‘Startups are not nurtured by just setting up incubators’

Interview with Sajjad Mustafa Syed, CEO ExD (Pvt.) Ltd.

Sajjad Mustafa Syed is the founder and CEO of Excellence Delivered (ExD). Previously, he has worked as the Managing Director for SAP Pakistan and led senior positions at Oracle and PWC in the country. ExD was founded in 2010, with services in technology, outsourcing and optimization segments. BR Research recently sat down with Sajjad Syed to discuss the company’s projects and plans in particular and IT sector prospects in general. Following are the edited excerpts of the interview.

BR Research: Tell us about your journey at Excellence Delivered (Pvt.) Limited?

Sajjad Mustafa Syed: In the eight years of our existence, we have gone from starting very humbly back in 2010 to being present in five different countries and becoming one of the largest in our industry. We were blessed with a very good core team right from the beginning, which we were able to retain. We are designed very differently compared to most of the other companies as almost everybody is a shareholder in the company and all employees have same perks.

This company is my passion. I believe that as long as the management is capable, and there is willingness and hunger to succeed, you will succeed. The other thing that I think very important is the core values. Our key to success has been our core values. Initially, we were not doing anything innovative; we were doing what our competitors had been doing for a long 20-50 years. So our focus had been to stick to our 4 key core values no matter what the outcome.

Number one for us was customer centricity – something that was lacking in the monopolistic market and thus gave us the opportunity to fill that gap. The other core value was unflinching integrity, which did affect our business in the short-term but has paid off really well in the long term. Third is superior profitability. And fourth is the passion in our workforce. We turn people around too, because in our country, I see a lot of young people choosing careers not because they love them, but because they don’t have a choice. We give young people the opportunity to go into any of the verticals within the firm.

BRR: Do you plan to move to employee stock options? Any plans for going public?

SMS: Pakistan still needs clarity on the guidelines for structuring and offering employee stock options, including the taxation aspect. But yes, employee stock option is absolutely the direction we will be heading to.

As far as an IPO is concerned, it is certainly a plan. We expect that we will be going public in the next three to four years. Right now, we are looking at the countries for our IPO. We are not limiting to Pakistan only; the other prospects are Dubai and China

BRR: What is the size of your company?

SMS: We are about 300 people in various countries, which is big for Pakistan but small for the world.

BRR: How do you explain your offerings and business portfolio?

SMS: We are basically vendor agnostic; we do a lot of things. We do ERP implementation that includes both SAP and Oracle. We are very strong in retail, with Bareeze, Elan, Outfitters, Chinyere, Keyseria, HKB and many more as our clients. We are extremely strong in social media marketing and ecommerce. We are actually one of the largest reseller of women clothing online where we not only maintain the ecommerce sites of the sellers, but also look at the physical logistics and control inventory. We are also into making apps. Soon we will be launching the country’s first fashion app; we are also making some travel apps like Expedia and others for Pakistan.

We benefitted great from the retail boom in the country. We have done very well in the FMCG and the oil and gas sectors. We got into the education sector. We are also going into the utilities.

We have a training division as well. We are training about 200 youngsters at any point in time. Not only are we extremely cost effective, we are also probably the only company in the world that guarantees a job to students with A grade on the international exams.

BRR: Human resource is very critical for IT business because that’s probably the only major input.  What are your views on the human capital available here?

SMS: Our philosophy behind providing world-class training is that while there is a lot of unemployment in the country, there are also a large number of unemployable people in the country. Quality human capital is our biggest constraint. Somehow, in our education system, we have compromised quality over quantity. This is true not only for the IT professionals but also others. But I do see some initiatives by the government and some efforts in that direction. If they can do it in short to medium term, I see our industry benefitting.

Here, I would stress that a lot needs to be done. There are a couple of key reasons that we need to focus on education. One is the huge youth population bulge that needs to be handled. Second, education needs to be among government priorities for investment, specifically for the IT industry, where young talented youth and relevant skill-sets are the only inputs we require compared to the traditional sectors.

BRR: How much of the revenues are you generating from each line of business?

SMS: ERP is our bread and butter.  As we stand today, around 60-70 percent of our revenue comes from it. The second would be making apps, what we call mobility. Third would be ecommerce, and fourth would be training.

BRR: Can you tell us what percentage of ERP business do you get from Pakistan and abroad?

SMS: Today, we have about 70 percent of the revenue from Pakistan and the rest is from abroad. This share has had its ups and downs. When we started, our first contract was in Pakistan, but very early on, we started focusing on the Saudi Arabian market. We wanted to focus on the international market because rates were better; also Saudi economy was growing in 2010. We picked Saudi Arabia over Dubai because Dubai was very competitive. We won some very large groups in Saudi Arabia.

