An Assignment

On

Software Business Making Differences

Date of submission: 21/07/2013

An Assignment
On

Software Business Making Differences

Submitted to:
Md. Lecturer Department of Marketing Comilla University

Submitted by:
Name
Md. Faizul Haque

ID NO
12030707

Date of Submission: 21 / 07/ 2013

INDEX
Description
Abstract, Introduction Software Development Process Snapshot of the Industry: Size, Composition and Market
Business Expertise of the software Industry Industry Growth and Manpower Scenario of Software Industry PPP in gov. Policy and Budget Current Status Of e-Government In Bangladesh

Page No
4 5-6 7 8 9 10-11 12 13 14-16 17-21 22

Benefits of Electronic Business and on line banking system Software prices Infrastructure ,Hardware and technical back-up Local market opportunities ,Market threats Export of ICT services .Key areas of operation Investment scenario ,ICT industry employment scenario ICT Business Promotion Council (IBPC) ICT education in Bangladesh .Political risks with the industry Total Market Analysis Conclusion And Recommendation

ABSTRACT Improving software process to achieve high quality in a software development organization is the key factor to success. Bangladeshi software firms have not experienced much in this particular area in comparison to other countries. The ISO 9001 and CMM standard has become a basic part of software development. The main objectives of our study are: 1) To understand the software development process uses by the software developer firms in Bangladesh 2) To identify the development practices based on established quality standard and 3) To establish a standardized and coherent process for the development of software for a specific project. It is revealed from this research that software industries of Bangladesh are lacking in target set for software process and improvement, involvement of quality control activities, and standardize business expertise practice. This paper investigates the Bangladeshi software industry in the light of the above challenges. INTRODUCTION As computer technology offers efficient and high performance information processing, it has got popularity over the home and office users in the whole world. By the decade of 1990, in Bangladesh, it has also taken an important role. Since during this time PCs become more user friendly and attractive, the number of users had been increased. Beside the general users, in Bangladesh, a number of software developers have been increased as well. Many of Computer Science and Engineering graduates form public and private universities as well as computer diplomas from training institutions are getting employed to the local software companies. As the time goes, the overall development of skill of software developers has been increased with respect to Bangladesh. Bangladesh stands out distinctly as a potential software-exporting nation, considering the analytical and technological ability of its people. Bangladesh is one of the potential countries where software development is to be grown as a software industry. According to Bangladesh Association of Software and Information Service (BASIS), there are around 250 companies, are working closely with the development of software for local and international market for different information and communication technology services 1. Bangladesh is a country, where the only surplus property is the human resource. Considering the earning of foreign exchanges and removing of unemployment problem, software industry is a very prospective field. To make this field more profitable, several plans has been done by the government and private organizations in the last several years. The Government of Bangladesh made an in depth study on how the software sector of the country could be designed to suit the needs of the global market. To follow up on the outcome of the study and to monitor the issues associated with the sectors growth and development, a high powered National Standing Committee (NEC) on software export has been formed. This standing committee has brought together the concerned government offices organizations and leaders of the software trade to work in unison to study the problems and prospects of the sector 2. Table 1 shows the business application nature of software service of software industry at Bangladesh 1. It is notable that each software company in software industry develops multiple category of software service.

Table Products/Service Category Accounting & Financial Management Inventory Management Human Resource Software Web Site/Web Application Development ERP (Enterprise Resource Planning) Software Implementation & Integration Billing Asset Management POS (Point of Sales) E-Commerce Data Entry/Data Conversion CRM (Customer Relationship Management) E-Governance Application SCM (Supply Chain Management) Data Warehousing Access Control Mobile/Wireless Application Development E-Learning Data Security Gaming Software SOFTWARE DEVELOPMENT PROCESS: A software process is a framework for the tasks that are required to build high quality software 3. Therefore, software process defines the approach that is taken as software is engineered. It may be an ad-hoc process devised by the team for one project. But the team often refers to a standardized documented methodology which has been used before on similar projects or one which is used habitually within an organization. Some managers who are held accountable for software development may seek to find the commonalities in the efforts of their organizations. If those managers are process oriented then they may seek methodologies or other proxies which can serve as templates for the software development process. Another reason why software development process is important is that a process provides organizational stability and more control to its activity. Scott et al. 4 discusses important requirements for software process improvement (SPI) that should be built on developed and proven SPI technologies like CMM, SPICE, and ISO 12207. However, as these models are built actually for large companies, they may not be appropriate for Small and Medium Entrepreneurs (SMEs), where they have short deadlines, are dynamic projects and have tight budgets. Another paper of Kautz, Hansen and Thaysen 5 has investigated the suitability for IDEAL model for small software enterprises, though it was actually based on the experiences of large organizations. IDEAL model was developed by Software Engineering Institute at Carnegie-Mellon University, USA (SEI). This model, as originally conceived, was a life-cycle model for software process improvement based upon the Capability Maturity Model (CMM) for software, and for this reason, this model uses process improvement terms. IDEAL model defines five phases: Initiating, Diagnosing, Establishing, Acting and Learning. The Authors implemented this model in a small Danish company named NP and deployment of IDEAL model took 10 weeks for them, one week initiating, % of Companies Offering Service 69% 59% 58% 57% 48% 46% 43% 38% 37% 36% 34% 32% 29% 27% 23% 22% 18% 17% 14% 6%

