How Avanceon now charges a premium for being in Pakistan

A Pakistani company behind the FIFA World Cup pipeline

The episode opens with Muzamil in Avanceon’s regional office in Dubai, asking a question that frames the entire conversation. The parkour pipeline at the FIFA World Cup 2022 in Qatar, the Dubai, Riyadh and Doha metros, and the automation work at Masjid al-Haram all share one common denominator: a Pakistani industrial automation company that almost nobody in Pakistan has heard of. Avanceon Limited is listed on the Pakistan Stock Exchange. Together with its sister concern Octopus Digital, the group is worth more than 37 billion rupees. Last year Avanceon alone did 58 million dollars in revenue. This year, on its thirtieth anniversary, the target is a hundred million dollars in order generation — the plan the company internally calls Road to 100.

Bakhtiar Wain is the founder and CEO. Muzamil’s opening line of questioning is deliberately small and biographical. Bakhtiar was born in Bahawalpur, where his father taught at Sadiq Public School, before the family moved to Sargodha. His father was the principal of the school Bakhtiar attended. “He was an educator all his life,” Bakhtiar says. His mother did not work. He went to FC College Lahore for the second year of his FSc and then to UET Lahore for engineering, graduating in 1984.

University, in his telling, was a mixed bag. UET was closed for six months when he joined, in the political turbulence around the end of the Bhutto era. Some teachers were outstanding; others used the disruption as an excuse to coast. But he holds onto one feature of that era that he says no longer exists: the universities were homogenous societies. A government engineering university took everyone — the rich kid and the poor kid, two and a half to three hundred mechanical engineers in a single batch. Bakhtiar is still in a chat group with the roommates he lived with for four years. One of them retired as the Managing Director of OGDCL after doing a PhD at Imperial College on scholarship.

Why he left Fauji Fertilizer after four years

Bakhtiar’s first job was at Fauji Fertilizer, followed by Exxon Chemicals and a brief stint at ICI. He was doing well — by his recollection, his salary at Exxon was in the top one to two percentile of the company. He still keeps in touch with his bosses from that period, and says they have been unfailingly kind in the decades since. But four years in, he knew he was not built for the corporate ladder.

Muzamil presses him on the decision. In the eighties, walking away from Fauji Fertilizer and Exxon was not a small move, and Bakhtiar was not from family money. “Not at all,” he confirms. “Absolutely not, nothing actually.”

His own framing of the decision is unfussy. “Risk is easier when you are young,” he says. “A lot of time in hindsight you can intellectualise things.” He is careful not to glamorise the choice. “I don’t promote that every person should do this, because it’s not for everyone. Water flows in the direction of least resistance. You try to follow a bit of what you’ve been thinking about, and that’s it.” His colleagues from that era have done phenomenally well in corporate careers. It was simply not who he was.

Importing IBM-compatibles when Fauji Fertilizer did not own a computer

The conversation moves to what he did next. His cousin had come back to Pakistan after studying computer science abroad and had started a small computer outfit, riding the first wave of IBM-compatible machines. Bakhtiar joined a year in.

The detail he offers about that period is striking. He had bought his own first XT computer with three years of his bachelor’s savings at Exxon — and at the time, Fauji Fertilizer, where he had worked previously, did not own a computer. Muzamil asks the obvious question: in the late eighties, did he actually believe this thing was going to remake the world?

“100 percent,” Bakhtiar says. “It was totally known. I would spend hours doing calculations on Lotus 1-2-3, and I would say, this will just be a turnaround. The productivity increase was so phenomenal. It was a step jump.”

The business was end-to-end. They imported the hardware themselves, assembled it, sold it, and trained the customer. Bakhtiar personally did the corporate training sessions on Lotus 1-2-3 for the higher management of many of Pakistan’s largest organisations. The imports, in pre-liberalisation Pakistan, were a nightmare. To open a Letter of Credit you had to make four separate trips — bank, Chamber of Import and Export, foreign exchange allocation, and back to the bank. He and his cousin had made an early principle decision not to pay bribes. “We were honest,” he says. “We had made up our mind that we will not give a single rupee. So there was a lot of trouble.” He does not, looking back, remember it as torture. “That was part of the time. That’s it.”

How the computer business became an industrial automation business

Six to eight years in, the business evolved. Bakhtiar had been spending time in industrial plants, and his partner Aamir Wain went deep on the software side. The hardware-import business split into two new businesses chasing two different kinds of demand: a software services business that Aamir led, and an industrial automation business that Bakhtiar led.

