How to accelerate software export growth
First and foremost is the fact that according to Bangladesh Bank export remittance statistics, software exports in 2004-05 registered 75 percent growth compared to the previous year. In fact, in the last three years the year-to-year growth has been 51 percent, 71 percent, and 75 percent. This 70 percent plus growth rate in the last two years has continued in the first quarter of 2005-06 as well, paving the way for four successive years of high growth. However, as the baseline export at the beginning of the new century in 2001-02 was a paltry $2.3 million, we are only expected fetch about $20 million in 2005-06 despite this high growth.
Highlights of the past year
The back-to-back visit of a software business delegation from Denmark at two successive BASIS SoftExpo (an annual software exhibition organized nationally by the Bangladesh Association of Software & Information Services) is noteworthy. A number of software outsourcing deals have been reached between Danish and Bangladeshi software houses in the last two years.
For all latest news, follow The Daily Star's Google News channel. The day-long visit last year by Microsoft founder Bill Gates caught the attention of the whole nation and I am sure of the world as well. Although Mr. Gates, presumably the richest man alive today, came primarily in connection with charitable projects in public health funded by the Gates Foundation, his short engagements with the business leaders and the government high-ups resulted in a couple of Microsoft initiatives being penned for the expansion of training facilities for their software products.
Another milestone of the past year is the cabinet approval of the electronic transactions act draft which is popularly known as the cyber law. However, the approved draft has not been made public yet nor its fate afterwards. When pressed into law this will provide legal cover to all financial transactions done electronically without any paper documentation and physical signatures of the parties involved. One can only guess when this will get past the floor of the parliament and become law. The parliament, however, did pass the copyright amendment bill 2005 thereby removing the typographical inconsistencies from the landmark copyright act of 2000 which for the first time recognized the copyrights of intellectual properties recorded in electronic media such as software, e-book, e-music and e-video.
BIBC closure
On the down side, last year saw the closure of the Bangladesh ICT Business Centre (BIBC) -- the first-ever overseas marketing office for the software industry of the country set up in 2003 in the heart of Silicon Valley in California at a cost of nearly half million dollars funded by the World Bank under the export diversification project of the ministry of commerce (MoC). Much was expected from BIBC in terms of channeling software outsourcing work from US to Bangladesh. Some work did come from BIBC but not enough to keep it going according to the MoC.
While on the subject of outsourcing, let me summarise the kind of jobs being parceled out to Bangladeshi software companies. According to BASIS and the Export Promotion Bureau (EPB) there are more than 50 companies that regularly export software to clients in more than 30 countries of the world in four continents. The bulk of these contracts are for programming (coding) services and graphics/animation works. However, Bangladesh is increasingly becoming a destination for software support services, multi-media content development and business process outsourcing.
Continued growth but no breakthrough
The current trend in near triple digit growth in software export appears set to continue throughout the year. The industry seems to be in sync with its natural potential as the growth is continuing without any command intervention from the govternment. Most developed economies of the world are recognizing the availability of large pool of IT professionals and the economic gain that can be realized by harnessing this resource. In addition to the Danish software business delegation this year we are expecting significant IT trade delegations from the UK and the US among others. A bigger Microsoft presence is also expected on account of the landmark visit by Bill Gates late last year. The continued high natural growth of the software export industry will happen behind the scenes through mostly organic growth of existing export capabilities and no high-visibility breakthroughs are foreseen at this point.
From Tier 3 to Tier 2
Despite our sustained high growth we are still not recognized as a major outsourcing destination due to our small share of global software exports. According to Intellect, the British IT Trade Association, Bangladesh is listed among Tier 3 countries for software outsourcing. The good thing is we are listed but our pride is pinched when we find that Pakistan and Sri Lanka are grouped under Tier 2. To move up the ladder a number of developments are required to take place: (a) the presence of a major IT multinational having software development facilities, ( b) software industry profiling and growth plan done by a globally accepted consulting firm such as McKinsey or Gartner, (c) aggressive overseas promotion of Bangladeshi software products and services, and (d) building world-class software applications. If we can achieve a major breakthrough in any of the above, the world is sure to notice us and help us climb up the pecking order.