three weeks diagnosing, and six weeks establishing and acting in parallel. McGuire & McKeown 6 showed how an ISO 9001 certified company adopted CMM level 2 first and later adopted level 3. The authors pointed that ISO 9001 had similarities with CMM level 2; however, differences were more pronounced and profound with CMM level 3. McGuire & Mc Keown placed a UK-based software companys example in this regard and examined that it takes five (5) steps to adopt CMM in an ISO environment, which are: 1) Establish a Software Engineering Process Group to change the culture of the organization, 2) Perform a gap analysis between ISO 9001 practices and CMM key practices, 3) Make a plan, schedule and detail the specific tasks, target a timeframe, 4) Provide training that address the CMM specific roles, and finally 5) Measure the improvement. Each of the companies is following their own software development policy and software development standard if any. Some of the companies got certified that they are following ISO9000-1/2/3: 1994/2000 for their software development. Some of are trying to upgrade their certification up-to CMM level. But there are no unique guidelines for software development for all companies as well as for the nation so that each of the software developer can follow the unique standard guidelines throughout the country. These rules of software development come through the software development life cycle (SDLC). To develop international standard software, it is important to know the SDLC. Software and IT service industry in Bangladesh has crossed a long road over the last few decades. It has matured. The industry no more remains at the sideline. It joined the mainstream. Not only the industry is contributing significantly in the national income, but also it has been playing very crucial role in creating high quality employment for a sizable portion of young graduates of the country. The presence of high number of young entrepreneurs is one of the distinctive features of this industry. In last decade many tech savvy young graduates, some of them returning from abroad after finishing education, have started their IT ventures. Despite various local and global challenges, these young spirited entrepreneurs have done remarkably well in building sustainable business organizations through their hard work and passion. Surely, the enthusiasm and resilience of the young entrepreneurs are the main driving force of Bangladesh IT industry. Snapshot of the Industry: Size, Composition and Market According to BASIS survey, there are over 800 registered software and ITES (IT Enabled Service) companies in Bangladesh. There are another few hundred of unregistered small and home-based software and IT ventures doing business for both local and international markets. The total industry size is estimated to be around Tk. 1,800 crore (US$ 250 million). Approximately 30,000 professionals, majority IT and other graduates, are employed in the industry. Though, compared to other traditional mainstream industry, the contribution for overall employment creation is not significantly high, but if considered in terms of creating high quality employment (average monthly compensation over Tk. 15,000 per month), software and IT service industry is surely one of the top graduate employment sectors in the country. BASIS recently carried out a survey on three hundred of its member companies. Analysis has been done on business nature, business volume and size of companies. Over 70% of the companies (please see chart 2 next page) are found to be involved in development and maintenance of software for their clients. A number of those are simultaneously engaged in providing different IT enabled services for their clients as well. In total, almost half of the

surveyed companies are involved in providing range of IT enabled services (data/form processing, graphic/web design, content management etc.). Interestingly, a significant number of companies (18%) have developed software products or productized services; most of those have been developed over time after repeated installations for multiple clients. A number of companies are in digital content development and delivery business , mainly providing content services through mobile platform. One of the most encouraging recent trends in the industry is that, leveraging on recent positive changes like larger Internet user-base, better connectivity as well as introduction of new payment methods (online payment through credit card and mobile payment), a good number of companies (around 45%; some dedicatedly and some along with their core software or IT service business) are focusing or diversifying on different web based services that include specialized portals, listing services, e-Commerce, e-Learning, payment intermediary services etc. A number of these ventures have done quite well in terms of popularity as well as financial viability. Off late, some companies are also developing web applications based on cloud/SaaS delivery model. These emerging new business and service delivery models might define the new wave in the coming years for Bangladesh IT industry. With regard to average size of enterprises within the industry, it is interesting to note that, the distribution is quite spread with respect to both revenue size and employment number. Majority of the companies are in the range between 10 to 50 people in employee size. Similar pattern can be found in revenue size of the companies. However, there are few product companies who have relatively less number of people for significant revenue. Local market still constitutes the major part of business of the software and IT service industry (63% of BASIS member companies are focused only in local market). There has been a consistent growth (around 20-30%) in this market over last few years. The trend also shows that the market is maturing in terms of both client requirement and solution response from IT companies. Although there is high level of interest for IT jobs in public sector, market share is still dominated by private sector. From a survey carried out on 110 IT solution companies who are focused mainly in domestic market, it is found that a large part of them provide business application solutions including ERP, Accounting software, HR software, Sales Automation, Inventory Management system etc. to private sector business enterprises. Banking and other financial sectors (including capital market, Insurance, Leasing, MFIs) still continue to be the major focus for a large portion of IT companies. In the banking sector, the core banking software market is dominated by foreign software (though in a number of cases local solution companies are working for implementation and maintenance for those software's). However, interestingly a good number of local IT solution providers are working with banks for providing range of ancillary services related to banking. Because of the increased activities in Bangladesh capital market during recent years, a number of companies have developed solutions for merchant banks, brokerage house and issue managers. As regulation in the micro credit/micro finance institutions (MFI) are getting more stringent and more pressure is on for operational efficiency, a number of MFI solution development companies are targeting this otherwise untapped market. Manufacturing sectors including RMG, textile, pharmaceuticals and other consumer goods industries have created sustainable demand for IT solutions like ERP, HR information system, production and financial management solution. On the other hand, service industries like telecom (second highest after financial sector within service sector), retail & wholesale,

