from the cloud start giving them an analysis on a monthly basis. And these SMEs will not have to invest any capital.

The problem statement of SMEs in Pakistan defines our business plan. We would be able to give that information and analysis I spoke about earlier to those manufacturing plants anywhere from $800 to $2,000 per month, without any capital spending on their part.

BRR: Tell us more about Octopus Digital. How is it different from the parent company Avanceon?

BHW: If you look at our first IPO’s Information Memorandum, we had said that we were (and are) into projects. And projects can be cyclical. So we will strive to build a service company in which there are recurring revenues, and we will improve production on a recurring revenue basis. So we set up a service division, which was called After Market Support. Once we do a project, or if there is an existing project of somebody else, we get into a service contract, we analyze how it’s working, and then keep providing them inputs and improvements.

That business germinated, became successful and it contributed towards 50 percent of overall fixed cost of Avanceon. Soon we realized that it was a separate business, and service business all over the world is a separate business. When you put Octopus Digital on top of that, this is the new mantra. You may have heard of Industry 4.0; people talk about it a lot – it marries service with data. So when we were providing data services over cloud, we realized that we had developed a skill which on its own could build an agnostic company that can provide services to anyone in the world.

Over the last five years, a lot of work has gone into the proof of concept and working with our customers, and now we are ripe and ready to take it independently. This is the business that has the most potential internationally. Investors would recognize this business’s intellectual properties much more than project business. I am not trying to undermine our bread-and-butter project business, but this service business is a recurring business. The investor appetite and customer outlook is totally different. And now it has reached a scale where we can have a separate company that is our fully-owned subsidiary.

In the end, our business plan is to have almost 98 percent of Octopus business to be generated from overseas. But Pakistan remains pivotal to the business, because it keeps our cost structure optimal.

BRR: Which countries is Octopus aiming to serve over next five years?

BHW: In the first year, the focus will be to get into every vertical in Pakistan, because we need to have those names when we move abroad for marketing. We will further refine our technology and develop our Intellectual Property to a higher level. Subsequently, we will focus on the Middle East, followed by the US, UK and then Singapore. This is because we have already done business in these markets and these are mostly English-speaking markets. For Octopus, our goal is to make it the largest player in data in the SME business in the industrial sectors.

BRR: What is the nature of competition facing Avanceon and Octopus in Pakistan and abroad?

BHW: For Avanceon, we technically do not have significant competition in Pakistan. Because we have been investing in moving up the food chain, we have acquired scale. There is some competition, but sometimes they complement our business. Internationally, in project business, we do have competition, with all those firms that operate in our space. Our unique proposition is IX. If somebody has to scale up internationally, the cost of hiring new engineers is prohibitive. But we have our bench strength in Pakistan, we can add engineers and bring them in two years to a level where they can work anywhere.

In Octopus, we feel we have something unique. We have been trying to challenge ourselves by showing to a lot people what we have been able to do. We are working very closely with Microsoft in developing everything, so we keep on checking with their senior regional leaders if what we are doing is being done by anyone else. So our whole business plan hinges on the fact that we are eliminating all proprietary technologies and taking data and open systems over to cloud. That is not being done by many people in the industrial space.

We believe that once we have our minimum scale of projects in Pakistan, about 25 to 30 projects, we can demonstrate internationally that the work we are doing at Octopus is unique. That uniqueness will also help Avanceon a lot, because any project company that does not have the skill of cloud will struggle in the future.

BRR: Which areas do you feel need improvement in your business?

BHW: I think our biggest weakness is in marketing. We have never invested on it. Nowadays, firms have to put around 4 percent, even more, of their budget aside for marketing. We are now budgeting for marketing. What we have is technical marketing, which includes other key things like defining your processes, technical script-writing, etc. Moving on, we will invest in it because it is key to our bottomline. I had to convince my team that this is an investment that we need to make, in order to increase scale.