bangladesh it and telecommunication industry

8/4/2019 Bangladesh It and Telecommunication Industry

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BUSINESS OPPOrTUNITIES WITHIN

THE IT AND TELECOMMUNICATIONINDUSTrY

BANgLADESH


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Danida

A sector study prepared for Danidaby Hndvrksrdet (The Danish Federation ofSmall and Medium-Sized Enterprises)in collaboration withMuhammad Hasibul Hasan,

Bangladesh

November 2006

Business Opportunity Studywithin the IT and

Telecommunication Industryin Bangladesh


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Ministry o Foreign Aairs o Denmark

Danida

November 2006

Publisher

Ministry o Foreign Aairs o Denmark

Asiatisk Plads 2

DK-1448 Copenhagen K

Phone: +45 33 92 00 00

B2B service line: +45 33 92 00 55

Internet: www.b2bprogramme.com

www.b2bprogram.dk

Production

The Danish Federation o Small and Medium-Sized Enterprises (DFSME)

Islands Brygge 26

DK-2300 Copenhagen S

Phone: +45 33 93 20 00

Internet: www.hvr.dk

and

Muhammad Hasibul Hasan

Apt. # C5, H # 8, R # 13

Dhanmondi Residential Area

Dhaka 1209, Bangladesh

Phone: +880 2 8120872

Cell phone : +880 189 286926

Design

Designgrak.dk

Coverphoto

Kristian Granquist

The report can be downloaded rom:

www.b2bprogramme.com

ISBN 978-87-7667-764-0 (Internet version)

ISBN 978-87-7667-765-7 (print version)


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Executive Summary

ICT industry in Bangladesh

Industry prole

ICT industry in Bangladesh is relatively new in comparison to other business sectors.However, the unlimited potential o the ICT sector has commended inquisitive interestsrom all concerned. The impact o global hype o the ICT sector is clearly visible inBangladesh as well. In the recent years, the local ICT sector has grown enviably.

With over 3,000 local enterprises operating in hardware, sotware and ISP segments, thesize o Bangladesh ICT industry at present stands at USD 160 million. With the advan-tage o earlier initiation, the hardware segment dominates the market share (65 per cent)

while the relatively late entrant, sotware segments command about 15 per cent o thetotal market. The ITES segment (15 per cent) and Internet and Network Services (5 per-cent) make up the remaining part o the market.

The sotware segment is relatively new in the market; however, the segment is showinghealthy growth in terms o export earnings. According to Bangladesh Bank sources,export earnings rom Sotware and ITES was USD 27.01 million in 2005-06, registeringa growth o 113 per cent rom the previous year. The sotware companies in Bangladeshmainly ocus on servicing the IT/ITES needs o the local leading sectors like Garments,Banks and Government. At the same time, leveraging the global nature o the IT busi-ness, the local entrepreneurs are always looking or international opportunities. Thanksto these eorts, Bangladesh now has become one o the most potential outsourcing desti-nations in the world.

The core strengths o Bangladesh ICT sector is the people. An educated, trainable andyoung workorce working in this sector possesses the required skill sets to compete in theglobal scenario. A BCS source revealed that in 2006, the number o IT proessionals inBangladesh was 25,200, which was 12.50 per cent higher than in 2005. The majority othis work orce excels in pure technical tasks such as programming and networking. Inact, a survey conducted by BASIS on 1,100 employees o 55 IT companies revealed that,respectively, 42 and 14 per cent o the respondents were engaged in programming and net-

working jobs. However, the same survey states that, much to the delight o the industryexperts, the number o non-code personnel in the IT companies is rising at ast pace.

The success o the IT industry has prompted many relevant associations to evolve to pro-vide ocal points or entrepreneurs and oreign investors. The government o Bangladeshhas declared the ICT sector as thrust sector. The creation o a separate Ministry or ICT(Ministry o Science and Inormation and Technology), ormulating avorable laws andinitiating government IT projects are encouraging steps or the local/international inves-tors in the Bangladesh ICT industry. In addition to the policy development, the govern-ment is keeping close interactions with various industry associations. BASIS, BCS, BCCand ISPAB are some o the apex bodies working or the improvement o the ICT indus-try in Bangladesh.


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Labour orce

Bangladesh enjoys a clear competitive advantage in its IT labour orce. The leading uni-versities in the country provide world class IT courses. Each year, various institutionsproduce about 2,000 IT graduates. In addition to that, a huge number o non-IT gradu-ates are working in the sector as well.

The most signicant advantage o the Bangladeshi workorce is the low wage rates. Thesalaries or IT proessionals could be as low as USD 75/month. On the other hand, thehigher salary ranges at approximately USD 1,000-1,200/month. The quality o the grad-uates coming out o various institutions is satisactory. Bangladeshi students have provedtheir potentials in the international competitions by winning a number o programmingcontests.

However, the available workorce is still not adequate to meet the industry demand.According to Mr. Fahim Mashroor Chowdhury, CEO, Bdjobs.com (BASIS director aswell), each year the industry aces a shortage o about 1,800 to 2,600 proessionals. Heidentied the brain drain and a perceived lack o career prospects as the two major rea-sons or this short all. Along with other industry experts, he suggested improving theindustry-academia collaboration to produce the right people or the right jobs.

Inrastructure

Bangladesh has been building its inrastructure support or the IT industry over theyears. This year, the country ensured global connectivity by connecting to theInormation Super Highway through SEA-MEA-WE 4 consortium. High-speedInternet connectivity through ber optics cables costs about USD 2.67/per month or 1kbps connection. The existing VSAT backbone will continue to remain the majorInternet inrastructure until the new Backbone (Submarine Cable Connectivity) operates100 per cent. There are as many as 150 ISPs in the country and the competition amongInternet service providers has resulted in signicant improvement in their services. Mosto the ISPs are now providing 24/7 on-site technical support.

In relation to inrastructural weaknesses, all the stakeholders identied stable electricityas the top priority. In general, the country lacks adequate electrical supply. The compa-nies operating in Bangladesh, thereore, must make alternative arrangements to ensuresmooth power supply, This has developed a strong market or alternative power equip-ment in the orm o UPS (Uninterrupted Power Supply) and IPS (Instant Power Supply).For smaller projects, the cost addition due to power shortage may not be signicant, butor larger projects the cost o a project may increase or this reason.

Hardware and technical back-up

According to research by Springboard Singapore, the volume o the hardware market inBangladesh is USD 129.4 million at present. Locally assembled and oten unbrandedmachines dominate the pc/server market. However, most o the international giants(HP, IBM, and Dell etc.) are present in the market through their local agents.

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The cost o a PC or server in Bangladesh is in line with world market prices. A brandedserver with basic conguration costs about USD 6000 whereas the unbranded versioncosts about USD 2,000. The average workstation price is USD 700-900 or a brand PCand USD 500-600 or a clone PC.

Ater sales support o the hardware is satisactory. Most large organisations usually go orAMCs (Annual Maintenance Contract) with the vendors. The AMC is customizable inaccordance to the clients need. However, the local vendors are o the opinion that aninternational warranty is not always suitable or clients o brand equipment. Their logic isthat the designated vendors (local agents) would always keep their direct customers ontheir priority lists. Additionally, the international warranty does oten not make themdirectly obligated to provide local support.

Industry competencies

As stated in earlier section, cheap labour is the biggest competency or the BangladeshICT industry. The skilled labour orce is easily trainable and quick learners. They alsoshow greater commitment to specic areas o concentration provided the employerscareully build the loyalty.

The industry experts opined that the geographical location o the country is suited toreach out to other markets in Asia. Additionally, India is moving to a higher strata o theglobal IT market, which has created an opportunity or Bangladesh to capture the lowerniches (let by India) o the market.

Bangladesh does have willing investors with comprehensive local business knowledge.The investors in other sectors (textile, garments etc.) have proven their competencies ininternational business. They are good at spotting new business opportunities and imple-ment them eciently. The avorable government policy or the ICT industry is attractingthese investors towards this sector. With their accomplishments in international busi-nesses, they could become the ideal strategic partners or international companies intend-ing to venture into Bangladesh ICT industry.

Regarding specic competencies, Bangladesh at present is more suited or less complexprojects such as web content development, mobile content development, back oce sot-

ware development, 2D/3D animation, desktop publications and call centers. Bangladesh,however, possesses potential to move up the ladder or more complicated projects (ERP,CRM, ASP etc.) in the close uture.

Local market opportunities

In recent times, Bangladesh has become one o the prominent outsourcing destinations inthe world. Danish companies could easily venture into this readily available opportunity.

The telecom boost in the country presents another opportunity or the IT companies assupport service to the telecom companies. The major ocus o the telecom opportunitieslie in the orm o mobile content development and value added service solutions. Thegovernment is yet another big opportunity that is worth pursuing. To act on its declara-tion o ICT as thrust sector, the government is seriously taking initiatives towards public

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IT projects. The ocus o these projects is in the orm o e-governance and oce automa-tion.