healthcare (hospitals, diagnostic centers etc.), education (University, schools and colleges), publishing/media and real state have created sizable market space for IT solution companies. A good number of software and IT service companies who provide non-specialized/non focused services are surviving on business demand generated across different client industries. Examples of such general IT solutions are accounting solution, web site development, CRM, sales automation, office management, security solutions etc. The local software industry has been trying to keep pace with the most recent development going on across technology and communication space. A number of companies are developing apps for mobile and other hand-held devises. Some companies are also providing services (platform or content service) in the new business models like pay per use, primarily using the mobile distribution channel.
Business Expertise of the software Industry

Response provided in Table 8 reveals the information that although most of the software company follows documented contract review procedure, they generally do not use any documented procedure for involving sub contractor. Even though few companies engaged sub contractor for developing their product they do not generally do not have any organizational policy to manage sub contractor. After sale services is very crucial for software business. But substantial percentage amount of software firm do not maintain documented procedure for after sales service. Most of the company gives priority on training which will be beneficial for the software industry in the long run. The statistical techniques to control and verify process capability of the organization need to introduce more in the software company in Bangladesh.
Industry Growth and Manpower Scenario of Software Industry

Now a days Software customers are clearly going global and are demanding quality. It is important for software organizations to understand all the rules for self-improvement and for doing business in the international marketplace. At present, more than fifty (50) software and IT service companies have been exporting their services to 30 countries in the world including USA, Canada, Middle East, Japan, Australia, South Africa and some of the South East Asian and European countries. Table 9. Growth of Software Export in Bangladesh
2000- 2001 2001- 2002 2002-2003 2003- 2004 2004-2005 (till February, 2005 first eight months) 7.38

Export in US$ (in Million) Yearly Growth

2.24

2.8

4.2

7.2

25%

51%

71%

77% (over same period last year)

Another important thing is that a knowledge based software industries required the qualified human resources in the market. The following table shows the academic background of the technical professionals employed software firms. From the table 10, it is clear that only 44% professional are from Computer science graduate and 56% from other education background.

CURRENT STATUS OF E-GOVERNMENT IN BANGLADESH

The World Bank in 2007 ranked Bangladesh 92nd among 132 countries and last among 5 countries in the South Asian subcontinent, with regards to its ICT infrastructure. It is also ranked 123rd and 5th in South Asia, in the e-services adoption index. However, despite being behind most South Asian counterparts, Bangladesh has been catching up quickly in the field of e-Government. According to UN's E-Government readiness report 2008, while most other countries (including India and Sri Lanka) in the region have slipped significantly in the rankings, Bangladesh advanced 20 steps between 2005 and 2008. Bangladesh's Readiness Index value of 0.29 was not that far behind India (0.38), although it was still some distance from the regional leader Maldives (0.45). Nevertheless, Bangladesh was still behind all neighbors except Nepal, Myanmar and Afghanistan.
PPP IN GOV POLICY AND BUDGET:

The present government has put emphasis on building a "Digital Bangladesh", and also demonstrated its intention to pursue PPP projects widely during its 5 year tenure. The FY 2009-10 budget gives due importance to PPP (creating three new expenditure heads focused on PPPs with about 3% of the total budget allocation), although not explicitly in the eGovernment sector. A major step forward in the quest for digitized government has also come recently in the form of the National ICT Policy 2009, which has also mentioned PPP as a mode for providing e-services to citizens. The ICT policy 2009 and the ICT Roadmap, however, have failed to shed specific directions regarding the possibilities of PPP in e-Government implementation. The policy has noted the importance of encouraging public private partnerships, promising to "wholeheartedly encourage use of PPP for new e-citizen service initiatives" in the short term, and to "develop PPP as an appropriate model for e-Citizen service delivery" in the medium term. However, these policy statements are yet to be realized through specific initiatives. PPPs have so far been governed by the Bangladesh Private Sector Infrastructure Guidelines (BPSIG), which is the de-facto PPP policy. However, these guidelines did not cover ICT sector or e-Government projects, although e-Government is a vast sector and ICT component is integrated with many developmental activities. Recognizing the importance of having a new standard PPP policy, the gov is now preparing a national PPP policy which will replace the existing BPSIG. The Board of Investment (BOI) of the Prime Minister's Office (PMO) has finalized this draft PPP policy in March 2010, entitled "Bangladesh Public-Private Partnership Policy & Guidelines" which has been sent to the Cabinet Division for further approval. This PPP policy is being designed to attract both local and foreign investors and partners (including NGOs) in ten explicitly mentioned development sectors, which includes Information Technology (IT).However, it is not clear whether e-government projects are subsumed under the IT sector or considered to be an inseparable component of each development sector. According to the draft policy, a PPP Cell will be established in the Board of Investment, under the PMO; and line ministries and executing agencies will encourage local investors through awareness creation and motivation to participate in various projects. The draft policy has included 16 modalities for implementation of PPP related projects which are BuildOperate-Transfer, Build-Own-Operate, Build-Own-Operate-Transfer, Capitalization, Design-

