Thursday, August 11, 2011

Bangladesh Software sector at a glance

The software and information technology enabled services (ITES) industry in Bangladesh is estimated to be worth around Tk 1,800 crore ($250 million).

The sector employs approximately 30,000 professionals, mostly IT graduates, according to a survey report by Bangladesh Association of Software and Information Service (BASIS).

Software size distribution

BASIS recently carried out a survey on 300 of its member companies. It analysed business nature, business volume and the size of companies. Over 70 percent of the companies are found to be involved in development and maintenance of software for their clients. A number of those are simultaneously engaged in providing different IT enabled services, such as data or form processing, graphic or web designing, and content management.

BASIS is the national trade body for software and the ITES industry of Bangladesh that was established in 1997. The association started its journey with only 17 members. Today membership stands at more than 450.

According to the BASIS survey, there are over 800 registered software and ITES companies in Bangladesh. In addition, there are a few hundred unregistered small and home-based software and IT ventures doing business for both local and international markets.

Around 45 percent of the companies are focusing or diversifying different web based services, that include specialised portals, listing services, e-Commerce, e-Learning, and payment intermediary services. Off late, some companies are also developing web applications based on the cloud delivery model, which is a new system that keeps information in remote servers rather than in personal computers. A majority of the companies in Bangladesh employ between 10 and 50 people with small revenue sizes as well. However, there are a few companies that have significant revenues with a relatively small employee base, according to the survey.

Domestic market:

The local market still constitutes a major part of the business of the software and IT service industry. Some 63 percent of BASIS member companies are focused only on the local market. There has been consistent growth -- around 20 to 30 percent -- in this market over the last few years, according to the report.

The local software companies recorded a total of Tk 790 crore in revenues last year. Although there is a high level of interest for IT jobs in the public sector, the market is still dominated by the private sector. A total of 110 IT solution companies are focused mainly on domestic market.

BASIS also published a catalogue styled 'Software and IT Services Catalogue 2011'. The catalogue includes 233 products and services of 110 software and IT enable services companies.

Mahboob Zaman, president of BASIS, said the catalogue gives a complete image of the Bangladeshi software industry that will answer all queries that buyers may have. It is a complete snapshot of the industry. He said the catalogue gives a detailed profile of each product and service of the companies, with information on client benefits, specific product features, representative client list and other related facts and figures.

According to the survey, a large part of the IT industry provides business application solutions including, accounting software, human resource software, sales automation, and inventory management systems to the private sector.

Banking and other financial sectors, including capital market, insurance, leasing, and micro-finance institutions, still continue to be the major focus for most IT companies. The core banking software market is dominated by foreign software but in a number of cases local solution companies are working to implement and maintain the software.

Interestingly, a good number of local IT solution providers are working with banks to provide a range of ancillary services related to banking, the report said. Because of increased activities in the Bangladesh capital market in recent years, a number of companies have developed solutions for merchant banks, brokerage houses and issue managers.

The survey observes that the manufacturing sectors, including readymade garments (RMG), textiles, pharmaceuticals, and other consumer goods industries have created sustainable demand for IT solutions, human resources information system, and production and financial management solutions.

On the other hand, service industries like telecommunications, retail and wholesale, healthcare (hospitals, diagnostic centres), education (university, schools and colleges), publishing and real estate have created sizable market space for IT solution companies.

A good number of software and IT service companies who provide non-specialised or non-focused services are surviving on business demand generated across different client industries. Examples of such general IT solutions are accounting, web site development, customer relationship management, sales automation, office management, and security solutions.

The local software industry has been trying to keep pace with the most recent developments going on across the technology and communication space. A number of companies are developing applications for mobile and other hand-held devises, said the survey.

Export market

Over the last decade, the software and IT service industry could not perform according to its potential on the export front, according to the survey. The export value is still meagre compared to other outsourcing countries in the region. As reasons behind this lacklustre performance, industry experts have identified a number of problems, including a lack of proper infrastructure, shortage of qualified IT resources, and an absence of international branding and marketing activities.

The local industry earned $41.47 million from exporting software and ITES from July 2010 to May 2011. In 2010 and 2011, there were a number of achievements that made the industry upbeat about export trends in the coming years. Currently, there are at least 10 small to mid sized offshore development or back office service centres (established in the last 3-4 years) operating from Bangladesh. In addition, at least 30 joint ventures have been set-up in Dhaka in the last few years and these are providing offshore services to clients in North America, Europe and the Far East.

In December 2010, Gartner, one of the most respected global consulting groups, has published a list of top 30 outsourcing destinations of the world, and Bangladesh was included in the list for the first time. Gatner publishes this list every two years.

According to BASIS, this recognition is certainly going to positively influence the perception of prospective overseas clients. There already are signs that global companies have started to seriously consider Bangladesh as their outsourcing or back-office location.

In late 2010, Samsung, a global leader in the consumer electronics industry, has opened up its high-end research and development centre in Bangladesh with over two hundred engineers. Also, there are a few other global IT companies, such as AMD, LG and IBM, that are also currently in the process of setting up their back-office research and development or support centres in Bangladesh.

Apart from the formal corporate outsourcing/off-shoring initiatives, there has been a new trend in individual/group-based outsourcing (alternatively called as freelancing) in the last couple of years. These are informal initiatives taken by young IT professionals, some still students, who are acquiring clients through various online marketing channels.

These include software, web design, mobile application, graphic design, search engine optimisation, social media marketing, and data processing. Although these informal initiatives by freelancers are small individually, their aggregated contributions in employment generation and export earnings are not insignificant. Proper estimation is not possible as their income often is not recorded officially as earning from IT service exports.

Industry experts feel that if properly supported and guided in areas like business development, investment planning and organisational capability growing, this new class of entrepreneurs would definitely contribute more to the industry.

According to the BASIS survey, there are over 160 BASIS member companies who have export in their portfolio. Around a third of those companies are 100 percent export based. In terms of export destinations, North America (mainly USA; a major part of business in US market is still done through the non-resident Bangladeshi linkage) still dominates, while in Europe, countries like UK, Denmark and Netherlands, have emerged as major destinations in recent years.

News Source:
The Daily Star

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