The SME sector in Bangladesh has the potential to become a lucrative market niche orthe Danish companies. According to a survey report (by BASIS-KATALYST), the latentIT/ITES demand o the specic SME segments is about USD 17.94 million. The reportalso suggested that demand is gradually growing along with the increase in the awarenesslevel o the SME entrepreneurs.

The opportunities exist without any doubt. Moreover, Nordic companies are making useo these opportunities already. The successul companies in Bangladesh identied pre-planning and market-analysis as two o the major success actors or new companiesentering the Bangladeshi IT industry.

Market threats

The Bangladeshi IT industry has many o the right ingredients or success, however,according to the industry stakeholders, some existing/perceived threats or the industryremain.

At individual company level, the business vision (or lack o it) o the local IT entrepre-neurs is the biggest threat. Groups o companies have many times started in IT as achance venture. This naturally, in most cases, did not succeed. On the other hand, thelack o nance or the real IT entrepreneurs has limited them rom reaching their truepotential.

The countrys IT policy is avorable, yet, Bangladesh aces a big threat o resourcecrunch in the near uture. Brain drain and attractiveness o other business sectors arereducing the number o proessionals pursuing an IT career.

Bangladeshis are used to short term prot rom investing in the textile business. Many othe investors rom this sector are also expecting short-term prot in the IT business.

The management style in Bangladesh is largely based on a top-down approach. Apartrom clashing directly with the Danish/Scandinavian style i.e. each person is responsibleor its own job it also means that Bangladesh is short o middle management skills.

In Bangladesh, the process o legally establishing a company takes a long time. It cantake up to six months to obtain the necessary licenses, approvals etc.

The existing supply o Internet access is somewhat constrained. The costs o Internetaccess are relatively high, and even at high costs no optimal connection is yet available.

China, Vietnam and similar countries pose a uture threat to the Bangladeshi IT indus-try. The industry prospect/potential or those countries is very similar to Bangladesh. Inaddition, they enjoy more stable political situation. The even eld in the lower strata oIT industry created by the act that India moving to higher strata provides equalchance or all potential countries like Bangladesh, China, Vietnam etc.

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SWOT

The specic success actors that Danish companies could leverage when entering theBangladesh ICT industry are:

Business Vision (taking IT as core business) Management Practices (proven eective management practices and business

acumen) Business linkages (links with prospective clients in Nordic/EU regions) Regional knowledge (knowledge o the business practices o the regions rom

where many outsourcing projects placed) Danish Governments presence (support or relationships between Danish

and Bangladeshi companies)

The Danish companies, however, need to improve on some aspects i they are to succeedin Bangladesh. The oremost success actor is to improve local knowledge. Similarly, theHR management needs to be customized to suit the local culture. Overall, the commu-nication barriers are to be addressed properly.

Entering Bangladesh would help Danish companies in expanding their market andwould help them enter new markets. In the long run, Danish companies could ventureinto the potential Asian markets and they could capture the SME market niche inBangladesh and in other regions. However, the road to success presents some challengesor Danish IT companies. The lack o methodical approach o Bangladesh IT companies(and IT proessionals) and their lack o inormation could become major hurdles in busi-ness planning. On the operational aspect, the training requirement and communicationbarrier has to be addressed properly to achieve the desired outcome.

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Table of Contents

Executive Summary 3

1 Introduction to Bangladeshi ICT industry 111.1 Number o enterprises 111.2 Size o enterprises (industry volume) 121.3 Proportion o GNI 131.4 Export o ICT services 131.5 Key areas o operation 141.6 Investment scenario 151.7 ICT industry employment scenario 151.8 Related associations/governing bodies 161.9 Tax rules and other policies 201.10 Working hours etc. 211.11 Political risks with the industry 21

2 Labour orce 222.1 ICT education in Bangladesh 222.2 IT proessionals skill matrix 222.3 Availability o skilled labour 232.4 Labour cost 242.5 Universities and training institutions 24

3 Inrastructure 273.1 Internet bandwidth availability 273.2 Bandwidth cost 273.3 Electricity and power stability 29

4 Hardware and technical back-up 304.1 Overall hardware market 304.2 Servers/workstation availability 304.3 Servers/workstation price 304.4 Availability o technical support 314.5 Major hardware companies presence 31

5 Key competencies in Bangladeshs ICT sector 325.1 Key industry competencies 325.2 Sotware application competencies 33


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6 Local market opportunities and threats 356.1 Specic market segments 356.2 Micro level 366.3 Macro level 366.4 International 37

7 SWOT 38

Appendices List o abbreviations 41

Reerence web sites 42Case study 43Interviewed companies 46Outline o the CSE course curriculum 51Acknowledgments 51


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1 Introduction to Bangladeshi ICT industry

During the late 90s, Bangladesh has seen an increasing growth o the ICT industry.Initially, the avorable tax policy o the government o Bangladesh in 1998 accompaniedby the global aordability o personal computers have had tremendous impact on theusage o computer. The avorable import tax policy on computers and computer accesso-ries during that time was one o the timely steps taken by the government o Bangladesh.From then on, in accordance with the global trends, both private and public sectors inBangladesh caught up with eective utilization o inormation technology. The orma-tion o a substantial number o sotware development companies is a good indication othis development. Recently, wide spread telecommunication (especially the cellulartelephony) outreach all over the country has given the ICT industry in the country anadded impetus to move orward.

1.1 Number of enterprises

A report by Bangladesh Computer Samity (BCS) provides an overview o the composi-tion o ICT enterprises in Bangladesh. However, the report is ocused on sotware, hard-

ware, Internet services and training and other segments and the statistics o the telecom-munication enterprises are not included in that report.

Fig. 1: Number of ICT enterprises in Bangladesh

(Source: BCS)

As seen rom the gure, the hardware segment dominates the industry with 2500 enter-prises in 2006. In accordance with the growth in hardware demand, this segment hasshown a steady growth o about 11 per cent per year rom 2000 to 2006. The sotwaresegment grew at good rates in earlier years but has slowed down relatively in the recentyears. At present, there are about 350 sotware development rms in Bangladesh. TheInternet Service Provider (ISP) segment is in tune with the growth o sotware segment.


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The recent introduction o advanced technological backbone in the ISP shows a decentgrowth o the ISP segments (presently 150 ISPs are operating in the country). There are150 training institutes and auxiliary ICT support companies in the country.

The telecommunication segment is sometimes treated separately in the country, but theimpact and the huge volume o the telecom segment is quite signicant in the totalindustry perormance. According BTRC1, the number o mobile phone users has reached15.5 million in August 2006. According to ITU2 data, currently, Bangladesh has around1,000,000 xed telephone lines installed by the BTTB3, Sheba Telecom and BangladeshRural Telecom Authority (BRTA). The present tele-density in Bangladesh is approxi-mately 0.5 per cent.

1.2 Size of enterprises (industry volume)

A report4 included in the Sotware Product Catalogue (2006) published by theBangladesh Association o Sotware and Inormation Services (BASIS) states that thetotal ICT market size in Bangladesh is USD 160 million. The approximate proportion othe ICT industry among dierent segments is as ollows.

Table 1: Domestic ICT market in Bangladesh

Market segment Volume (million USD) Proportion (per cent)

Computer and network hardware 105 65%

Software 24 15%

Other ITES5 24 15%

Internet and network services 8 5%

(Source: BASIS)

Fig. 2: Bangladesh domestic ICT market (major) segments

1) BTRC: Bangladesh Telecom Regulatory Commission

2) ITU: International Telecommunication Union (ITU)

3) BTTB: Bangladesh Telephone & Telegraph Board

4) Bangladesh Sotware Industry and its dynamics

5) ITES: IT Enabled Services

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1.3 Proportion of GNI

As per Word Bank source, the GNI indicators or Bangladesh are as ollows: 6

GNI (million USD) 66,646GNI per capita 141.8

The available data or the sector specic GNI were not available. However, taking thetotal ICT industry size as USD 160 million (source: BASIS), the approximate GNI romICT sector comes to 0.002 per cent o the total GNI. The export earning rom sotwareor year 2005-06 is very nominal 0.0004 per cent o the total GNI.

1.4 Export of ICT services

According to the Bangladesh Bank source, export earnings rom Sotware and ITES wasUSD 27.01 million in the scal year 2005-06 registering a high growth o 113 per centrom the previous year (2004-05). The ollowing chart shows the Bangladesh sotwareand ITES export earning or last ve years.