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Build-Finance-Operate, Securitization, Build-Transfer, Build-Lease-Transfer, BuildTransfer-Operate, Lease Management Agreement, Management Contract, RehabilitateOperate-Transfer, Rehabilitate-Operate-Maintain, Service Contract, Supply-Operate-Transfer and Joint Venture Agreement [a brief information on popular PPP mode is given in Appendix 3]. It remains to be seen whether this new policy adequately covers the area of eGovernment, and how well the government can define a regulatory and legal framework for the operation alization of PPPs
Benefits of Electronic Business and on line banking system:

Managers at various levels of organizations especially in underdeveloped country like Bangladesh will have to play vital roles to successfully implement e-business. They may act as strategic leaders at different stages of managerial capabilities. They are the key forces to initiate dedicated strategy to change from the traditional business processes to the technology driven business processes. This is not involving only huge costs as a transition period of organizations but adaptability of the human being in the new processes to adding values are required. Due to global changing environment, to succeed in the global arena as well as domestic business, organizations often forced to do business in the electronic ways. Moreover, to succeed over the competitors organizations needs to be changed their strategy and they are gradually become bound to adopt e-business. At these stages successful implementations depends on all the stages of the Hierarchy of the Management i.e. starting from the Top Management level to the lower level management. On line banking system works as a complementary factor of electronic business. Though electronic business has a greater set of field but on line banking can work as a 14 subset of the e-business .Benefits derived form the e-business largely depends on successful implementation of the business process.
Managing external pressure as well as internal pressure should be coordinated by the anagement so that e-business can supersede traditional business processes of organizations .Moreover, ansformation process requires huge cost especially organizations of Bangladesh. Greater and cautious resource management especially financial capability should be handled by the management of the organizations. Flexible innovative changes processed by the management of the organizations are required for the organizations to succeed in the transformation process. Changing processes should consider socio-economic and cultural environment as well as labor surplus country. Business process reengineering may be designed with the aim that personnel of the organizations will use the technological functionalities which will lead to further enhancement of the organizations. As such strong motivations by the management towards all level of personnel of the organizations are required. Managers functionality to implement ebusiness is a stressful task for which their mindset should be strong and they should consider not only global considerations but also consider domestic situations. E-business can add value through knowledge management as it helps to attain new services to the customers. Successful ebusiness depends on sharing of strategic knowledge for which dissemination of the information and free flow of knowledge around the globe is required. On line banking can provide twenty four hours banking facilities. Through electronic data interchange customers are able to draw money from one branch to another. Letter of credits can be sent through SWIFT or electronic fund transfer from one country to another can be feasible. Actually on line banking provides faster, reliable services. Encryptionand decryption can be used to send money from one place to another. As such on line bank management handles customers in a far better way. In Bangladesh decision makers are generally reluctant about advancement of technology. It is difficult for people who do not have

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much technical knowledge to understand the necessity of adoption of new technology. So the pace of computerization in various offices, business enterprises and sectors are low. Another problem of initiating E- business is that in our country policy makers, managements are generally reluctant to accept something new. As such management prefers to maintain current business model and thats why they are reluctant to introduce some thing new. To avail the advantage of E- business, organizations including banks have to invest for software, hardware, infrastructure development etc. The owners are uncertain about the positive return on investment as transformation from manual system to electronic transaction involves huge cost. This is a great drawback to implement E-business at a full swing. But the organizations are not interested to invest because they consider huge expenses. In Bangladesh most of the business organizations are running centralized manner. As such visions, missions, goals of the top management of various organizations are very important. Top management should change their mindset and like Bangladesh Bank, they should encourage ebusiness process. Top management views are reflected to the mid level management and lower level management. Unfortunately most e-business efforts fail for non-performing visions, missions, goals and tactics at the business processes of the organization.

Software prices :
BEA uses a hedonic price index (as well as a matched-model index) in the estimation of real prepackaged software investment for 198593, but this index declines more slowly than BEAs computer price index, and its impact is largely offset by BEAs use of cost-based estimates in constructing the price indexes for the other two components of software-custom software and own-account software (charts 1 and 2). BEAs price index for custom software is a weighted average of the prepackaged- software index and a cost-based price index; the price index for ownaccount software is a pure cost-based index. (A paper describing BEAs methodology for software .By construction, BEAs cost-based indexes assume roughly zero growth in multifactor productivity A number of observers have questioned this conservative methodology, but until BEA is able to obtain better indexes, the contribution of software investment to real GDP growth is likely to be little different than its contribution to current-dollar GDP growth, so

Infrastructure
Bangladesh has been building its infrastructure support for the IT industry over the years. This year, the country ensured global connectivity by connecting to the Information Super Highway through SEA-MEA-WE 4 consortium. High-speed Internet connectivity through fiber optics cables costs about USD 2.67/per month for 1 kbps connection. The existing VSAT backbone will continue to remain the major Internet infrastructure until the new Backbone (Submarine Cable Connectivity) operates 100 per cent. There are as many as 150 ISPs in the country and the competition among Internet service providers has resulted in significant improvement in their services. Most of the ISPs are now providing 24/7 on-site technical support. In relation to infrastructural weaknesses, all the stakeholders identified stable electricity as the top priority. In general, the country lacks adequate electrical supply. The companies operating in Bangladesh, therefore, must make alternative arrangements to ensure smooth power supply, This has developed a strong market for alternative power equipment in the form of UPS (Uninterrupted Power Supply) and IPS (Instant Power Supply). For smaller projects, the cost addition due to power shortage may not be significant, but for larger projects the cost of a project may increase for this reason.