Muzamil asks him to explain industrial automation as if he were six years old. Bakhtiar’s answer is the cleanest version of the pitch in the conversation. Walk into an old textile mill and you will see things happening manually. Walk into a new one and everything is run from a single central panel where lights flicker and a programmable logical controller — the brain of the operation — is managing every machine. Avanceon’s earliest pitch was: keep your existing machine, we will upgrade the electronics and write the programming that turns it into something controllable from a panel. As the business matured, the work moved up the pyramid — first whole plants, then central control rooms, then logging the data coming off thousands of sensors into information management systems.

The goal of automation, he is at pains to point out, is not the cliché. “It is taken as if human resource will be reduced and labour will be reduced. They are actually elevated — their skill levels go up. But it is the repeatability of the process, quality, productivity and efficiencies. These are extremely important parameters.”

Competing inch to inch with multinationals

This is the section of the conversation where Bakhtiar explains the actual value proposition that built the company. In the early days, Avanceon was a small Pakistani company bidding against multinationals on industrial automation contracts for Pakistan’s largest industries. Muzamil asks how he convinced local industrial buyers to take the bet.

The answer turns on a decision they made early. “We made a principal decision that we will not invest in hardware. We will use the world’s best equipment. But our value addition is that we eliminate the engineering which comes from abroad.” Bakhtiar’s analysis of project economics at the time was that the equipment component of an automation project was roughly 30 percent of the cost. The remaining 70 percent — the engineering, assembly, integration, formula-writing, process tuning — was where a Pakistani company could compete. “Even if we turn ourselves upside down, we cannot compete with the equipment side. They are billions of dollars in scale. But yes, if we have confidence in our ability, we can fight inch to inch, foot to foot with anybody who can come from abroad and do a project.”

The catch was that they had to actually build that capability — hire engineers, train them, retain them, and prove it project by project. There were doubts in the early years. There were also lost projects. But the strategic claim has now inverted entirely. “We now command actually premium because we are in Pakistan,” Bakhtiar says. The reason is structural. Avanceon has 300 engineers in Pakistan available on a local call. A multinational competitor sells the same project with support that requires an international phone call. “If I have to sell outside with no support, even if I am cheaper, it doesn’t make sense.”

He also pushes back, gently, on a cliché that Pakistani founders often inherit. Muzamil tells a story about his wife’s notebook-planner business, where roughly a fifth of every shipment from China would arrive unsellable, and the industry consensus is that Pakistani manufacturing simply cannot hit the quality bar. Bakhtiar names a customer — Tapal, the tea company — whose operators, working with Avanceon, have driven shop-floor visibility and efficiency to a level he says he has seen in very few plants anywhere in the world. “Quality, if somebody does not understand it is important — survival is impossible in today’s world if you don’t focus on quality.”

The 2002 Engro investment and the 2010 IPO

Avanceon had been operating on organic capital for the better part of a decade when Bakhtiar decided it was time to raise outside money. In 2002, Engro took a position. The total investment was less than a million dollars — roughly six crore rupees at the time. The plan: build a state-of-the-art engineering facility in Pakistan and run a careful international marketing trial out of a tiny three-person Dubai office.

In early 2010, Engro decided to divest from its non-core businesses. Avanceon bought back the shares and went public. The IPO was not, in Bakhtiar’s framing, primarily a capital event. The team had already committed stock options to its leadership, and human resource was Avanceon’s product. Delaying the listing would have killed the excitement. Going public honoured the commitment.

Muzamil zeroes in on a question he says comes up constantly in Pakistan’s IT industry: why do most local services businesses not pursue equity, not pursue listings, and not pursue stock options for their teams? Bakhtiar is careful not to judge other founders’ choices. But on stock options he is unambiguous. “I will not discount that you have to give responsibility. Until you build an able, confident and responsible leadership team beneath you, a lot of things just cannot happen. For that middle tier, stock options have played a very big role.” He adds the benchmarking argument: top companies in his industry, anywhere in the world, do this. “When you are in business, benchmark yourself. See how top companies do the same thing outside your country in a competitive world.”

The Empiric AI share swap and the Octopus Digital story

Avanceon’s second outside-capital move was a merger and acquisition rather than a raise. The company acquired Empiric AI — a private machine learning company of around 35 to 40 people that had been working on industrial AI for about five or six years, with GE among its larger international clients. The acquisition was structured as a share swap with the Dawood Group, with no cash changing hands.

