Software industry: Bright future
INFORMATION technology and business are becoming inextricably interwoven. I don't think anybody can talk meaningfully about one without talking about the other." -- Bill Gates
The software and information technology enabled services (ITES) industry is one of the most promising sectors of Bangladesh, with several growth drivers, like a large pool of efficient young professionals, collaborative environment with the government, dynamic leadership from Bangladesh Association of Software and Information Service (BASIS) and positive media involvement. Some twenty years ago, this industry predominantly existed as a hardware vendor market with little or no value addition on the local front. A series of programmes was initiated in 1997 with specific focus on export of software and IT services.
Over the last decade, Bangladesh has pushed the idea of an Information and Communications Technology (ICT) driven society, but with no significant progress except on the telecommunications front. The government amended copyright laws for software and other intellectual properties in 2000, instituted ICT Task Force in 2001, approved ICT policy in 2002, and established an ICT incubator along with an e-governance programme under the ICT Task Force in 2003. The IT sector was declared a key priority by the previous government (2007-2013) since it fits their ongoing campaign to create a “Digital Bangladesh” by 2021. However, poor infrastructure, including frequent power crises, and slow and unreliable internet connections are the most immediate problems.
Today, this industry is estimated to be worth around $400 million, where approximately 70,000 professionals, mostly IT graduates, are employed. As per BASIS, there are over 800 registered software and ITES companies, along with a few hundred unregistered small and home-based software and IT ventures doing business for both local and international markets.
Some companies are developing web applications based on the cloud delivery model, thus defining a new wave in the IT industry. A large part of this industry provides business application solutions including accounting software, human resource software, office management and security solutions, and sales automation and inventory management systems to the private sector. However, a major focus for most IT companies still continues to be in the banking and other financial sectors.
IT companies have created a sizable market space in service industries like telecommunications, retail and wholesale, healthcare, education, publishing and real estate. The growth in the software and ITES industry has been driven by this growing IT automation demand in the domestic market. The impressive trends in software exports in recent years played a deterministic role as well. Bangladesh has made major strides in laying the groundwork for a diverse and successful outsourcing market, particularly in 2010 and 2011.
A new trend is the individual/group-based outsourcing, also known as freelancing. These are informal initiatives taken by young IT professionals and students to acquire clients through various online marketing channels. Freelancing activities mainly include software, web design, mobile application, graphic design, search engine optimisation, social media marketing and data processing. Exports from the software and ITES sector were around $100 million in July-May 2012-13.
In terms of export destinations, North America (mainly USA) dominates while UK, Denmark and Netherlands have emerged as major destinations in recent years. Besides regular exports to Australia and Japan, a number of IT companies have also achieved considerable success in mobile related applications and communications in Malaysia, Singapore, UAE, Saudi Arabia and South Africa. The IT sector of Bangladesh is expected to reach a target of $1 billion within the next few years.
Despite facing challenges like high price of internet bandwidth, absence of submarine cable, lack of infrastructure, skilled human resources and software Technology Park, it was said at the BASIS IT Marketing Forum 2013 that the IT sector is an untapped opportunity with huge possibilities. It is considered to be a thrust sector today, due to its rapid expansion and growing contribution to the economy.
The software and ITES sector is not only contributing significantly to the national income, it has also created high quality employment for young IT graduates. Many tech savvy young graduates, some of them returning from abroad after completing education, have started their own IT ventures over the last few years. In spite of various local and global challenges, these young entrepreneurs have successfully established their businesses. But new software companies often face lack of government support.
The absence of policy reforms for software export and import, strict regulation, tax waiver for internet use, bank loans and content development efforts by the government make the survival of new IT companies difficult. The current competition level in the software industry is another major challenge, since many large and small local companies provide fierce competition to new initiatives of small companies. Established software companies have the advantage because they are already known in the IT sector, and sometimes because of their attachment with established organisations.
Both large and small software and IT companies specialise in various types of applications and software that provide services in different industries. Most of the applications are in software development, software testing, IT consulting and, in recent times, game development. However, most people know little about their service offerings. As a result, the user base of the companies is limited. One reason is lack of promotion. The existing companies should create awareness among the current and potential IT users from both private and public sectors to establish their IT solutions in the market and define their promotional and marketing strategies accordingly.
To achieve recognition among the users of software and web, mobile and game applications, companies need to conduct research on the demands and recent trends of the software industry of Bangladesh as well as the overseas markets. A major part of the business still comes from the local market. Based on clients' feedbacks, they can plan changes to their current service offerings or innovate future strategies. In addition, new companies can follow the key players in the industry and learn about their service offerings and strategies to survive in the competition in domestic market and enable companies to compete with the international players in the software industry.
The writer is an Associate Professor and Chairman of Department of Management, School of Business, North South University, Dhaka.