Discretelogix is an IT services company in Islamabad, and holds a position in Elance‘s both Top 5 Companies in Pakistan and Top 50 Companies in the World. Discretelogix is part of a group of 4 companies founded over the course of a decade by a group of friends. We had a chance to talk with Discretelogix CEO Farrukh Malik about all these ventures and how they came into being.
Tell us a little about Discretelogix, and the other companies you are a part of.
Farrukh: Discretelogix is an initiative of four friends – Zia Ghafoor, Ahmad Nadeem, Saqib Rafiq and I. We were class fellows during Bachelors in CS. We have founded three other companies along with Discretelogix as well – XS Mobiles, Xport (PVt) Ltd and BuyBest Enterprises (Pvt) Ltd (online store en route).
Our first venture was XS Mobiles (started in 2005), which is a chain of stores selling mobile phones and accessories, from which we started to gain entrepreneurial experience and raise capital to fund our dream of opening an IT company along with funding from friends and family. Our second business was Discretelogix which is a technology-based services company which was established in 2006. Discretelogix specializes in web & mobile applications development, game development, ecommerce solutions, graphic designing and online marketing. Our major target markets are the US and Australia, where we work on projects and dedicate our employees to companies to work service long-term contracts.
Riding off the (relative) success of those two businesses, we started Xport in 2009. We sell customized stitched to fit leather goods to American, Australian ad European consumers. We had started off exporting gemstones and sports goods, but moved to and eventually settled on leather products manufacture at our own factory in Sialkot. Our most recent venture is BuyBest Enterprises, which sells high tech computer and networking equipment in the Pakistani market.
All of these businesses are run and managed by us and our core team. We have divided responsibilities among ourselves so that everyone is doing the job at which he is best. Currently, I am the CEO of Discretelogix & CTO at Xport, Zia is CEO of Xport & Director Operations at Discretelogix, Sakib is CEO at XS Mobiles & Director Finance at Discretelogix, and Nadeem is Managing Director at Discretelogix.
We understand the Discretelogix is only one of 4 businesses you are the co-founder of? Can you talk about the other co-founders and the other companies?
Farrukh: I did my undergrad from the University of Arid Agriculture in Rawalpindi, where I met Zia, Nadeem and Sakib. We were great friends, and all of us knew that, number one, we did not want to work for someone else all our lives, we wanted to stay together and we wanted to open a technology company. After completing our Bachelors in Computer Sciences, we split up to pursue education in different fields around the world, but always remained in touch. I chose to go to NUST for a Masters in IT, Zia went to UK for Masters in Networks, Nadeem focused on freelancing and Sakib did his MBA from IBA. However, our dream of an IT company could not be realized right away when we reunited in 2005 because of a lack of seed funding. Once we reunited in 2005, the first issue we faced was the initial capital investment needed to start a technology company. Since we did not want to take any loans from banks and be in debt, we decided to raise funds from friends and family and earn from our much different business i.e Mobiles’ sales.
How did you fund these businesses?
Farrukh: Originally, we wanted to open a mobile phone shop in Rawalpindi i.e where we live. However the upfront costs were quite substantial hence we decided to partner up with someone already in this business. Now, no one wanted to go 50/50 and open up a new shop with mere rookies, so the best we could do was convince one shop owner to let us use certain counter space in his shop to sell our merchandise, i.e. accessories, SIMs and pre-paid cards. Everything we were selling was complimentary to what the shop owner sold, so both parties benefited from the sales that followed. After that, we opened a new shop with him and split the initial investment, costs and revenue. After a while, our partner liquidized his stake in the store and we finally had our first fully owned business. We continued running XS mobiles and currently stand at five stores. The revenue we had gotten from our partnership in the first year helped us launch Discretelogix along with funding from friends and family.
Once you did launch Discretelogix, what was your first step?
Farrukh: Our first step was finding customers, as is usually the case with startups. This was in 2006, and there were not a lot of avenues through which we could find clients in the local market. Hungry for work, we registered Discretelogix on Elance – the world’s biggest online marketplace for services – and started bidding on international projects. That was where we got most of our business in the first few years. Since then we have built a significant client base and reputation. Now, new projects come in through referrals, but we use Elance to show potential clients a third party ranking and what previous clients have said about our work. Currently, Discretelogix is one of the top 50 companies on Elance worldwide, one of the top five in Pakistan and yet to receive a single negative review. How we got there was through utilizing our personal and professional networks to find opportunities where we could help. Initially, a lot of family members and friends around the world connected us with people who were in need of the technical assistance we provided.
For example, our first referral client came through since the owner’s sister was a classmate of one of my friends. We reached out through him and assisted the company in its starting phases. Another friend in Hong Kong had a company developing a software product, and they outsourced Quality Assurance to Discretelogix. That business relationship was extremely beneficial for both parties, and today we are providing them with services in Quality Assurance, Development and Business Analysis. Your current clients can also be source of growth. For instance, we had one client in Australia with a business model similar to ours. When he could not continue his business due to personal reasons, he directed all his clients to us, which helped us breakthrough in the Australian market. Quality work attracts clients.