Hardware and technical back-up

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

Local market opportunities

In recent times, Bangladesh has become one of the prominent outsourcing destinations in the world. Danish companies could easily venture into this readily available opportunity. The telecom boost in the country presents another opportunity for the IT companies as support service to the telecom companies. The major focus of the telecom opportunities lie in the form of mobile content development and value added service solutions. The government is yet another big opportunity that is worth pursuing. To act on its declaration of ICT as thrust sector, the government is seriously taking initiatives towards public

Market threats
The Bangladeshi IT industry has many of the right ingredients for success, however, according to the industry stakeholders, some existing/perceived threats for the industry remain. At individual company level, the business vision (or lack of it) of the local IT entrepreneurs is the biggest threat. Groups of companies have many times started in IT as a chance venture. This naturally, in most cases, did not succeed. On the other hand, the lack of finance for the real IT entrepreneurs has limited them from reaching their true potential. The countrys IT policy is favorable, yet, Bangladesh faces a big threat of resource crunch in the near future. Brain drain and attractiveness of other business sectors are reducing the number of professionals pursuing an IT career. Bangladeshis are used to short term profit from investing in the textile business. Many of the investors from this sector are also expecting short-term profit in the IT business. The management style in Bangladesh is largely based on a top-down approach. Apart from clashing directly with the Danish/Scandinavian style i.e. each person is responsible for its own job it also means that Bangladesh is short of middle management skills. In Bangladesh, the process of legally establishing a company takes a long time. It can take up to six months to obtain the necessary licenses, approvals etc. The existing supply of Internet access is somewhat constrained. The costs of Internet access are relatively high, and even at high costs no optimal connection is yet available. China, Vietnam and similar countries pose a future threat to the Bangladeshi IT industry. The industry prospect/potential for those countries is very similar to Bangladesh. In addition, they enjoy more stable political situation. The even field in the lower strata of IT industry created by the fact that India moving to higher strata provides equal chance for all potential countries like Bangladesh, China, Vietnam etc.

SWOT
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The specific success factors that Danish companies could leverage when entering the Bangladesh ICT industry are: Business Vision (taking IT as core business) Management Practices (proven effective management practices and business acumen) Business linkages (links with prospective clients in Nordic/EU regions) Regional knowledge (knowledge of the business practices of the regions from where many outsourcing projects placed) Danish Governments presence (support for relationships between Danish and Bangladeshi companies) The Danish companies, however, need to improve on some aspects if they are to succeed in angladesh. The foremost success factor is to improve local knowledge. Similarly, the HR management needs to be customized to suit the local culture. Overall, the communication barriers are to be addressed properly. Entering Bangladesh would help Danish companies in expanding their market and would help them enter new markets. In the long run, Danish companies could venture into the potential Asian markets and they could capture the SME market niche in Bangladesh and in other regions. However, the road to success presents some challenges for Danish IT companies. The lack of methodical approach of Bangladesh IT companies (and IT professionals) and their lack of information could become major hurdles in business planning. On the operational aspect, the training requirement and communication barrier has to be addressed properly to achieve the desired outcome.

Export of ICT services

According to the Bangladesh Bank source, export earnings from Software and ITES was USD 27.01 million in the fiscal year 2005-06 registering a high growth of 113 per cent from the previous year (2004-05). The following chart shows the Bangladesh software and ITES export earning for last five years.

Key areas of operation

BASIS carried out a survey among the 152 participating companies in SOFTEXPO8 2005 to find out some key industry trends9. One of the findings of this survey provides a good insight into the client/industry focus of the software companies operating in the Bangladeshi market. The following section reproduces the findings of the BASIS survey of operational domains of the software companies The industry analysts find the survey results positive because of the fact that a significant proportion of the software companies (57 per cent) are focusing on the government sector. The obvious implication is that the public ICT projects are increasing in numbers