Table 2: Export earning of Bangladeshi software in recent 4 years

Figures in million USD

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

Software export 2.24 2.80 4.20 7.20 12.68 27.01

Yearly growth - 25% 51% 51% 76% 113%

(Source: Bangladesh Bank)

Fig. 3: Software export from Bangladesh

6) Source: http:/ /www.doingbusiness.org (Word Bank - Doing_Business_2007_Country_pages.pd)

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According to industry experts (BASIS leaders), the recent development in joint venturesand business collaborations among Danish companies and Bangladeshi sotware compa-nies would assist signicantly in sustaining the enviable growth in the export earning.Some o these projects are already in place and many others are either in the pipeline orperceived to be coming in the near uture. Another actor that has contributed to therecent high export growth is the infuence o the multinational telecom companies.These companies while operating in Bangladesh utilized the local IT sector or many otheir international projects giving a good sotware export opportunity or Bangladesh. Atpresent, there are about ty companies in the country engaged in exporting sotwareand ITES to thirty countries across the globe. The export destinations are USA, Canada,EU countries, Middle East, Japan, Australia, South Arica and some South East Asiancountries.7

1.5 Key areas of operation

BASIS carried out a survey among the 152 participating companies in SOFTEXPO82005 to nd out some key industry trends9. One o the ndings o this survey provides agood insight into the client/industry ocus o the sotware companies operating in theBangladeshi market. The ollowing section reproduces the ndings o the BASIS surveyo operational domains o the sotware companies.

Fig. 4: Industry focus of Bangladesh ICT (software segment) industry

The industry analysts nd the survey results positive because o the act that a signicantproportion o the sotware companies (57 per cent) are ocusing on the government sec-tor. The obvious implication is that the public ICT projects are increasing in numbers

7) According to BASIS survey (2005) [152 BASIS members and non members companies were surveyed]

8) Yearly sotware & ITES exposition organised by BASIS

9) This section explains one o the trends and other sections (Labour orce) explains the other ndings

o the survey

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and attracting business people towards them. The ocus o the government spending onIT is targeted towards e-governance and oce automation. The public sector is the larg-est domestic segment or sotware (IT) companies in Bangladesh. Greater access to thissector has denitely provided added impetus or the local ICT industry.

Among other sectors, the textile and garment and the pharmaceutical industry stand out(both at 60 per cent). The textile and garment industry is the largest export sector inBangladesh. The international exposure and competition o the sector have prompted thegarment manuacturers to streamline their productivity. The most eective and readilyavailable option was the introduction o process control through automation. As a result,many export oriented garment companies opted or phase-by-phase automation and thuscreated opportunities or the local IT companies. Similar scenarios exist in the pharma-ceutical industry. However, contrary to garment and textile industry, the pharmaceuticalindustry ocuses on ullling the needs o the domestic market.

Another key operational area or the IT companies is the nancial sector. In recent years,the banks are going online creating a huge demand or sotware and network solutions.However, so ar, oreign sotware dominates the banking sector.

The hardware/server market segment in Bangladesh is doing relatively good in its opera-tions. A recent Springboard10 research reported that Bangladeshi PC/server market gen-erated growth o 23.8 per cent in Q1 2006 (Jan-Mar), compared to the rst quarter othe preceding year.

From a buyer perspective, large enterprises are currently the dominant segment o themarket, contributing around 23.0 per cent o the total PC/Server shipments11. The largecorporations particularly in banking and telecom are the key customers driving mar-ket growth. The government segment showed strong growth o 30.7 per cent annuallymainly due to the increased automation activities o local and national bodies. The SMEmarket represents a signicant portion o shipments (33.9 per cent) in Bangladesh butreceives limited ocus rom IT vendors due to the substantial opportunities in the govern-ment and large enterprise sectors.

1.6 Investment scenario

The lions share o the ICT market in Bangladesh is dominated by the internationalgiants like Microsot, Oracle, Sun etc. The o the shel (packaged/license) sotware wereintroduced in the local market in the mid 90s. As a result, they enjoy a market domi-nance compared to the indigenous customized sotware segment. In addition, the multi-national companies working in Bangladesh brought in their global sotware. Though,recently they have been working with local companies in procuring their ICT require-ments. One other aspect o the investment scenario is the presence o international sot-

ware vendors through local agents. Microsot in this regard leads the way.

10) A Singapore based market research company (http:/ /www.springboardresearch.com)

11) The shipment reers to No. o PC/Server coming to Bangladesh.

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Mainly, the initiation and implementation process o IT projects at the organisationallevel is done through market exploration and an internal operational requirement assess-ment. The exploration based on the internal assessment mainly takes place in the orm omarket research or available solutions. In this case the more established companies(MNCs etc.) have their own in-house IT consultancy support available. For the othersegments, the proper IT planning is sometimes missing. In light o that, an opportunityexists or IT consultants. There are a ew such consultancy support companies who havestarted their ormal operation (Microsot, IBM etc.), but in most cases advice is soughtrom individuals with IT knowledge.

1.7 ICT industry employment scenario

The total number o IT proessionals available in Bangladesh is more than 25,00012 .The booming telecom industry has created a large IT related employment. As a result,the technological proessionals are switching over to the telecommunication industryleaving alarming many vacancies in the other ICT segments. The most severely aectedis the sotware segment.

Table 3: IT professionals in Bangladesh

Year No. of professionals Yearly growth

2000 11,440 -

2001 15,840 38.46%

2002 18,960 19.70%

2003 19,720 4.01%2004 20,480 3.85%

2005 22,400 9.38%

2006 25,200 12.50%

(Source: Bangladesh Computer Samity (BCS)

The BCS reports that in 2006 the number o IT proessionals increased by 12.50 percent. When considering the yearly growth, the table shows that there is a slow growth inthe 2003-04 period. The reason behind is that the introduction o telecom companiesencouraged many aspiring proessionals to choose a business education instead o ITstudies. However, the trend in the number o IT proessionals is gradually increasing asthe career opportunities and salaries are increasing.

12) Inormation source: BCS (Bangladesh Computer Samity)

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Fig. 5: No. of IT professionals in various years

(Source: BCS)

According to BASIS, more than 300 local sotware companies employ about 5,500 sot-ware proessionals. In 2005 (during SOFTEXPO 2005), BASIS carried out a survey on1,100 employees working in 55 companies. This section discusses the general ndingsrom that survey. Section 2.0 (Labour orce) includes other ndings (skill matrix, educa-tional level etc.) o the same survey.

Table 4: Technical job distribution in software companies

Job type No. of respondents Per cent of total respondents

Network engineer 7,700 14%

Programmer 23,100 42%

System architect 3,850 7%

System analyst 4,400 8%

Testing/QA 4,400 8%

Project manager 3,850 7%

Graphic designer 3,300 6%

Web developer 4,400 8%

(Source: BASIS survey. Number of professionals sur veyed : 55,000)

Industry experts are o the opinion that the signicant proportion o the jobs in the non-coding segments (Project Management, System Analysis etc.) is an encouraging sign.They contribute to the commitment and seriousness o the local sotware companies.Keeping in mind the ever used 80-20 rule or management and technical work in sot-

ware projects, the experts believe that with the increase in larger projects, the non-codeproessionals in IT companies could establish their prominence more eectively and e-ciently.

The act that non-technical people are more and more required in the IT industry, haveencouraged many o the new graduates rom the universities to choose a career in ITcompanies in areas o business development and customer services. However, the curricu-lum in the universities or business graduates do not include any specialization in busi-

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ness and IT (IT Marketing, IT Sales etc.). Consequently, there is a gap between the aca-demics and the people rom the IT industry. However, trade associations with the help ovarious industry development partners are in the process o bridging the gap between therequirements rom the industry and the output o a skilled workorce. In this process, thebiggest hurdle or the universities is the lack o impetus or the new students to decide onthe IT all along. In most cases, other industry segments absorb the business graduates ortheir dierent operations. Moreover, as business and IT is still a relatively new eld, topclass business graduates are reluctant to engage themselves in the IT industry.

1.8 Related associations/governing bodies

Ministry o Science and Inormation and Communication Technology (MOICT)(http://www.mosict.gov.bd)

The ormer government established the MOICT. The reason behind this establishmentwas to harness the potential o the IT industry and to channel government support orthe growth o the industry. Headed by a Minister, MOICT works as the hub to spreadIT around the country. The Ministry has set up an ICT incubator and is in the planningprocess o creating a Hi-Tech Park in order to promote ICT related investments in theprivate sector (rom home and abroad).

Export Promotion Bureau (EPB) (http://www.epb.gov.bd/index.html)

The EPB is a National Export Promotion Agency under the Ministry o Commerce. Theorganisation is reorganized by the promulgation o a Presidential Ordinance in 1977 as asemi autonomous body. The goal o the organisation is to promote export trade andimprove plan and policies helpul to the private sector. IT is administered by a Board oManagement (BOM) comprising members rom both public and private sectors, thehonorable Minister or Commerce is the ex-ocio Chairman and the Vice-Chairman isthe chie executive o the Export Promotion Bureau.

