Transformation of software industry in Bangladesh

For the technology driven leading-edge companies in Bangladesh, when it comes to becoming a global brand considering both conventional and unconventional ways, meeting the service demands of the savvy consumers is the highest priority.  The global software & services industry grew by 4.6% to reach a value of $2,596 billion in 2012. Then the Compound Annual Growth Rate (CAGR) increased up to 4.8% in the period 2008 to 2012. The global software & services industry declared forecasts showing a value of $3,223.4 billion by the end of 2017 with an anticipated CAGR of 4.4% for the last five-year period from 2012 to 2017. In recent years, Bangladesh is recognized as one of the emerging IT outsourcing and software exporting countries in southeast Asia. One of the most prominent factors that brought us the global remark is the booming IT industry besides RMG revenue during the last few decades. The contributions being made by the IT industry towards the country’s GDP has led to a steady growth of the Bangladeshi economy. While comparing with our neighbor country & one of the strongest competitors in southeast Asia, Indian IT industry is regarded as a hub of innovators providing world class technology solutions across the globe when we are still thriving to get our names out in the light provided our good works around the globe. But in the last ten years, we’ve seen remarkable changes in the growth figures. Renowned international organizations already opened their local offices here in Bangladesh including Microsoft, Accenture etc. This contributed in intangible exports of software and outsourcing of talents achieving a global standard.

Over the last few decades, we’ve witnessed much ups and downs in our IT industry. Today people from diverse industry and needs adopting information technology more than ever. But a few years back the scenario was not the same. The usage of the internet was very limited and not everybody was aware of its miracles. But with new innovations and developments, IT has burgeoned to become the most integral part of every industry and every way of life. Therefore, the benefits of IT industry cannot be limited to software development alone, the technologies can be applied to areas like hospitals, banks, schools, libraries, airports, shops and many other places with the help of database management systems or through custom made software as per the requirement.

Domestic Market Insights

Our local market still constitutes the major part of a business of the software and IT service industry (which is almost 63% of the local market). There has been a consistent growth (around 20-30%) in this market over last few years. The trend also shows that the market is maturing in terms of both client requirement and solution response from IT companies.

Banking and other financial organizations (including capital market, Insurance, Leasing, MFIs) still continue to be the major focus for a large portion of IT companies in Bangladesh. In the banking sector, the core banking software market used to be dominated by foreign software companies (though in a number of cases local solution companies are working for implementation and maintenance for those software projects). However, interestingly a good number of local IT solution providers are working with banks for providing a range of ancillary services related to banking (i.e. Internet banking, mobile banking, FDI Automation, Treasury Office Management System etc.). Because of the increased activities in Bangladesh capital market during recent years, a number of companies have developed solutions for merchant banks, brokerage house and issue managers. As regulation in the micro-credit/Micro-Finance Institutions (MFI) are getting more stringent and more pressure is on for operational efficiency, a number of MFI solution development companies are targeting this otherwise untapped market.

Manufacturing sectors including RMG, textile, pharmaceuticals and other consumer goods industries have created sustainable demand for IT solutions like ERP, HR information system, production and financial management solution.

On the other hand, service industries like telecom (second highest after financial sector within service sector), retail & wholesale, healthcare (hospitals, diagnostic centers etc.), education (University, schools and colleges), publishing/media and real state have created sizable market space for IT solution companies.

A good range of software and IT service companies who provide non-specialized services are surviving on business demand generated across different client industries. Examples of such general IT solutions are accounting solution, website development, CRM, sales automation, office management, security solutions etc. The local software industry has been trying to keep pace with the most recent development going on across technology and communication space. A number of companies are developing apps for mobile and other hand-held devices. Some companies are also providing services (platform or content service) in the new business models like pay per use, primarily using the mobile distribution channel.

 

As it’s seen, our IT industry has matured over time. The industry is no more remaining on the sideline. It has joined the mainstream and not only the industry is contributing significantly to the national income, but also, it has been playing very crucial role in creating high-quality employment for a sizable portion of young graduates of the country. The presence of a high number of young entrepreneurs and startups is one of the distinctive features of this industry. We have seen many tech-savvy young graduates, returning from abroad after finishing education, to start their IT ventures in Bangladesh. Many Venture Capital companies are also investing in tech startups in Bangladesh recent days.  Despite many local and global challenges, our young spirited entrepreneurs are doing remarkably well in building sustainable business organizations through their hard work and passion. Certainly, the enthusiasm and resilience of the young entrepreneurs are the main driving force of Bangladesh IT industry now, but the existing local leaders are also the ones we’re looking forward to putting our remarks on a global market.

According to BASIS survey, there are over 800 registered software and ITES (IT Enabled Service) companies in Bangladesh. There are another few hundred of unregistered small and home-based software and IT ventures doing business for both local and international markets. The total industry size is estimated to be around US$ 400 million. Approximately 70,000 professionals, majority IT and other graduates, are employed in the industry. Though compared to other traditional mainstream industry, the contribution for overall employment creation is not significantly high, but if considered in terms of creating high-quality employment (average monthly compensation over Tk. 15,000 per month), software and IT the service industry is surely one of the top graduate employment sectors in the country.

Key drivers for growth in the IT sector are-

  • Low operation cost and tax advantages
  • Supportive policies from the government
  • Availability of technically skilled manpower
  • Rapid introduction of IT technologies in major sectors such as telecom, BFSI.
  • Potential growth in export demand
  • New technology usage like Cloud Computing
  • Government established Special Economic Zones (SEZ)s

New innovations and developments like technologies in cloud, big data, analytics, mobility, social media and internet of things have become the latest buzzword and the need of the day. Bangladeshi companies are also keeping the track of these changing trends and are pulling their sleeves up to change their products and services to accommodate them in these areas so that delivery procedure can be enhanced with the help of IT innovations. Also for the software companies, there will be a regular need for upgrading skill sets, particularly in this decade where some revolutionary trends will probably fundamentally redefine the technology marketplace, probably immediately in the outsourcing market, but gradually in the local market as well.