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and attracting business people towards them. The focus of the government spending on IT is targeted towards e-governance and office automation. The public sector is the largest domestic segment for software (IT) companies in Bangladesh. Greater access to this sector has definitely provided added impetus for 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 in Bangladesh. The international exposure and competition of the sector have prompted the garment manufacturers to streamline their productivity. The most effective and readily available option was the introduction of process control through automation. As a result, many export oriented garment companies opted for phase-by-phase automation and thus created opportunities for the local IT companies. Similar scenarios exist in the pharmaceutical industry. However, contrary to garment and textile industry, the pharmaceutical industry focuses on fulfilling the needs of the domestic market. Another key operational area for the IT companies is the financial sector. In recent years, the banks are going online creating a huge demand for software and network solutions. However, so far, foreign software dominates the banking sector. The hardware/server market segment in Bangladesh is doing relatively good in its operations. A recent Springboard 10 research reported that Bangladeshi PC/server market generated growth of 23.8 per cent in Q1 2006 (Jan-Mar), compared to the first quarter of the preceding year. From a buyer perspective, large enterprises are currently the dominant segment of the market, contributing around 23.0 per cent of the total PC/Server shipments11. The large corporations particularly in banking and telecom are the key customers driving market growth. The government segment showed strong growth of 30.7 per cent annually mainly due to the increased automation activities of local and national bodies. The SME market represents a significant portion of shipments (33.9 per cent) in Bangladesh but receives limited focus from IT vendors due to the substantial opportunities in the government and large enterprise sectors.

Investment scenario
The lions share of the ICT market in Bangladesh is dominated by the international giants like Microsoft, Oracle, Sun etc. The off the shelf (packaged/license) software were introduced in the local market in the mid 90s. As a result, they enjoy a market dominance compared to the indigenous customized software segment. In addition, the multinational companies working in Bangladesh brought in their global software. Though, recently they have been working with local companies in procuring their ICT requirements. One other aspect of the investment scenario is the presence of international software vendors through local agents. Microsoft in this regard leads the way.

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Mainly, the initiation and implementation process of IT projects at the organisational level is done through market exploration and an internal operational requirement assessment. The exploration based on the internal assessment mainly takes place in the form of market research for available solutions. In this case the more established companies (MNCs etc.) have their own in-house IT consultancy support available. For the other segments, the proper IT planning is sometimes missing. In light of that, an opportunity exists for IT consultants. There are a few such consultancy support companies who have started their formal operation (Microsoft, IBM etc.), but in most cases advice is sought from individuals with IT knowledge.

ICT industry employment scenario

The total number of IT professionals available in Bangladesh is more than 25,00012 . The booming telecom industry has created a large IT related employment. As a result, the technological professionals are switching over to the telecommunication industry leaving alarming many vacancies in the other ICT segments. The most severely affected is the software segment. The BCS reports that in 2006 the number of IT professionals increased by 12.50 per cent. When considering the yearly growth, the table shows that there is a slow growth in the 2003-04 period. The reason behind is that the introduction of telecom companies encouraged many aspiring professionals to choose a business education instead of IT studies. However, the trend in the number of IT professionals is gradually increasing as the career opportunities and salaries are increasing. According to BASIS, more than 300 local software companies employ about 5,500 software professionals. In 2005 (during SOFTEXPO 2005), BASIS carried out a survey on 1,100 employees working in 55 companies. This section discusses the general findings from that survey. Section 2.0 (Labour force) includes other findings (skill matrix, educational level etc.) of the same survey. Industry experts are of the opinion that the significant proportion of the jobs in the non-coding segments (Project Management, System Analysis etc.) is an encouraging sign. They contribute to the commitment and seriousness of the local software companies. Keeping in mind the ever used 80-20 rule for management and technical work in software projects, the experts believe that with the increase in larger projects, the noncode professionals in IT companies could establish their prominence more effectively and efficiently. The fact that non-technical people are more and more required in the IT industry, have encouraged many of the new graduates from the universities to choose a career in IT companies in areas of business development and customer services. However, the curriculum in the universities for business graduates do not include any specialization in busi-ness and IT (IT Marketing, IT Sales etc.). Consequently, there is a gap between the academics and the people from the IT industry. However, trade associations with the help of various 16

industry development partners are in the process of bridging the gap between the requirements from the industry and the output of a skilled workforce. In this process, the biggest hurdle for the universities is the lack of impetus for the new students to decide on the IT all along. In most cases, other industry segments absorb the business graduates for their different operations. Moreover, as business and IT is still a relatively new field, top class business graduates are reluctant to engage themselves in the IT industry.

ICT Business Promotion Council (IBPC)

Public and private sector representatives related to the ICT sector have formed an ICT Business Promotion Council. The Council is responsible for promoting ICT related service and businesses in foreign as well as local markets. IBPC has already established a shared office in Silicon Valley in California, USA, for Bangladeshi ICT companies inter- ested in doing business in the US. Very soon, offices in Europe and other cities in the US will be established. Bangladesh Association of Software and Information Services (BASIS) is the national association for software and IT related services companies of Bangladesh. Formed in 1997, the association has been working with a vision of developing a vibrant local software and IT service industry in the country. In light of this vision, BASIS has been working hard to create IT awareness in the society through underlining the high importance of making the country more IT capable for a better future of the nation. At the same time, the association has been working hard for creating an enabling environment for the software and ITES industry of the country so that it can flourish by rightly utilizing the huge market potential both at home and abroad.A nine (9) member Board of Directors (elected by direct voting by the members for a two-year term) runs BASIS. The Board of Directors has the overall responsibility for running the affairs of BASIS and setting policy guidelines for its secretariat. Aside from the elected board of directors, different sub-committees comprising of members deal with different policy and development issues. BASIS has a strong secretariat headed by the secretary. The secretariat is well staffed to deliver various member services and to carry out programs and activities in the different areas as specified within the broad goals of the association.