Bangladesh Computer Council (BCC) (http://www.bccbd.org)

The main objective o establishing BCC was to ensure the eective application andexpansion in the use o inormation technology. In view o this, BCC has been ormulat-ing appropriate policies and implementing them since its inception. BCC works in threemajor service areas:I. Advisory ServicesII. IT- Based Training CoursesIII. Initiation and implementation o Development Projects

ICT Business Promotion Council (IBPC)

Public and private sector representatives related to the ICT sector have ormed an ICTBusiness Promotion Council. The Council is responsible or promoting ICT related serv-ice and businesses in oreign as well as local markets. IBPC has already established ashared oce in Silicon Valley in Caliornia, USA, or Bangladeshi ICT companies inter-

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ested in doing business in the US. Very soon, oces in Europe and other cities in the USwill be established.

Board o Investment (BOI)(http://www.boi.gov.bd)

The Board o Investment (BOI) was established by the Investment Board Act o 1989 topromote and acilitate investment in the private sector both rom domestic and overseassources with a view to contribute to the socio-economic development o Bangladesh. It isheaded by the Prime Minister and is a part o the Prime Ministers Oce. Its member-ship includes representatives (at the highest level) o the relevant ministries industry,nance, planning, textiles, et.al. as well as others, such as the Governor o BangladeshBank and heads o some business associations. The executive Chairman is theOperational Head and CEO o BOI.

Bangladesh Association o Sotware and Inormation Services (BASIS)(http://www.basis.org.bd)

Bangladesh Association o Sotware and Inormation Services (BASIS) is the nationalassociation or sotware and IT related services companies o Bangladesh. Formed in1997, the association has been working with a vision o developing a vibrant local sot-

ware and IT service industry in the country. In light o this vision, BASIS has beenworking hard to create IT awareness in the society through underlining the high impor-tance o making the country more IT capable or a better uture o the nation. At thesame time, the association has been working hard or creating an enabling environmentor the sotware and ITES industry o the country so that it can fourish by rightly utiliz-ing the huge market potential both at home and abroad.

A nine (9) member Board o Directors (elected by direct voting by the members or atwo-year term) runs BASIS. The Board o Directors has the overall responsibility orrunning the aairs o BASIS and setting policy guidelines or its secretariat. Aside romthe elected board o directors, dierent sub-committees comprising o members deal

with dierent policy and development issues. BASIS has a strong secretariat headed bythe secretary. The secretariat is well staed to deliver various member services and tocarry out programs and activities in the dierent areas as specied within the broad goalso the association.

Bangladesh Computer Samity (BCS) (http://www.bcs-bd.org)

Bangladesh Computer Samity is the national association o the ICT companies (mostlyocusing on the hardware segment) in Bangladesh. BCS was established in 1987 witheleven members.

The ICT industries o Bangladesh comprises distributors, dealers, resellers o computersand allied products, locally assembled computer vendors, sotware developers and export-ers, Internet service providers, ICT based educational institutions and training houses,ICT embedded services providers etc.

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The total number o members comprises 524 at present. The body is run by a 7-numberexecutive council elected every two years.

Internet Service Providers Association o Bangladesh (ISPAB)(http://www.ispabd.org)

The Internet Service Providers Association o Bangladesh was established in 1998. Thegeneral purpose o ISPAB is to improve business conditions o the Internet service pro-viders operating in Bangladesh. It serves the common business interest o its members.Their working areas include

- Promoting higher business standards- Disseminating inormation- Ensuring benet or members (and their customers)- Infuencing the government or pragmatic policies- Perorming unctions that are customary among trade associations- Cyber Ca Owners Association o Bangladesh (CCOAB)

(http://www.ccoab-bd.org)

CCOAB is the trade association o the cyber ca businesses at the national level.Established in 2003, the association saeguards the rights and interests o the membersand helps the ICT in Bangladesh through combined strengths o the members.

1.9 Tax rules and other policies13

The government declared the ICT sector as a Thrust Sector A National ICT Task Force has been ormed which is headed by the Honorable

Prime Minister. The task orce made 45 suggestions or improvements; 25 have beenimplemented by the government and urther 9 are in the process o being imple-mented

A pragmatic National ICT Policy has been adopted (2002) The Copy-write law is enacted The drat o the ICT Act has been approved by the Cabinet (it awaits the nal

approval rom the policy makers) The government have allocated minimum 2 per cent o ADP (Annual Development

Program) in IT spending (more than USD 53 million per year) The sotware business in Bangladesh enjoys ull Income Tax Exemption ICT and ITES products/services enjoy Value Added Tax (VAT) Exemption Generally a 5-7 year tax holiday is provided to oreign direct investors and ull

repatriation o invested capital, prot and dividend is available The government has exempted customs duties and VAT on computers, hardware and

accessories Now, Bangladesh is connected to the Inormation Super Highway (submarine cable

connectivity) through SEA-MEA-WE 4 consortium. The present VSAT backbonewould soon be replaced by high speed ber optic connection backbone

13) Sources: Board o Investment (http:/ /www.boi.gov.bd/invest_incentive.php); BASIS (www.basis.org.bd);

National Board o Revenue (http: //www.nbr-bd.org); http:/ /www.itorchange.net/WSIS/dhaka .More on

ICT policy and government initiatives is available at http:/ /www.itorchange.net/WSIS/dhaka/

1 Introduction


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The xed and cellular telephone connections have shown signicant growth in thelast ew years

An ICT incubator is established and an ICT park is in the pipeline Computer science as a course has been introduced at the High School level The Ministry o Science and ICT has introduced an ICT Internship Program in

cooperation with the private sector There are about 600 cyber cas in the country with 250 o them in Dhaka People are showing encouraging awareness or Internet use. Increasingly, the young

generation is utilizing the Internet acilities.

1.10 Working hours etc.

Working days Sunday to Thursday

Weekend Friday and Saturday (Many soft ware companies, most hardware

companies, major branches of banks operate during Saturdays)

Time zone GMT+ 6:00

Country IDD code 880

Dhaka city code 2

Working hours 9:00 am 5:00 pm

(However, most private companies carry on till 6:30/7:00 pm)

Special working hours/days The software companies involved with outsourcing and

international projects accommodate the time difference with theclients countries by customizing the working hours and

workdays

1.11 Political risks with the industry

The government o Bangladesh has declared the ICT sector as one o the major thrustsectors. This has prompted suitable/encouraging government policies or the sector.However, the sector is not immune to the general political risks. The countrys politicalrisks do not directly all under the scope o this report and thereore, it is suggested toconsult other reports to learn about the general political risks associated with business. Inthis regard, the Doing Business, published by World Bank could be very eective.

1 Introduction


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2 Labour force

2.1 ICT education in Bangladesh

In recent years, the growing number o private universities has provided new and broaderopportunities or aspiring IT proessionals to pursue relevant education. However, as theIT orientation is not quite widespread in the lower/secondary education system, theindustry relies solely on the competencies the IT proessionals obtain during their gradu-ation/post graduation levels. Companies are stating that the students have a lot to learn

when they have graduated and as a result, special training and on the job training play avital role in developing the workorce in the sotware companies.

At present, most o the university level IT education is concentrated on computer scienceand engineering courses15. According to a presentation16 by Mr. Fahim MashroorChowdhury, CEO, Bdjobs.com Limited, the industry demand or IT proessionals peryear is about 2,800. The estimate is based on an assumption o a 50 per cent industrygrowth and minimum 20 per cent attrition rate. Each year the number o IT graduatesrom dierent universities is 2,000. However, about 50-70 per cent o the graduateschoose a non-sotware rm or go abroad. As a result, it is estimated that each year theindustry aces a net shortage o qualied workers in the range o 1,800 to 2,600.

2.2 IT professionals skill matrix

The ollowing tables show the academic qualications and the skill set o the IT proes-sionals working in the sotware companies in Bangladesh.17 The ndings are based onthe BASIS Survey 2005. The survey interviewed 1,100 employees working in 55 local ITcompanies.