I think what helped grow our client base so rapidly was our transparency. Our website’s “About Us” section has a ton of information on us. We have micro-details of skill levels of developers, our computing infrastructure, labor growth, technologies we use, client types we service and other items. We allow our clients to know as much as possible about us so that they can trust us.
What is one problem you face that is unique to a service company.
Farrukh: An issue we have constantly faced and will probably continue to do so is expanding our team and making sure we have enough room for them. In the IT services industry, you have to expand human resources by X amount if you want to take on Y more amount of work. That is nearly opposite to what happens if you are a product company, where human resources is not linearly correlated to growth. Our first office in 2006 housed all four of us co-founders in I-8 Islamabad. From there, our entire team of 15-17 people moved. Then we moved again in 2011 as a 25-28 person company. We are now in our fourth office in 7 years, and housing 70 people. This office (in Software Technology Park) can hold about 80 people, and once we expand beyond that we will have to move again.
How did you start your export business and how is it going?
Farrukh: Three years after starting Discretelogix, we had gained enough confidence in our entrepreneurial abilities to open another business. We decided to another stream into our revenue as our revenue sources needed diversification, and hence we decided to export Pakistani goods. Not sure which goods would be best suited for this purpose; we started off with gemstones, which are relatively inexpensive and obtainable here. We drove to Peshawar, bought gemstones in bulk and looked towards eBay for customers. As is the case with starting any new business, we ran into difficulties early on.
Firstly, we could not set up PayPal accounts from Pakistan. We solved that issue by using our friends abroad to set and link the account accordingly. We started off by selling individual gemstones for $10-15 each, and since each gemstone is slightly different, each gemstone had to be individually photographed, packaged and shipped. It was not an easily scalable model. Being in Pakistan, we also faced moral issues when given no choice but to bribe government post offices. However, we had decided to be fair and honest, especially since what we were doing was 100% legal. We started backing off exporting gemstones and looked towards sports goods.
Sialkot was obviously the place we looked for quality sports goods to be bought in bulk. Given our lack of experience, we truly could not distinguish the higher quality product when two or more vendors would show us virtually identical goods for different prices. If we ourselves doubt the quality of a product in our store, how can we be sure our consumer is getting the high-quality product we are selling and that they are paying for? So we moved onto leather goods.
In terms of quality and craftsmanship, work done in the leather industry here is unparalleled. Workers can recreate any design and accessory they are shown a picture of. Our initial foray involved putting up a basic website with general images with local workers from Islamabad/Rawalpindi ready to work on orders; just to dip our toes in the water. Everything was started on a small scale and we adjusted our processes as the business took off.
With sales increasing, stitching was moved to Sialkot. As we streamlined processes, we expanded aboard towards Australia and the US. We partnered with our contacts in those countries to ensure that there was a local to handle customer service, while we handled everything else – order processing, leather cutting, packaging and shipping. Xport’s websites in those regions sell the same products, but have different interfaces. We have realized that for a particular region, for example in Australia, an .au site attracts more people because they are more comfortable. Soon, we will be launching this in the UK and Canada to pull in more customers.
Farrukh: An issue with working with local merchants is that many of them care more about the quick sale rather than long-term relationships. For example, we want all our leather goods to meet a certain standard of quality, whether it is the leather, the stitching, the workmanship or the cutting. Irrespective of that, a tailor you have subcontracted can easily replace a zipper with another of lesser quality to slip a little more into his own pocket. A faulty component, or one with noticeably lower quality, could destroy our credibility in our customers’ minds. After much dissatisfaction with the people we had hired, we opened up our own factory in Sialkot and hired someone we trusted to oversee the 15 people working over there. There is no compromise on quality, even if the resulting profit margins take a hit. Our reputation in the industry is more important in the long run.
How do you differentiate Xport from other leather ecommerce sites that may sell similar quality?
Farrukh: The major difference between others and us is how we treat our customers and how easy it is to buy exactly what they want. Features like free shipping return options and full refunds are pretty standard in e-commerce, and we try to go beyond that. First, we let customers know exactly what stage their ordered item is in, Customers are alerted as their product moves through cutting, stitching, quality checking, packaging & shipping. Second, the order process is as easy and compressed as possible. Clothing orders can be completely customized if a customer cannot find his or her size, and we try to make sure they find it easy to assess the exact fit they need. Customer can get any jacket in their desired colors. We have a guide next to each product page that helps consumers determine which measurements they need, and how to take them. The customer should get what they want, and that is why we recently launched a celebrity jackets section, which has been a huge hit. We have jackets with designs related to Wolverine, Captain America, Spiderman and even Uma Thurman from Kill Bill – available for both genders.
Furthermore, from our perspective, it is very easy for us to change anything on the website’s front-end or back-end because our own IT company is powering Xport. We do not have to wait long for changes to be made and have complete control over the websites’ design, usability and back-end. This also means that costs are significantly reduced, as there is no need to hire another firm, which is an investment in itself. We try to do everything in-house; even the photographs are taken and edited by our own employees. Additionally, the website helps us advertise and get leads with companies looking for similar platforms because it has a footer with “Powered by Discretelogix”.
