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The State of the ICT Sector in Bangladesh

Published on April 16, 2017

Thump thump… Silence. Thump thump… Silence. Mr. Anubal, a hotshot IT consultant
looks around at the scenery as his taxi hurtles through one of India′s longest flyovers.
Then, he notices his destination passing him by to the right, the head offices of Infosys,
one of the largest Indian IT firms. Welcome to Bangalore, the Silicon Valley of India. It
is the darling of western companies and is seen as the defacto destination for
outsourcing from the most simple of office operations to the most complex of business
processes.

The city however wasn’t always known as a tech hub. Instead, it resulted from the
vision of a top infrastructure development firm, Keonics in the late 1970s and
subsequently the political leaders of India during its liberalization in the early 1990s.
Today, Bangalore is known as the outsourcing capital of the world.

At the initial stages of Bangalore as an outsourcing hub, business development

worked a lot like a game of football, where Non Resident Indians would act as the
midfielders, integrating themselves into the tech elite, networking and bringing in work
for their partners in India – the strikers; these were IT professionals who were picked
from the country′s top engineering schools such as the Indian Institute of Technology
(IIT), commanding cheap rates but nonetheless offering dedicated and skilled labor. The
rest as they say, is history.

Today, in 2016, the small delta of Bangladesh, housing the world′s 8thlargest
population needs to develop these midfielders and strikers and get on its way to
becoming the next India of outsourcing. Bangladesh needs more institutes similar to
IIT so that those outsourcing work to Bangladesh don’t have to be afraid of Messaging
not finding
the right talent. With the right set of structured actions, Bangladesh can leapfrog into the
domain of IT/ITES outsourcing heavyweight by leveraging its inherent advantages.
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1.    Background of the ICT Industry in Bangladesh

Bangladesh′s ICT industry has been developing slowly over the past three decades,
culminating to hundreds of millions of dollars of value addition every year recently. In
fact, Bangladesh is now considered to be among the next high prospect destinations in
the segment, with accolades from AT Kearney, Gartner, Goldman Sachs and a host of
others. The industry has seen strong growth over recent years, characterized by local
demand as well as global exports. Total earnings of the industry in FY 2014 was USD
600 million, out of which exports amounted to USD 132.5 million.

Source: AT Kearney Outsourcing Destination Rankings

Because the ICT industry encompasses technology, it is fast changing with fluid
categories that often merge into each other. The industry segmentation has been
designed keeping this in mind.

The ICT industry can be divided into two broad categories; IT and ITES. IT
services can be broken down into Application Services (that include systems
integration, IT infrastructure and consulting) and Engineering Services (including
hardware and software development and testing).

The ITES category on the other hand can be categorized into Horizontal Process
Outsourcing (including call centers and business process management such as HR and
Supply Chain functions), Vertical Process Outsourcing (including banking,
manufacturing, telecom, pharmaceutical), Knowledge Process Outsourcing (including
business research, animation, data analytics, other specialized processes) and lastly, the
latest entry into the segment, Automation Services (including task automation and
Business Process as a Service; BPaaS).

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The 1,500 IT/ITES companies currently registered in Bangladesh, are involved in
most of the mentioned verticals of the ICT value chain, ranging from customized
Kashifdevelopment
application Choudhury and maintenance, to BPO services throughout the
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Local demand has largely been driven by banking, telecom, pharmaceutics, RMG and
Textile sectors, which has also built up capacity in the sector to export services.

The ITES segment in Bangladesh covers the entire gamut of operations which exploit
IT for improving efficiency of an organisation, driving revenue growth and increasing
profitability. This in turn can be broken down into horizontal, vertical and knowledge
process outsourcing (categorized broadly as BPO).

The ITES category consists of specialized services that rely on technology for delivery.
Including voice services, data processing and animation among others. This represents a
major portion of Bangladesh′s ICT market exports, standing at 17%. The IT segment on
the other hand includes services that require extensive technical expertise to accomplish.
These include services that offer Platform as a Service (PAAS), Software as a Service
(SAAS) models to help businesses reach their goals. Furthermore, technology
consulting, product design, infrastructure development, systems integrations and ERPs
are all examples of IT Services.

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 Kashif Choudhury Follow 25 1 Write an article

Software development on the other hand is another part of the IT services segment. It
falls under the engineering services section of IT services and is extensively sought after
by international firms looking to outsource this facet of their operations abroad. This
segment has opportunities ranging from platform and software development to testing to
specialized software design and beyond. This segment is the driver of digital growth
around the world and world class expertise in this field are always sought. Bangladeshi
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companies have been outsourcing these services for a while now and have recently been
joined by freelancers from across Bangladesh sourcing work from online platforms like
UpworkKashif
and Choudhury
Freelancer on Follow
their own. However, the integrated and multidimensional
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nature of the software development arena requires the support of teams, with multiple
capabilities, that can only be found in firms.

Source: BASIS & LightCastle Research

2.    ICT Industry Fundamentals: The Numbers, Past, Present and Future

The ICT industry in Bangladesh has grown to 250,000 people, with 1500+ companies
and revenues near USD 500 million. On top of this are the legions of freelancers
registered in platforms like Upwork and Elance who have gained a reputation for
providing quality service at affordable costs; albeit at the lower tier job categories.

The fundamentals of the industry are summed up in the diagram below.

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Source: BASIS

Kashif Choudhury
The fundamentals above have been supported by coherent and supportive25government
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policy, push from the industry and the leadership of associations like BASIS. Being an
industry with a global outlook, total exports are crucial to the long term viability of the
ICT sector and should be given due importance.

The sector currently brings in a paltry USD 132.5 million, which is dwarfed by the
billions earned by the top exporting sector of the country, RMG. However, there is
scope for enormous expansion in the sector, driven by insatiable demand from
developed and developing countries alike as all facets of life and business move into
the digital realm, taking with it the demand for digitization, automation and
economization of IT.

Currently, the USA, UK, Canada and Australia are the top outsourcing destinations for
Bangladesh.

Source: BASIS

3.   The dream

The prospects of the sector have compelled the government of Bangladesh to set a target
of USD 1 billion export earnings by 2018. The scenario is depicted below.

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Source: BASIS & LightCastle Research

Kashifhas
Bangladesh Choudhury
to think bigFollow
and think different in order to achieve this mammoth
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Current growth rate forecasts show exports to be USD 490 million by 2018. Less than
half of the target amount. As with all things technology, there is a way however, but
it will require everyone from the freelancer working from his home in Rajshahi to the
policy makers at the very top to completely disrupt their operating model.

4.    The Game

Bangladesh has to overhaul its ICT outsourcing efforts with combined efforts from the
government, private sector, Non Resident Bangladeshis, the government, and the entire
gamut of institutions that the sector encompasses.

Broadly speaking, the problems of the sector can be categorized into three. The
problem-solution matrix is identified below.

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 5.    Time to Get a Move On

At USDKashif
132.5 million, exports
Choudhury
of the ICT industry have a long way to go.
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But the1 Write an article
essentials such as government will, private sector capability, talent availability and
enabling infrastructure are already in place. Now, with the right set of structured
actions, Bangladesh can leapfrog into the domain of IT/ITES outsourcing heavyweight
by leveraging its inherent advantages.

This post was originally posted at the LightCastle Blog

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Mehedi Hasan 6mo

Social Media Marketing at Personal Loans On Spot Pty Ltd

Thanks for the post!

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