Table 5: Academic qualication of technical professionals[% (respondent) of total technical staffs in the surveyed software rms]

Graduate in Non-IT 19% (209)

Masters in Non-IT 23% (253)

Computer science/engineering graduate (3/4 yrs.) 35% (385)Masters in computer science/engineering 9% (99)

Diploma/certicate courses in IT 12% (132)

Other 2% (22)

(Source: BASIS survey)

15) An overview o the IT course curricula is included in the appendix

16) Presentation made during a roundtable on HR problems or sotware companies and possible solutions

organised by BASIS on June/2005

17) Source: BASIS survey 2005


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Table 6: Skill matrix of local software industry[% (respondent) of total surveyed employees skilled in particular area]*

Programming language Database

Basic/VB 50% (550) MS SQL 40% (440)

C/C++/VC 28% (308) MS Access/FoxPro 39% (429)

C# 16% (176) Oracle 27% (297)

Java 24% (264) PHP 18% (198)

Net 24% (242) Operating system

HTML 34% (374) MS NT/2000 58% (638)

ASP 21% (231) Unix/Linux/Solaris 17% (187)

PHP 18% (198) Other technical skills

Javabean 18% (198) XML 21% (231)

JSP 16% (176) UML 17% (187)

CGI Perl 5% (55) Lotus notes 4% (44)

Cold fusion 4% (44)

*There are instances where the same respondent identied multiple skill competencies

(Source: BASIS survey)

2.3 Availability of skilled labour

According to Mr. Chowdhury, the industry aces ew specic problems in availing ade-quate IT proessionals18. The ollowing table present these problems as well as the under-lying reasons.

Problems Reasons behind

Unavailability of a pool of employees

to be recruited

Computer science course enrollment is declining

Better quality students opting for non-software industry

(mainly Telecom and Banking)

High attrition rate High salary range in Telecom and Banking sector

Absence of structured HR policy in most software

companies

Absence of institutional infrastructure

for continued training

Lack of nishing school to groom fresh graduates

The curricula of training institutions do not match the

industry needs

Though the industry aces problems in the HR pool, the inspiring act o the matter isthat the local sotware companies are seriously attempting to change the scenario. Thecompany chies and top management have admitted their diculties, which is a goodsign in nding a solution. BASIS members have already identied specic steps orimproving HR aspects o the sotware companies. Some o these are organisation spon-sored training, induction o nancial institutions, long-term internship and infuencing

18) Mr. Chowdhury is one o the BASIS directors and he has worked as the chairperson or the HR Sub-

Committee o BASIS. The problems he identied were presented during a HR Roundtable among the

BASIS member representatives. The participating CEOs and MDs in that roundtable agreed with Mr.

Chowdhury while discussing the HR problems in IT companies in Bangladesh. In light o this, we can take

the ollowing as the overall industry wide view or Bangladesh ICT industry

2 Labour force


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academia. Additionally, the inclusion o a higher number o international projects in theindustry has provided new impetus or proessionals to seek opportunities.

2.4 Labour cost

There are three main categories o sotware companies that operate in Bangladesh; theseare locals, joint ventures (JV), and transnationals. The labour cost (salary range) variesacross the categories.

Following table displays the salary range o dierent categories o proessionals workingin the sotware industry.

Table 7: Salary range of IT professionals in Bangladesh Companies

Salary range (USD) Local19 JV20 Transnational21

Network engineer 230 300 400 750 600 1200

Programmer* 75 400 400 700 400 1200

System architect 380 600 400 900 400 1000

System analyst 380 600 400 900 400 1000

Testing/QA 380 600 400 900 400 1000

Project Management 300 750 600 900 600 1200

Graphic designer 300 600 400 700 400 1200

Web developer 75 400 400 700 400 1000

* Depending on experience the range varies

2.5 Universities and training institutions

According to statistics o the Ministry o Education, there are 73 universities in the coun-try. O them 21 are public universities while the other 52 are private universities. In termso technical education, Bangladesh University o Engineering and Technology (BUET) isthe leader. University o Dhaka (Computer Science and Engineering Department),Shajalal University o Science and Technology (Sylhet) and Khulna University are alsoproducing good quality IT proessionals. These public universities enjoy the qualityintake advantage over other private universities. The dierence in the intake is mainlythe result o the cost o education. The students in the higher education level inBangladesh mostly come rom middle class amilies. The high cost o education at pri-vate universities is still out o reach or most o them. Naturally, the government sup-ported public universities become the obvious choice. In addition, the public universitiesalso provide better resources and environment (aculty, inrastructure etc.). The privateuniversities are new in the education system and most o them lack the basic require-ments or university studies. Some o the private universities, however, in the recent times(last 2-3 years) have done well in IT education.

19) Collected rom a recent survey report by Mr. Mohammad Ashraul (the report is available at http://

geekswithblogs.net/joycsharp/articles/84330.aspx). Some gures are collected through personal interviews

20) The gures are collected through personal interviews

21) The gures are collected through personal interviews

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The students pursuing IT education in the country have shown tremendous potentialover the years winning international programming contests, developing eective anti-virus sotware and many other such achievements are very common or Bangladeshi ITstudents. In this regard, BUET and Dhaka University have been most successul. Amongthe private universities, North South University, Ahsanullah University o Science andTechnology, American International University o Bangladesh, BRAC University,Daodil University and East West University are some o the leading institutions in ITeducation.

The ollowing table provides the web address or the leading universities in Bangladeshor IT education.

Table 8: Leading Universities for IT education in Bangladesh22

Bangladesh University of Engineering and

Technology (BUET)

www.buet.ac.bd

Islamic Universit y of Technology (IUT ) http://ww w.iutoic-dhaka.edu

Dhaka University (DU) http://www.univdhaka.edu

Khulna University of Engineering and Technology

(KUET)

http://www.kuet.ac.bd

Shajalal University of Science and Technology

(SUST)

http://www.sust.edu

North South University (NSU) http://www.northsouth.edu

Ahsanullah University of Science and Technology

(AUST)

www.aust.edu

American International University of Bangladesh

(AIUB)

http://www.aiub.edu

East West University (EWU) http://www.ewubd.edu

BRAC University (BU) http://www.bracuniversity.ac.bd

Daffodil International University (DIU) http://www.daffodilvarsity.edu.bd

In addition to the universities, there are number o Diploma/Vocational Institutions inthe country who provide IT education. There are 20 government and 87 private poly-technic institutes in the country. These institutions mainly oer diploma courses onengineering subjects. Most o these centers are owned and administered by the govern-ment through the Technical Education Directorate.

An unauthenticated source reveals that there are more than 1000 private and public sec-tor computer-training institutes oering IT skill development at various levels. However,the interviews with the stakeholders revealed a dierent scenario.

The industry experts (interviewed company CEOs and BASIS leaders) opined that thetraining acilities in Bangladesh or the ICT industry are inadequate. Especially, thetypes o training provided are not in line with the industry requirements. Most o thetraining institutions provide training in basic computer skills. Few specic institutions(NIIT, Aptech, Base etc.) provide advanced level o training courses. However, they lackthe relevance to the actual needs o the sotware companies. Proessionals have the optionto acquire certications by Microsot Certied Partners.

22) Source: Personal interview

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To overcome the deciency o the institutional training acilities, almost all companiesdevelop in-house training programs. Moreover, they strongly recommended oreign com-panies coming to Bangladesh to do the same.

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3 Infrastructure

3.1 Internet bandwidth availability

Bangladesh has joined the Inormation Super Highway through submarine connectivityin 2006. Bangladesh Telegraph and Telephone Board (BTTB) is the ocial custodian othe new connectivity backbone. The BTTB authority has recently publicized a utilizationplan o the submarine connectivity. The ollowing sections provide a summary o theplan and the upcoming Internet connectivity scenario o the country.

Bangladesh connects itsel to the submarine cable connectivity through the SEA-MEA-WE-4 consortium. Available capacity or BTTB in this cable is 468,000 MIU* Kmwhich may have a maximum o 64 STM-1 (10 Gbps) at the landing station. MIU isMinimum investment Unit that is equivalent to one STM-1. Out o BTTBs total capac-ity, 50,000 MIU* Km has already been contributed to the common pool o the consor-tium or sale. The BTTB urther plans to enhance the capacity o the cable in dierentphases with minimal investment. Minimum capacity unit or this cable is STM-1 i.e.BTTB has to utilize the capacity at STM-1 or multiple o that between any two landingstations.

Although the connection to the Submarine Cable Super Highway presents tremendousimprovement opportunities or Bangladesh, the present situation in terms o Internetconnectivity is not at all satisactory. The present VSAT backbone connectivity is slowerin nature and is prone to technical diculties. The new Submarine backbone on theother hand, still has to be streamlined.

3.2 Bandwidth cost

The BTTB Internet connection sets the tone or the trend in connectivity. The ullranges o bandwidth/Internet connection costs are available at the BTTBs website(http://www.bttb.net). The ollowing sections describe the general cost o getting anInternet connection.


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Table 9: LOW COST Internet connectivity for corporate users23

Type of

connection*

Average

bandwidth

Backbone Initial charge**

(USD)

Monthly

Charge (USD)

Technical support

64 kbps(shared 2)

70%(of 64 kbps)

(Fiber optic)Submarine

Cable

Connectivity

100%

VSAT 25%

(as emergency

back-up)

380 170 1. Connectionwithin 7 days of

work order.