Political risks with the industry:

The government of Bangladesh has declared the ICT sector as one of the major thrust sectors. This has prompted suitable/encouraging government policies for the sector. However, the sector is not immune to the general political risks. The countrys political risks do not directly fall under the scope of this report and therefore, it is suggested to consult other reports to learn about the general political risks associated with business. In this regard, the Doing Business, published by World Bank could be very effective.

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ICT education in Bangladesh:

In recent years, the growing number of private universities has provided new and broader opportunities for aspiring IT professionals to pursue relevant education. However, as the IT orientation is not quite widespread in the lower/secondary education system, the industry relies solely on the competencies the IT professionals obtain during their graduation/ 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 a vital role in developing the workforce in the software companies. At present, most of the university level IT education is concentrated on computer science and engineering courses15. According to a presentation16 by Mr. Fahim Mashroor Chowdhury, CEO, Bdjobs.com Limited, the industry demand for IT professionals per year is about 2,800. The estimate is based on an assumption of a 50 per cent industry growth and minimum 20 per cent attrition rate. Each year the number of IT graduates from different universities is 2,000. However, about 50-70 per cent of the graduates choose a non-software firm or go abroad. As a result, it is estimated that each year the industry faces a net shortage of qualified workers in the range of 1,800 to 2,600. According to Mr. Chowdhury, the industry faces few specific problems in availing adequate IT professionals18. The following table present these problems as well as the underlying reasons. Though the industry faces problems in the HR pool, the inspiring fact of the matter is that the local software companies are seriously attempting to change the scenario. The company chiefs and top management have admitted their difficulties, which is a good sign in finding a solution. BASIS members have already identified specific steps for improving HR aspects of the software companies. Some of these are organisation sponsored training, induction of financial institutions, long-term internship and influencing

Universities and training institutions

According to statistics of the Ministry of Education, there are 73 universities in the country .Of them 21 are public universities while the other 52 are private universities. In terms of technical education, Bangladesh University of Engineering and Technology (BUET) is the leader. University of Dhaka (Computer Science and Engineering Department), Shajalal University of Science and Technology (Sylhet) and Khulna University are also producing good quality IT professionals. These public universities enjoy the quality intake advantage over other private universities. The difference in the intake is mainly the result of the cost of education. The students in the higher education level in Bangladesh mostly come from middle class families. The high cost of education at private universities is still out of reach for most of them. Naturally, the government supported public universities become the obvious choice. In addition, the public universities also provide better resources and

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environment (faculty, infrastructure etc.). The private universities are new in the education system and most of them lack the basic requirements for university studies. Some of the private universities, however, in the recent times (last 2-3 years) have done well in IT education The students pursuing IT education in the country have shown tremendous potential over the years winning international programming contests, developing effective antivirus software and many other such achievements are very common for Bangladeshi IT students. In this regard, BUET and Dhaka University have been most successful. Among the private universities, North South University, Ahsanullah University of Science and Technology, American International University of Bangladesh, BRAC University, Daffodil University and East West University are some of the leading institutions in IT education. In addition to the universities, there are number of Diploma/Vocational Institutions in the country who provide IT education. There are 20 government and 87 private polytechnic institutes in the country. These institutions mainly offer diploma courses on engineering subjects. Most of these centers are owned and administered by the government through the Technical Education Directorate An unauthenticated source reveals that there are more than 1000 private and public sector computer-training institutes offering IT skill development at various levels. However, the interviews with the stakeholders revealed a different scenario. The industry experts (interviewed company CEOs and BASIS leaders) opined that the training facilities in Bangladesh for the ICT industry are inadequate. Especially, the types of training provided are not in line with the industry requirements. Most of the training institutions provide training in basic computer skills. Few specific institutions (NIIT, Aptech, Base etc.) provide advanced level of training courses. However, they lack the relevance to the actual needs of the software companies. Professionals have the option to acquire certifications by Microsoft Certified Partners.

Internet bandwidth availability

Bangladesh has joined the Information Super Highway through submarine connectivity in 2006. Bangladesh Telegraph and Telephone Board (BTTB) is the official custodian of the new connectivity backbone. The BTTB authority has recently publicized a utilization plan of the submarine connectivity. The following sections provide a summary of the plan and the upcoming Internet connectivity scenario of the country. Bangladesh connects itself to the submarine cable connectivity through the SEA-MEAWE- 4 consortium. Available capacity for BTTB in this cable is 468,000 MIU* Km which may have a maximum of 64 STM-1 (10 Gbps) at the landing station. MIU is Minimum investment Unit that is equivalent to one STM-1. Out of BTTBs total capacity, 50,000 MIU* Km has already 19

been contributed to the common pool of the consortium for sale. The BTTB further plans to enhance the capacity of the cable in different phases with minimal investment. Minimum capacity unit for this cable is STM-1 i.e. BTTB has to utilize the capacity at STM-1 or multiple of that between any two landing stations. Although the connection to the Submarine Cable Super Highway presents tremendous improvement opportunities for Bangladesh, the present situation in terms of Internet connectivity is not at all satisfactory. The present VSAT backbone connectivity is slower in nature and is prone to technical difficulties. The new Submarine backbone on the other hand, still has to be streamlined.