How do you manage your time between all the 4 ventures?
Farrukh: Each of our business is in an entirely different domain. Therefore, us four co-founders can neither oversee all operations nor know everything there is to know about that particular industry. Our success is based on the fact that we believe in expanding our ventures organically and trusting the right people with out endeavors. Instead of utilizing and straining our core team whenever we try something new, we hire and empower people in the industry with more responsibility in terms of decision-making and revenue sharing. We do all this with honesty and fairness. This has helped us to do well in the industries we have tried to enter, create a strong team with a capable leader and expand our networks in various markets. For example, Sakib is overseeing XS mobiles, and a single person cannot handle multiple shops, so a handful of key people are responsible for day-to-day management while our core team handles policy making. In Discretelogix, department heads have a lot of authority. They can request resources of all sorts, makes changes in the department and approve employee perks etc.
Another thing that we believe in is to open heartedly share revenue with our employees, the same people that are the reason we get this revenue. We have a second level of management in Discretelogix – people that have spent 2 – 3 years with us and are extremely hardworking and smart. They get a share in the revenue, giving them an incentive to improve this company constantly. Our employees take ownership and responsibility of their work, and we are always looking for ways to bolster that.
What is your role and how has it changed?
Farrukh: From day one, roles and responsibilities were not written in stone. They cannot in startups. The only responsibility we had to fulfill 24/7 was to work and make major decisions as a team, regardless of titles. All these businesses can be run separately, but we choose to do so as a team.
As for roles, we decide who works best in what space, and shift people accordingly. What our titles are and what we do in those roles evolve along with the company. When we started Discretelogix, my business card said “Software Engineer”, then “Sr. Software Engineer” after two years and finally “CEO”, even though I was fulfilling the later role all along. Today, I would have been the CEO of Xport or BuyBest or XS Mobiles had we decided that my skills were better suited to that industry.
Currently, as CEO of Discretelogix, my role is that of strategic planner and the public face of the company. It is my responsibility to represent the company, as I am doing in this interview. It is also my responsibility to make decisions that would bolster productivity. For example, I helped oversee the development of our own project Management system, which is designed to connect us to our clients and let them know the details of their project. On the platform, we list the human resources allocated for the project, such as developers, designers or QA engineers – all to increase transparency. Milestones and status reports are shown. The platform also allows a separate window where communication pertinent to only that project can flow between different personnel, departments and the client. Another example is the decision to switch to and use Google apps, such as Gmail, Drive and Calendar, as our primary communication and collaboration platform. Today, we save $5000 every month because having domain emails on Google is no longer free.
How do you find the right person in the IT industry?
Farrukh: We have a thorough interview process in which we access each candidate’s skills. If they are up to par with what we need, we include these people in our team but the evaluation never really ceases. We have a matrix to judge the competencies of our employees, looking at a variety of qualities and skills, technical and non-technical.
The team lead assigns numerical values, from -5 to 5, to quantify employee skills. Once we do hire someone, it is not uncommon to see negative grades for him or her in the first few months. We do not expect perfection in all areas, but do require improvement. Those who do not improve are let go. Those who exceed expectations are frequently promoted into leading roles. For example, we are creating an internal department to handle marketing services, and the project lead is an employee who has proved himself in the past. Executives are also hired from within.
We do have to make an extra effort to monitor performance across the board, and we do so using our own version of task reports. Google Calendars of each employee are linked to his or her task report, and includes that day’s agenda, responsibilities, completion reports of tasks, time spent on projects and tasks for the next day. These items allow flexibility and can be moved around, but completion of tasks or changes are verified by team leads, in order to confirm authenticity. These task reports and monthly skill-set reports of employees use numbers to rate performance in particular areas, and the statistics are aggregated to generate an overall picture of company productivity for management.
What is the future of your ventures?
Farrukh: We are always vigorously expanding our existing businesses as well as looking to open new ventures. For example, we are working with Professor Kashif from Global Entrepreneurship Week to help people making hand-made products for the local market by expanding their market reach and accessibility. However, I cannot tell you what we have planned for the next few years. We usually try to do what we are currently doing as well as we can, and plan for only the quarter ahead.
Any advice you give to aspiring entrepreneurs?
Farrukh: The most important thing is your idea/vision – what you are bringing into the market, whether it is a new product or service or a significant improvement on existing ones. Coming up with new products or services is slightly over-rated because people looking in that space come across a very limited pool. Look at what already exists and can be improved. How you are better than your competitors, whether you are a new market entrant or have been in a space for a long time. That will be your competitive edge and you will have to keep it sharp. For example, you can improve on the already existing idea and implementation of a meat or fruit shop, and have a viable business model. Next most important thing is Team, you know very well 1+1=11. Of course, be smart about what you plan to do, hard work is good but Smart Work is even better. Plan your project well, determine the milestones you have to reach, and allow flexibility. I also cannot stress Sincerity and honesty enough. Be sincere with your team, your customers, and your partners. Treat people in your company well, reward those who are working hard, and develop a culture of openness, trust and collaboration. That is how you can keep a team intact and have it become more than the sum of its parts.