2. Connection

problem Instantly

within Dhaka

9 am 8 pm; at the

site

8 pm 9 am; over

the phone.

3. Backbone problem

within 2 hours.

64 kbps

(dedicated)

100 %

(of 64 kbps)

320

Table 10: HIGH COST Internet connectivity for corporate users24

Type of

connection*

Average

bandwidth

Backbone Initial charge**

(USD)

Monthly

Charge (USD)

Technical support

64 kbps

dedicated

(with VSAT

support)

64 kbps

dedicated

(without VSAT

support)

100%

(of 64 kbps)

100%

(of 64 kbps)

(Fiber optic)

Submarine

Cable

Connectivity 100%

VSAT 25%

(as emergency

back-up)

(Fiber optic)

Submarine

Cable

Connectivity

100%

460

460

300

210

1. Connection within

7 days (max.) from

work order.

2. Connectionproblem Instantly

1 hour (max.)

within Dhaka.

Automated

monitoring system

with 24/7 on site

technical support

(assistance within

15 minutes).

Redundancy supportwith 4 VSAT

3. Backbone problem

within 5 minutes

Average connectivity cost per month for 1 kbps = 2.67 USD 25

* The client could opt for Higher Bandwidth as well. However, according to Internet Service

Providers, for typical usage 64 kbps is adequate

** The charge may vary according to location of the installation

23) Source: R-net Online (www.rnet-online.net)

24) Source: Bangladesh Online Limited (www.bol-online.com)

25) Source: Agni Systems Limited (http://www.agni.com)

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3.3 Electricity and power stability

The problem with electricity is one o the major hurdles the sotware companies inBangladesh ace. Through the ICT incubator26, there are special arrangements or anuninterrupted power line, but the other companies with oces all around the city mustarrange or alternative power sources. In this regard, most companies opt or an electricgenerator or supporting the larger electricity requirement. They use UPS (UninterruptedPower Supply) and IPS (Instant Power Supply) or equipments and computer systems.The generators and UPS/IPS are widely available in the market and are quite reasonablein price. When asked to comment the cost addition to production due to this alternateelectricity support, one CEO o a local company said that the problem has been prevail-ing or last 2-3 years and in recent times it has deteriorated urther. He does not seeimmediate improvement in countrys power sector. He strongly suggested on arrangingor an alternate power source or any new ventures. However, he said that the additionalcost is very insignicant or his company and it increases the cost by about 0.5 per cent.Most i not all IT joint ventures have assured that there is a power generator.

26) ICT Incubator: Government supported inrastructure (foor space, utility, net connection etc.)

acilities or small IT entrepreneurs

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4 Hardware and technical back-up

4.1 Overall hardware market

The PC/Server market in Bangladesh is estimated at USD 129.4 million (2005).Springboard, a Singapore based Research Company revealed this in one o their recentresearch reports27. The report also said that the market growth rate in the rst quarter o2006 (Jan-Mar) was 23.8 per cent as compared to the rst quarter o preceding year. Thelaptop market expanded 24.0 per cent in 2005.

During Q4 2005, 48,340 PCs were shipped rom international locations to end-users inBangladesh or a value o USD 37.7 million, up rom 34,884 units in Q3 2005. For theull year (Jan-Dec), the PC shipments expanded 16.4 per cent to 162,400, generating avalue o USD 129.4 million. Aggressive sales and marketing activities undertaken byMNCs have helped increase PC market growth.

The large enterprises (companies with more than 500 employees) and government sectorscollectively accounted or almost hal o total PC/server shipments in 2005. NGOs arealso an important source o unding or IT investment in the country, but generally,spending is routed through the public sector. In the private enterprise market, banks andtelecom companies are largest on IT spending. The consumer and SME markets repre-sent signicant long-term promise, but both segments are currently in the inancy stage.

4.2 Servers/workstation availability

Locally assembled, oten un-branded, machines continue to dominate the market, hold-ing over 75 per cent o the PC shipment market shares. Most o the international giantsalso operate in the local market. In cases o brand equipment, the international giantsusually rely on local distributors and dealers. IBM, HP and Dell all have local distribu-tors in the country.

4.3 Servers/workstation price

The cost o a server/workstation varies with the conguration. The ollowing table showsthe cost o server/workstation with basic conguration.

27) www.springboardresearch.com


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Table 11: Price (in USD) of server/workstation with basic conguration28

Clone IBM HP Dell

Server (Basic Cong.) 1,800 2,000 4,800 5,000 5,700 6,000 6,000 6,500

Workstation (with OS*) 680 760 900 1,000 850 1,000 900 1,000

Workstation (without OS) 530 600 760 900 680 830 760 900

*OS Operating System

4.4 Availability of technical support

The position o the technical support or PC/server hardware troubleshooting is at asatisactory level. The vendors have enough technical knowledge to provide ater salessupport to their clients. Most large organisations29 usually have an Annual MaintenanceContract (AMC) with the vendors. The AMC is customizable in accordance to theclients needs. In some instances, the larger users preer having their own technicalsupport team; however, the general support rom the vendors is adequate or smallerorganisations.

The interviews with local hardware vendors revealed an interesting aspect regarding theater sales support. They opined that, the local agreement o maintenance is much moreeective than a international warranty agreement. Though, as agents o the internationalgiants, the designated local distributors are legally bound to take in the complaints romthe customer, however, they may not necessarily be bound to take the responsibility oproviding the technical support by themselves. They usually communicate with theregional oce and hand over the responsibility to them. In case o a local agreement, thevendors would provide the support locally by using their own resources. In the latter casethe support is more prompt and could be extended even to 24/7 support.

4.5 Major hardware companies presence

Among international vendors, HP led the market with a 7.6 per cent share o the ship-ments in 2005, ollowed by Dell and Lenovo/IBM. A local brand, increasingly viewed asa viable alternative to international players, is Daodil Computers (http://www.daodil-bd.com), which made several strategic announcements in the ourth quarter o the year.

28) Source: Flora Limited (www.foralimited.com), Rishit Computers Ltd. (www.rishit.com)

29) Source: personal interview/experiences (Large Organisation MNCs, Local Corporate)

4 Hardware and technical back-up


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5 Key competencies in Bangladeshs ICT sector

5.1 Key industry competencies

According to the industry stakeholders/experts, the major competencies (or comparativeadvantages) or ICT industry in Bangladesh are as ollow:

Cheap labour

Bangladesh has one o the cheapest rates or work orce among the similar business desti-nation countries. Concerning the ICT industry, the highly skilled labour orce comes at asignicantly competitive price. In addition to that, the IT proessionals in Bangladesh arevery good at absorbing new learning (easily trainable).

Another great advantage with the Bangladeshi work orce is their longer-term commit-ment to specic work areas. However, despite their commitment to their work areas, theyare not always necessarily committed to their organisations.

The reason or the persistence with a specic work area could be related to the act thatthe people working in the ICT industry in Bangladesh are not oered endless opportuni-ties (as is the case or many o the neighbouring countries). Thereore, IT proessionalsbuild their skills in a particular area. As a result, clusters o experts with dierent skillsets are available in Bangladesh. However, most companies need to customize their HRpolicies to support a long-term commitment o the work orce.

Quick learning/easily trainable

The Bangladeshi work orce as well as the business people are traditionally renowned ortheir quick learning abilities. The work orce, especially, has historically strong abilities inmathematical and logical analysis processes. Bangladeshi students have won a number oprogramming and mathematical competitions globally. Because o their capability toquick learning, the Bangladeshi work orce can easily be trained to acquire specic tech-nical knowledge.

Geographical location

Geographically, Bangladesh has the potential to become a business hub. Naturally, utili-zation o this advantage would result in growth in all industries. Furthermore, as non-nuclear country, Bangladesh has added advantage or countries that have restrictions incollaborating with nuclear countries.


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Changed scenario in neighbouring countries

India is no doubt the leader in South Asia when it comes to outsourcing and IT as awhole and India is a pioneer. However, in recent times India has moved up in the ladderand is now operating in higher and more complicated levels o IT. In addition, salaries inIndia have increased. This creates a vacant position or an outsourcing partner who canoperate at the lower strata o outsourcing. As a result, Bangladesh gains an edge on thissegment o market.

Favorable government policies

As was explained above (please see section 1.9), the government o Bangladesh hasdeclared the ICT sector as one o the major thrust sectors. Added to special policy bene-ts or the ICT sector, the avorable investment policies or FDI should encourage com-panies rom other nations to venture into the Bangladesh ICT industry.

Availability o nancially capable investors

Local business investors in Bangladesh are well equipped to invest in strategic alliances andpartnerships. The willingness o the investors combined with their local business know-ledge could be utilized or better return on the investment. Another aspect o these localinvestors is that they have proven records o accomplishment in international businesses inother sectors such as textile. These people have unds and are ready to invest money in newindustries. As a result, the oreign investors eel comortable working with them. However,in this regard, the local investors have more or less never avored the IT investment, as intel-lectual investment in IT businesses sometimes make the return invisible.