Pakistan also remained our focus because we got a lot of manpower from here. And because of our international business, we were able to get a lot of talent here. Then the oil crisis happened in Saudi Arabia; and we had to write-off a significant amount of money there. But luckily, our business from Pakistan had grown enough at that point in time for us to compensate for the losses in Saudi Arabia.

BRR: How conducive is the tax structure for the industry in your opinion?

SMS: Our tax on revenues went from 2 percent to around 25 percent in one year. There’s a 16 percent sales tax followed by a minimum tax of 8 percent. The natural consequence of high taxation has been the shift of the industry to Dubai – hence actually bringing down the tax revenue by the sector. In the last two years, a lot of our mid-sized companies have moved to Dubai. This has been a significant source of brain drain for Pakistan.

BRR: On that point, how much are Pakistan’s actual IT exports? What can be done to improve them?

SMS: There is no one number because of the reasons I just mentioned. Everyone is throwing a different number. You can say it falls anywhere between $800 million to $2 billion. Pakistan tried making a National IT Policy two to three times, but of little or no avail. The challenge is that IT is not just one sector; it has sub-sectors like telecoms, services, software development, etc. You need an enabling environment for them.

While you need bigger companies, you also need to nurture small companies and startups in the IT sector. If we want to change our IT industry, we need to change our government procurement practices. The way our procurement policies work today, small companies cannot bid on half of the government projects. Right now, the dice are loaded against younger, smaller companies. Thus if you want to bring a change in the IT sector, you either need to set aside a chunk of business for startups and younger companies, or tweak your procurement practices that enable them to bid for good projects. Startups are not encouraged by setting up incubators; they get nurtured when you get them business and sales opportunity.

BRR: Let’s turn to ecommerce. Can you elaborate on your ecommerce business?

SMS: To our retail clients, we actually maintain their entire ecommerce business from maintaining their websites and social media marketing to taking care of their inventory, packaging and logistics. Ecommerce is growing in the country; the Lawn business is extremely competitive, and we are probably the only company that has got IT into this.

For the last four to five years, we have been maintaining a database for the people who buy Lawn online to study the trends in designs and patterns that do well. Last year, we did an experiment and launched our own Lawn brand! And we were completely sold out! By using big data analytics and putting in a little bit of AI, we could judge what the customers actually preferred to some extent. We would be wrong at times, but we were right 70-80 percent of the time.

BRR: Big data and Artificial Intelligence are the future. For Pakistan in the next 3-5 years, where do you see big data making a difference?

SMS: We are using big data analytics and AI largely in textile and fashion as of right now. However, the uses of the techniques are huge; you can use them in security and politics; you will see immense use in retail. These are the areas where you have enough data because of Banks, Telcos, Twitter, Facebook, Instagram, etc.

We are launching another product based on IoT and big data in the next 6-8 months that will enable you to buy instantly something that you are watching on your television. It could be a shirt worn by an actor, or an appliance that’s coming on TV right then. It’s basically segmenting to an individual instead of a chunk of the population. This is a very innovative technology that took us 2.5 years to build.

We have conducted sample experiments, and we are now in talks with one of the major cable companies here to grant us access to their cable router. We understand that it’s a difficult concept to understand and commercialize, but once implemented it will change the advertising game all over. For example, the whole show on TV could then become an ad and that, too, very subtly.

BRR: Majority of the advertising spends is still on TV and billboards; however, many big companies and MNCs today are also moving to social media marketing. What do you think will be the speed of this shift in the coming years?

SMS: I think by the time they all reach social media marketing; the world would have gone further ahead. I think they are late if they haven’t done so much already.

BRR: Do you plan to bring your own ecommerce platform anytime?

SMS: Historically, we develop very innovative products and only when necessary. We are one of the largest partners in the region for Shopify, which is one of the largest ecommerce platforms globally. One of our initiatives was selling the products of SMEs. We targeted very small SMEs and local artisans across the country. Now that we have established a successful supply-chain infrastructure across the country, we want to scale it up, and I am very hopeful that it will do well.

BRR: What about the prospects of ecommerce in groceries in the country?

SMS: While the non-perishable items can be sold online - and they are being sold online – there is a need for standardisation and quality control in the perishable food items – something that is lacking here. When these two conditions are met, there will be enough trust for people to go into it.

Another major area missing in ecommerce here is the citizen services. If you look at Korea, China, and the Middle East, a lot of their local work is in their local language. We have less than 10 percent people who can converse in English, and yet Urdu is hardly used in such ecommerce apps. Our next move as a sector for citizen services in ecommerce should be to remove the language barrier to benefit from the 90 percent masses that can converse and/or write only in Urdu.