Domestic profile
The current software industry size is estimated to be approximately Tk 300 crore in 2005 as published by BASIS (software industry association) and Catalyst (a swiss NGO). Although the current membership strength of BASIS is a little over 200, this author estimates more than 500 software firms (including software development, IT-enabled services, BPO and IT services) in operation in the country sharing the relatively small pie of Tk 3 billion. This is why even within the country the software industry is not considered a major economic area. On top of it all the small number of professional software development firms feel threatened by the onslaught of much larger Indian software firms with huge marketing coffers built with burgeoning IT outsourcing business with the developed economies of the world.
Do's for the private sector
The industry is highly fragmented and ripe for a consolidation. The size of the domestic market as well as overseas outsourcing market cannot sustain such a relatively large pool of small to medium sized firms. There are too many firms doing the same kind of products or services. Judicious mergers among many of these firms can create a smaller number of stronger and highly focused firms that will be able to take on the outsourcing market with stride as well. A common weakness in the industry appears to be the lack of appropriate allocation for marketing activities resulting in less than desirable visibility of local software products and services. More investment in marketing and customer sensitization is a must if the local players wish to retain and enhance their share of the domestic market.
Another common malaise of the local industry is the lack of sufficient professional managers in most of the firms. Development of professional management in software firms has long been felt a necessity that still has not been adequately addressed. In a somewhat connected fashion most start-ups are falling prey to their own under-quoting and unrequited undercutting. Such undercutting leads to financial losses and often abandoned projects if the losses are unbearable. This practice is not beneficial to either the vendors or the clients and needs to be carefully redressed.
BOIPs and BOIEs
One recent phenomenon fueling the growth of exports has been the active participation of Bangladeshi Origin IT Professionals (BOIP) and IT Entrepreneurs (BOIE) living abroad in the marketing of software services from our country. This is really heartening given that most software companies here lack the financial and organizational strengths to carry out overseas marketing on their own. Such collaboration with BOIPs and BOIEs need to be pursued vigorously for further growth of the industry.
Immediate do's for the government
In the last seven years the government has been very supportive of the IT industry, at least in theory. ICT has been declared a thrust sector, an ICT Task Force has been constituted with the highest government functionary as its chair and funds have been allocated for (a) overseas IT fair participation (through EPB), (b) equity injection in IT firms (through Bangladesh Bank EEF Unit), (c) e-government initiatives (through the planning commission) and (d) laying fibre cable up to the landing point in Cox's Bazar for the SEA-ME-WE4 submarine trunk. However, the quantum of support and attention suffers from the much-despised "too little too late" syndrome. While the government claims brownie points for the hard-earned achievements of the industry, the lack of seriousness about the IT industry is clearly reflected by the fact that the ICT Task Force has not met once in the last two years and even the decisions reached more than two years ago remain largely unrealized.
With the parliamentary elections looming on the horizon in less than a year, the incumbent government is not anticipated to take on any new initiatives for the ICT sector which is still considered a fringe sector except for the telecoms part of it which is seeing big money of late. However, despite the equations of power politics that be, the least the government can do in the next several months is to sustain the fruits of the efforts made in the last four years to accelerate the growth of the ICT sector. That would require the government to at least hold one more meeting of the national ICT Task Force before fiscal 2005-06 comes to an end and ensure (a) continuity of funding in all four areas mentioned above, (b) formulating the usage and pricing policy for the submarine trunk cable before it becomes operational sometime middle of this year, and (c) reviewing the execution status of all decisions reached thus far.
Looking ahead
The current spate of software export growth should continue throughout this decade unless unforeseen political or natural calamities suck the air out of this youthful and energetic industry before it has had a chance to bloom. At the present rate of natural growth, exports will exceed $180 million by 2010. We are certain to be on the radar screen of all software outsourcing clients at that level. Many however wonder whether we should shoot for a higher target achieved through command growth regime. In the past we have seen very high targets being set without being followed up with the necessary resource mobilization resulting in disappointment and frustration. Given the constraints of resources and long term policy paradigms in the context of the country, this author favours natural growth and a policy regime supporting such growth.
The ICT industry has steadily grown over the last two decades in the face of doomsayers and cynics both inside and outside the country. Many even prophesied that we have missed the ICT train, the train of ICT-led bounty. Having ridden that train for two decades I can only continue my journey and hope the naysayers will join me too.