English prociency

Bangladeshi people have higher competencies in English compared to countries likeChina and Vietnam. However, the language prociency is to some extent skewedtowards proessionals with better schooling. In general, the English skills need to beimproved or Bangladeshi IT proessionals to be able to compete in the global market.

New outsourcing destination

Bangladesh is relatively new as an outsourcing destination. This means many unexploredareas o business. More and more investments are coming in and the industry is experi-encing growth. The attractive business prospects are bound to encourage local and inter-national investors in the near uture.

5.2 Software application competencies

In response to the question regarding the specic sotware application competencies orBangladesh ICT industry, the respondents o the interviews were o the opinion thatBangladesh is not yet ready or complex outsourcing support. They think that any or-



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eign company intending to enter Bangladesh IT sector, should start with small projectssuch as web development, desktop publishing, data entry, 3D animation and back ocedevelopment. For venturing into more critical sotware solutions such as ERP and CRM,the proper resources need to be built gradually. However, all the respondents were veryoptimistic about the potential o ICT in Bangladesh.

Software application Present competencies Potential competencies

Programming **** *******

Hardware assembling ******* *********

Desktop design, publishing ***** ********

ERP (Enterprise Resource Planning) ** ***

CRM (Customer Relationship Management) * ***

CMS (Content Management System) * *****

EDI (Electronic Data Exchange) *** ******

Drawing and model construction * ***Data safety * **

Mobile content development ****** *********

Call centers * ******

ASP (Application Service Provider) ** ***

Data base development * ****

Game Development *** *****

E-governance ** *******

The rating system presented above is based on the opinions o the interviewed compa-nies. It mainly asserts the attractiveness o dierent segments o sotware development.

In assessing the present competencies, the considerable actors were

Market awareness Extent o use Availability o workorce Number o companies working in specic areas Competitive advantages over other countries

The considerable actors or the potential competencies were similar to the present com-petencies with the exception in case o potential, where the perception o the stakeholders

was emphasized.



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6 Local market opportunities and threats

6.1 Specic market segments

The prevailing opportunities within the ICT industry in Bangladesh are as ollows.

Readily available

The top most readily available segment is the outsourcing segment. Bangladesh has comea long way in recent years to attract an increasing number o outsourcing projects. Majorcountries that are outsourcing IT projects to Bangladesh include USA, UK, Canada andDenmark. Knowledge and learning rom the Business-to-Business (B2B) Programmecould be a good indicator. The B2B Programme has as many as 42 projects running inBangladesh at this moment. O these, 11 are sotware development (outsourcing)projects30.

The specic sub-segments within outsourcing are more ready than the others, theyinclude Web Development, Back Oce, Data Entry, Animation and Multimedia andDesktop Publications.

Potential/upcoming

The telecom sector in Bangladesh is rising at great pace. The number o mobile phoneusers in Bangladesh has crossed 15.50 million in August 2006 with GrameenPhone asthe leading operator31. An encouraging act about the mobile phone usage is Bangladeshis that it is not restricted to the urban areas only; rather it is wide-spread throughout thecountry. The booming mobile communication has provided new business opportunitiesor sotware companies. The concentration o these opportunities at present lies withinvalue added services. However, the assurance o local support would denitely infuencethe major telecom companies to procure their operational sotware rom local market

A similar segment that came right ater the telecom boom is mobile content developmentopportunities. Many o the local companies are capable o providing support to the localand international telecom companies.

The government commitments/initiatives towards e-governance have provided a veryimportant opportunity or the sotware companies. Additionally, the ICT4D proposi-tions though not directly designed with a business ocus would result in new businessopportunities or IT companies.

30) Source: http:/ /www.psdbangladesh.com

31) Source: Bangladesh Telecommunications Regulatory Commission (BTRC)


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Niche

The SME sector in Bangladesh is growing at a steady rate. The use o IT or the SMEs isnot wide spread. However, the potential remains. A survey report32 on the SME segmentin Bangladesh revealed that there exists a demand or IT/ITES estimated to the value oUSD 17.94 million. The demand is expected to rise at a rate similar to the SME sectorgrowth rate. The demand or sotware includes accounting, billing, productivity andinventory management.

6.2 Micro level

Regarding the individual IT companies in Bangladesh, the most dicult aspects atpresent are: disloyalty o employees in the IT business, recruitment (on a medium to longterm basis), access to bank nance and lack o business vision o the entrepreneurs.

Bangladeshis are used to short term prot rom investing in the textile business. Many othe investors who come rom this sector are also expecting short term prot in the ITbusiness. The management style in Bangladesh is to a large extent based on a top-downapproach. Apart rom clashing directly with the Danish/Scandinavian style i.e. each per-son has the responsibility or his/her own job it also means that Bangladesh is short omiddle management skills. There is not one large company (like in India, or instance) tooperate as an example and drive the development o the IT business. During the inter-views, the stakeholders reiterated these acts and opined that the aorementioned dicul-ties could become even larger threat in the uture (unless proper steps are taken).

Based on the experience o Danish companies, it takes long time to establish a companylegally in Bangladesh. The process o obtaining licenses, approvals etc. has a duration oup till six months. This actor infuences the ease with which new ICT companies areestablished, and it can decrease the speed and number o companies in the developmento the ICT sector.

As well, the cost and the quality o Internet connections infuence this development. Thecosts o Internet access are relatively high, and even at high costs no optimal connection isyet available. The quality o Internet connections will aect especially the internationalpossibilities or the sector, as eective communication overseas is somewhat constrained.

6.3 Macro level

The interviews with dierent stakeholders revealed that the ollowing industry widethreats might aect the ICT industry in the uture.

Labour constraints: Most stakeholders perceive the quality labour constraint as themost threatening aspect to the Bangladesh ICT industry. The vicious cycle o a lessattractive career path in IT and the less developed sector due to lack o resourcescould deeply aect the sector. Especially, the quality o the Bangladesh IT proession-als is deteriorating all the time.

32) BASIS-KATALYST IT/ITES Study (2005) jointly conducted by BASIS (www.basis.org.bd)

and KATALYST (www.katalystbd.com)

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Lack o interest: The universities are aced with a problem o declining number ostudents or IT courses. Even the business graduates are not willing to work or ITcompanies. In most cases, the other industry segments absorb the business graduatesor their dierent operations. Moreover, as the Business IT is still a relatively neweld, top class business graduates are reluctant to engage themselves in the IT indus-try.

Brain drain: Brain drain urther worsens the labour constraints. A talented group oIT graduates is leaving the country to pursue higher and better education and most othem do not return.

6.4 International

The international threats rom the neighboring countries (especially India) have alwaysbeen present. Recently, the business threats coming rom India has changed. India isgoing into an upper segment o the outsourcing/IT support market, which has created aneven eld or the second category countries. In this regard, countries like Vietnam andChina could become large threats or the Bangladesh IT industry.

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7 SWOT

Strengths

According to the literature research and the opinion o the stakeholders, the Danish com-panies (especially the IT companies) could bring in some specic strengths that will leadto success o their venture in the ICT industry in Bangladesh. They are as ollows.

Business vision: Most o the IT companies in Bangladesh severely lack the broaderbusiness vision. The usual trend was/is to start up an IT company, then look oropportunities and expect a ast prot. The IT sector does not enjoy the proper busi-ness planning as does the other sectors in the country. This is where the Danish com-panies can bring new knowledge. The management and business proessionalism othe Danish companies is expected to encourage the potential/existing investors romBangladesh to venture into IT. The Danes could make the investors understand thata long-term view is required and help them see the world o opportunities.

Cultural bridge: Knowledge o the outsourcing countrys culture could be o greathelp. Especially, the trade and investment routines o the particular country wouldprovide direction or the strategic partnering companies to serve the specic market.One o the interviewed stakeholders expanded on this point by specically sayingthat the Danish companies could utilize their Nordic Way to good eect.

Business linkage: Danish companies could use their networks in EU region to secureoutsourcing projects and utilize the competencies o the Bangladesh ICT to deliver.

Danish governments presence: Danish government has been involved in the develop-ment process o Bangladesh. Bangladesh and Denmark enjoy a good relationship.The Danish IT companies could use their governments good relationship to enterinto public service IT projects in Bangladesh.

The existing presence o a good record o Danish-Bangladeshi IT projects: Danishcompanies have already made some progress in entering the Bangladesh ICT indus-try. Through the B2B programme and private initiatives, many Denmark-Bangladesh

Joint Venture IT projects are operational at present. The experiences o these projectswould be helpul or planning new business projects in this sector.

