Bangladesh Software and ITES Service Industry
Status of Software and ITES Industry
Bangladesh has identified ICT as a "prospective sector" as it represents the potential for successful improvements, job creation, industry growth and developments, and high spillover effects to other sectors as well as improving governance and facilitating inclusion.The current World Bank's Country Assistance Strategy for Bangladesh also recognizes the key role of ICT in supporting Bangladesh’s growth, competitiveness, and governance agenda. The ICT industry in Bangladesh, especially the software and ITES industry, is moderately small compared to the dimension of its national population (160 million-plus), and the size of the national economy. However, the software and ITES industries in this country have started promptly growing in recent years. The average annual growth rate of these industries here has been over 40 percent for the recent five years, and this growth rate is expected to continue. This optimistic growth is supported by good software export trends and large demand for IT automation in the domestic market.
Chart 1: Bangladesh Software and ITES Industry
Source: BASIS Survey
Recently in Bangladesh, large-scale automation projects have been widely implemented in the sectors of telecom, banking, finance, pharmaceutical, and garment/textile industries. Domestic demand for software and ITES industries is expected to increase more.
As of now, there are over 4500 Software and ITES companies are registered in Bangladesh. These companies employ over 300,000 local ICT professionals. The size of the Local ICT market excluding telecom in Bangladesh is estimated to be USD1.54 billion (approx.). More than 400 companies export their products to over 80 countries. Current Export Earnings Crossed the mark of USD 1 billion. The major export market in North America and the EU but recently many IT companies started to export to the Middle East and East Asian countries, especially to Japan. Over 40 companies, among the exporters are established through joint-venture with an overseas company or as an offshore development center (ODC) by one-hundred-percent foreign capital.
Source: BASIS Survey
Snapshot of the Industry: Size, Composition and Market
1720 crore taka has been allocated for the IT sector in the 2021fiscal year.This allocation is about 20% more than the last year's announced budget. As per BASIS, there are over 1600 registered software and ITES companies, along withthousandsof 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 different business, banking and other financial sectors.
Chart 2: Business Specialization of BASIS Member Companies
Source: BASIS Survey
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.
The government has formulated a draft `Made in Bangladesh – ICT Industry Strategy’ aimed at turning Bangladesh into a manufacturing hub, enhancing export of local products, attracting foreign investment and creating employment.
The draft strategy prepared by the LICT project of Bangladesh Computer Council (BCC) under ICT Division has proposed three terms—short term from 2021 to 2023, mid-term from 2021 to 2028 and long term from 2021 to 2031 for implementation of the 65 action plans.
Information Communication Technology (ICT) sector can be a great means to create employment for the educated youth of this country without creating much pressure on its environment and very limited energy resources. ICT can play an important role in women empowerment too in a way that; if Bangladesh further strengthens its ICT infrastructure and facilitate skilled women to tap into the global ICT market, then women empowerment through decent work could be more substantiated here.
The software and ITES sector is not only contributing significantly to the national income, but 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. Despite various local and global challenges, these young entrepreneurs have successfully established their businesses.
Export of Software and ITES from Bangladesh
Bangladeshi software firms have expanded their footprint in the global market as the demand for local information technology-enabled services (ITES) has increased. In recent years Bangladesh earned a rapid growth in ICT export - which shows a rapid increase tend in ICT export.
Chart 3: ICT Export Trends in last 5 Years
Source: BASIS Survey
The local software firms export to around 80 countries across the globe, making Bangladesh a major source of quality software products. Bangladeshi firms also maintain global market-opening liaison offices in different countries, including the USA and the UK, according to the officials.
Bangladesh Association of Software and Information Services (BASIS) has been leading the sector as the apex trade body in the information and communication technology sector.
BASIS data shows that more than 25-30 Bangladeshi companies have already set up offices in UK, USA, Japan, Denmark, South Korea, Germany, Netherlands, Australia, and Canada.
Around, 400 local top software companies are trying their best to grab the whole of the country’s software market while they have also put their footprints in foreign markets, like the USA, Japan, and Germany.
Chart 4: Top Export Destinations
Source: BASIS Survey
According to BASIS, local software firms are growing fast with the yearly export earnings hitting around $1.3 billion (Approx.) through IT services where local firms contributed 75 percent and remained 25 percent held by foreign firms.
Soon the industry will reach out the target of $5 billion export from IT services and software and creating two million jobs in the sector by 2025. The association is now looking to expand its outreach in potential markets, including the USA, the UK, and Denmark, and in African countries.
Progression of Bangladesh's software and ITES industry
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 troupes 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.Although Bangladesh is a relatively recent entrant in the global ICT outsourcing market, we have made great strides in this market over the last ten years. Bangladesh today has more than three hundred software & IT-enabled services firms serving clients in more than thirty countries on four continents.
The software and IT-enabled services in Bangladesh are also blessed with a large number of young, enterprising, and well-educated entrepreneurs who are passionate about ICT entrepreneurship and will surely keep this industry here thriving for many years to come.
ITES 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.