Bakhtiar’s framing of why the deal worked is worth quoting at length. The Dawood side was represented by top professionals, including Arif Janjua, the CEO of Dawood, who came out of BCG Boston. “We had open candid discussions. And I did not say, brother, their revenue is low or they made a loss. We looked at what they could do in the future. Very amicably we did it.” Muzamil notes — and Bakhtiar agrees — that the deal is a near-textbook example of the trust deficit Pakistani business usually does not get past. Avanceon trusted Dawood to act in good faith on the valuation; Dawood trusted Avanceon to actually scale what Empiric had built.

Empiric folded into Octopus Digital, which is the other half of the group story. Avanceon’s services work had naturally evolved into managing the entire data pyramid of an industrial plant — from sensors, to control rooms, to information management systems built on proprietary databases licensed from Aviva, Schneider and Rockwell, with Avanceon’s engineering on top. That layer of licensed software ran from a hundred thousand dollars to a million dollars per project. As cloud and IoT matured, Bakhtiar’s team made a contrarian call: build a cloud-native product that eliminates the proprietary stack entirely, run the whole information layer in Azure, and put the no-code interface on top of it.

The product is called OmniConnect. It moves OT data — the streaming, two-second-interval data coming off industrial plants — into a cloud data lake in big-data format. A person with two hours of training can stand up a project. It connects out to any business analytics tool the customer prefers, including Power BI. Octopus has built its own machine learning tools on top, running on open Python. Avanceon’s existing Pakistani customers — Tapal among them — are using the dashboards from the cloud.

”I learned accounting. I learned future cash flow modelling.”

One of the most useful sections in the conversation, for any engineer thinking about starting a company, is Bakhtiar’s account of how he taught himself the business side. He went to Engro as a young engineer with no formal business education. Then he went to the Pakistan Institute of Management and took the courses. Accounting for non-accountants. Detailed accounting. Whatever was on offer.

The first time he had to pitch investors, he ordered three books from Amazon on future cash-flow modelling. He realised he still did not know enough, called a banker friend who had been one of the earliest LUMS graduates, and treated him as a consultant and a tutor. They built the financial model together. Net present value, enterprise value, valuation, future cash flows in Excel. “You have to go out and look for it,” Bakhtiar says. “I think I have to learn new things every day. If you understand engineering, the rest of these things are not that hard to understand.”

He returns to the point in different forms throughout the conversation. The notion that a founder can stop learning once the money starts coming in is, in his words, “a strange kind of thinking.” Those businesses fade away. Those thought leaders fade away. “You will not hear about them after a while.”

What the new salary tax actually does to a Pakistani software exporter

Late in the conversation, Muzamil asks about the recent salary tax. Bakhtiar’s response is the most pointed political moment in the episode. He calls it retrogressive, and walks through the logic carefully.

The companies that document their employees’ salaries are also the companies that pay their own taxes. The new tax falls precisely on those documented, compliant businesses. Layered on top of that, individuals exporting services as part of the gig economy — selling, say, a thousand dollars of services directly to a foreign client — are not taxed at the same rate. The result, in his reading, is a straightforward distortion. “You have increased the cost of business of local companies by 25 to 40 percent. A Pakistani software exporter’s salary cost is now 25 to 40 percent higher than an international company hiring the same individuals. Is that fair?”

The behavioural consequence is what worries him most. A Pakistani company that wants to escape the tax can simply set up a small office abroad and contract the work back. Avanceon, he is clear, has foreign operations but does not do this — “because there is a notion that you are circumventing something, and why should anyone do that?” But at a policy level, that is what the structure is incentivising. He compares it to “giving incentives to export cotton but not to high-end textile products.”

By the end of the conversation, Bakhtiar and Muzamil have circled into the broader question of brain drain. Bakhtiar’s framing of it is, again, structural rather than emotional. “Brain drain is not just the engineer who leaves the country. An engineer who leaves a local company to work for a foreign company sitting in Pakistan is also brain drain. One day he will leave and go abroad too.” On talent quality, he is unsentimental. “I am very proud of the fact that our talent is quite world class — what we have managed to hire and retain. But the other challenges, the policies and the tax, these need to be addressed.”

The conversation ends as it began: with a Pakistani engineer who built a thirty-year-old company sitting in a Dubai office, talking about the country he still chooses to build from.