Weaknesses

HR policy: The Danish companies have to be very careul in trying to implement theHR policy that works in Danish region. The employee orce in Bangladesh has di-erent value sets and that has to be addressed while venturing into the local market.The Danish companies intending to come to Bangladesh should prepare themselvesto cope with the complexity o culture in Bangladesh and to some extent be less navein their approach.

Local business knowledge: The stakeholders in the Bangladesh ICT industry opinedthat oreign companies (especially the Danish companies) trying to come toBangladesh should spend a signicant amount o time on pre-planning. The dier-ences in cultural values, unless addressed properly, could have serious negative conse-quences. For instance, the lengthy bureaucratic system in Bangladesh is almost anintegral part o business. People have to nd their ways around these systems andcope with them. The best way to deal with these diculties is to take in local people


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on board. Another option could be to outsource the bureaucratic procedures oDoing Business in Bangladesh.

Conservative approach: Some inormants said that sometimes the very cautiousapproach o the Danish companies rustrates the ambitious local partners.

Communication: The business communication o the Danish companies sometimescauses misunderstanding, as pointed out by a local IT company CEO. He said theproblem is not very signicant now. However, he is o the opinion that when increas-ingly more interactions take place in the uture, a common communication system

would become necessary. Conservative vs. expressive communication: Bangladeshi are very polite and do not

always express their opinion i.e. Danish business people would always get the reactionthey expect, misunderstand, and think that everything is in order when it is not. Onthe other hand Danes are very straightorward, impatient (or example when it comesto reaching a decision or to get an answer) and not always very polite in their com-munication. The two cultures are surely clashing regarding the issue o communica-tion and this is something both parts have to recognize and try to overcome.

Immediate opportunities

Horizontal market expansion through outsourcing

Outsourcing to Bangladesh gives the Danish companies a denitive competitive advan-tage in terms o lower costs or products and services. They could utilize this advantagein expanding into new market segments in (and outside) Denmark.

New market entrance

The cost savings and new revenue fows gives the opportunities to venture into new mar-kets and dierent segments.

Training needs

By adding a new service to their portolio, the Danish companies could capitalizethrough addressing the need or training in Bangladesh. The advanced technology as

well as business training by the Danish companies would also result in attracting theright people or right job or Danish companies interested to operate rom within theBangladeshi ICT industry (in order to gain competitive advantages).

Long term opportunities

Asian market penetration

The geographical location o Bangladesh provides a great platorm or operating in Asianmarkets.

Niche market penetration

The SME sector in Bangladesh has a great demand or IT services. The untapped marketcould through extensive awareness and marketing drive become a lucrative niche segment

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or Danish IT companies. The successes o this niche would provide a platorm to enterthe neighboring countries where the market size is many times larger than that oBangladesh. In this regard, strategic alliances with support organisations (e.g. nancialinstitutions) could be helpul.

Market capturing

The Danish companies could go or an ambitious plan o challenging the Indian giantsin capturing markets in other countries. The starting point in this process could realisti-cally be to take on some o the work, which is now too expensive to outsource to India.The tools or success in this regard would be the immediate development o competen-cies in the Bangladesh ICT sector.

Hurdles

Training requirements

The labour market in Bangladesh is cheap. However, there is a signicant need to trainthe existing labour. Generally, the training areas include areas o advanced technology,business acumen and middle management skills. One positive aspect in this regard isthat the labour orce in Bangladesh is easily trainable.

Lack o methodical approach

In general, Bangladesh companies and people lack documentation skills and systematicwork process skills. The continuity o work could be lost due to this. Especially, many othe companies ace diculties in times o employee turnover. Another impact o the lacko methodical approach is diculties in quality control.

Language barriers

Bangladeshi labour orce in general lacks English language prociency. In specic areas,the presentation and correspondence skills o the local labour orce has room orimprovements.

Lack o inormation

The inormation sources in Bangladesh are scattered and it can sometimes be dicult toget specic inormation. Usually, people use their personal network to get inormation.Some government agencies do provide related inormation. However, the overall research-based/authentic inormation sources are not adequate.

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Appendix A

Abbreviations and web references

List o abbreviations

BASIS Bangladesh Association o Sotware and Inormation ServicesBCC Bangladesh Computer CouncilBCS Bangladesh Computer SamityBoI Board o InvestmentBRTA Bangladesh Rural Telecom AuthorityB2B Business-to-BusinessBTRC Bangladesh Telecom Regulatory CommissionBTTB Bangladesh Telegraph and Telephone BoardCCOAB Cyber Ca Owners Association o BangladeshEPB Export Promotion BureauFDI Foreign Direct InvestmentIBPC ICT Business Promotion CouncilISP Internet Service ProviderISPAB Internet Service Providers Association o BangladeshITES IT Enabled ServicesITU International Telecom Union

JV Joint VentureMNC Multi National CompaniesMOICT Ministry o Science and Inormation and Communication TechnologyNBR National Board o RevenueSICT Support to ICT (task orce)SME Small and Medium EnterprisesUSD United States Dollar (For this report the currency exchange rate

is taken as 1 USD = 66 BDT Bangladeshi Taka)VAS Value Added ServicesVAT Value Added Tax

Appendices


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Reerence web sites

BCS www.bcs-bd.orgBTRC www.btrc.org.bdITU www.itu.intBTTB www.bttb.net)Doing Business (World Bank) www.doingbusiness.orgBASIS www.basis.org.bdWorld Bank www.worldbank.orgSpringboard Research www.springboardresearch.com

MOICT www.mosict.gov.bdEPB www.epb.gov.bdBCC www.bccbd.orgBoI www.boi.gov.bd;

www.boi.gov.bd/invest_incentive.phpISPAB www.ispabd.orgCCOAB www.ccoab-bd.orgNBR www.nbr-bd.orgDaodil University www.daodilvarsity.edu.bdBRAC University www.bracuniversity.ac.bdBangladesh Online Limited (BOL) www.bol-online.comR-net Online www.rnet-online.net

Agni Systems Limited www.agni.comFlora Limited www.foralimited.comRishit Computers Ltd. www.rishit.comDanida PSD www.psdbangladesh.comKATALYST www.katalystbd.com

Ministry o Education www.moedu.gov.bdSomewhere in... www.somewherein.netDataSot Systems Bangladesh Limited www.datasot-bd.comBdjobs.com Ltd. www.bdjobs.comeGerneation Limited www.egeneration.com.bdThe Decode Ltd. www.decodebd.comSouthtech Limited www.southtechlimited.comSpinnovation Limited www.spinnovation.com.bdWSIS (World Summit on www.wsis-online.net;the Inormation Society) www.itorchange.net/WSIS/dhakaTRADO www.trado.org;(IT Trade Opportunity) www.trado.org/Cou/BD/CouBDIts.aspxBangladesh Development Gateway www.bangladeshgateway.org

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Appendix B

Case study

Nordic-Bangladesh joint venture

To ollowing is a case study o a Nordic-Bangladesh joint venture in Bangladesh ICTmarket.

Somewhere in... (www.somewherein.net) An outsourcing success story

Background

With the motto oshore web solutions the Nordic way, Somewhere in... has beenoperating within the Bangladesh ICT industry as one o the best outsourcing companies(as claimed by Somewhere in management) or the Nordic region. The major workingpartnership o Somewhere in... is with Norway though they have also commencedexporting to other Nordic countries. The strongest competency o the company lies in itsin depth knowledge o the two dierent regions (viz. Nordic and Bangladesh). TheNorwegian Mr. Arild Klokkerhaug, Head o Opportunities, Somewhere inhas beenliving in Bangladesh or more than 12 years. He along with his two partners brings withthem the Nordic culture and blends them eectively with the local culture. That is thesecret o the success behind the company. Let us now look in detail at the road to successor Somewhere in....

Challenges

Beore the partnership began, the company identied the challenges that lay ahead.Three basic roadblocks were as ollows:

i. Establishment

Ater identiying the rough business idea based on their ICT skills, cultural bridgingexpertise and mission in lie, the ounders went into a month o sel-analysis and observa-tion. Their thinking process was We had to know and understand ourselves, our iden-tity and values beore starting a business, or else how can we design the oundation?They came down to the core values o inclusiveness, imagination, curiosity and engage-ment, and all talents we employ, all projects we take on and all partners we work withmust be recognized or these values. People can learn java, they can learn French, butunless curiosity is in their nature, it is hard to learn. By religiously applying these valuesalong with their business purpose o creating colorul moments, Somewhere in has aclear direction or growth.

Every country presents itsel with some unique diculties in business establishment andBangladesh is no dierent. The business culture in Bangladesh can sometimes be veryunproessional and the lack o commitment is one o the major hurdles or intendinginvestors. The legal procedures can also be very tedious owing to deep-rooted bureauc-racy. However, the IT sector in Bangladesh (and orei

bangladesh it and telecommunication industry

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