Electricity and power stability

The problem with electricity is one of the major hurdles the software companies in Bangladesh face. Through the ICT incubator26, there are special arrangements for an uninterrupted power line, but the other companies with offices all around the city must arrange for alternative power sources. In this regard, most companies opt for an electric generator for supporting the larger electricity requirement. They use UPS (Uninterrupted Power Supply) and IPS (Instant Power Supply) for equipments and computer systems. The generators and UPS/IPS are widely available in the market and are quite reasonable in price. When asked to comment the cost addition to production due to this alternate electricity support, one CEO of a local company said that the problem has been prevailing for last 2-3 years and in recent times it has deteriorated further. He does not see immediate improvement in countrys power sector. He strongly suggested on arranging for an alternate power source for any new ventures. However, he said that the additional cost is very insignificant for his company and it increases the cost by about 0.5 per cent. Most if not all IT joint ventures have assured that there is a power generator.

Bandwidth cost:
The BTTB Internet connection sets the tone for the trend in connectivity. The full ranges of andwidth/Internet connection costs are available at the BTTBs website (http://www.bttb.net). The following sections describe the general cost of getting an Internet connection.

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 of their recent research reports27. The report also said that the market growth rate in the first quarter of 2006 (Jan-Mar) was 23.8 per cent as compared to the first quarter of preceding year. The laptop market expanded 24.0 per cent in 2005.

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During Q4 2005, 48,340 PCs were shipped from international locations to end-users in Bangladesh for a value of USD 37.7 million, up from 34,884 units in Q3 2005. For the full year (Jan-Dec), the PC shipments expanded 16.4 per cent to 162,400, generating a value of USD 129.4 million. Aggressive sales and marketing activities undertaken by MNCs have helped increase PC market growth. The large enterprises (companies with more than 500 employees) and government sectors collectively accounted for almost half of total PC/server shipments in 2005. NGOs are also an important source of funding for IT investment in the country, but generally, spending is routed through the public sector. In the private enterprise market, banks and telecom companies are largest on IT spending. The consumer and SME markets represent significant long-term promise, but both segments are currently in the infancy stage.

Servers/workstation availability:
Locally assembled, often un-branded, machines continue to dominate the market, holding over 75 per cent of the PC shipment market shares. Most of the international giants also operate in the local market. In cases of brand equipment, the international giants usually rely on local distributors and dealers. IBM, HP and Dell all have local distributors in the country.

Availability of technical support:

The position of the technical support for PC/server hardware troubleshooting is at a satisfactory level. The vendors have enough technical knowledge to provide after sales support to their clients. Most large organisations29 usually have an Annual Maintenance Contract (AMC) with the vendors. The AMC is customizable in accordance to the clients needs. In some instances, the larger users prefer having their own technical support team; however, the general support from the vendors is adequate for smaller organizations. The interviews with local hardware vendors revealed an interesting aspect regarding the after sales support. They opined that, the local agreement of maintenance is much more effective than a international warranty agreement. Though, as agents of the international giants, the designated local distributors are legally bound to take in the complaints from the customer, however, they may not necessarily be bound to take the responsibility of providing the technical support by themselves. They usually communicate with the regional office and hand over the responsibility to them. In case of a local agreement, the vendors would provide the support locally by using their own resources. In the latter case the support is more prompt and could be extended even to 24/7 support.

Key industry competencies:

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According to the industry stakeholders/experts, the major competencies (or comparative advantages) for ICT industry in Bangladesh are as follow:

Cheap labour:
Bangladesh has one of the cheapest rates similar business estination countries. Concerning the ICT industry, the comes at a significantly competitive price. professionals in Bangladesh are very good (easily trainable). for work force among the highly skilled labour force In addition to that, the IT at absorbing new learning

Another great advantage with the Bangladeshi work force is their longerterm commitment to specific work areas. However, despite their commitment to their work areas, they are not always necessarily committed to their organisations. The reason for the persistence with a specific work area could be related to the fact that the people working in the ICT industry in Bangladesh are not offered endless opportunities (as is the case for many of the neighbouring countries). Therefore, IT professionals build their skills in a particular area. As a result, clusters of experts with different skill sets are available in Bangladesh. However, most companies need to customize their HR policies to support a longterm commitment of the work force.

Quick learning/easily trainable

The Bangladeshi work force as well as the business people are traditionally renowned for heir quick learning abilities. The work force, especially, has historically strong abilities in mathematical and logical analysis processes. Bangladeshi students have won a number of programming and mathematical competitions globally. Because of their capability to quick learning, the Bangladeshi work force can easily be trained to acquire specific technical knowledge.

Geographical location
Geographically, Bangladesh has the potential to become a business hub. Naturally, utilization of this advantage would result in growth in all industries. Furthermore, as nonnuclear country, Bangladesh has added advantage for countries that have restrictions in collaborating with nuclear countries.

Changed scenario in neigh bouring countries

India is no doubt the leader in South Asia when it comes to outsourcing and IT as a whole and India is a pioneer. However, in recent times India has moved up in the ladder and is now operating in higher and more complicated levels of IT. In addition, salaries in India have increased. This creates a vacant position for an outsourcing partner who can operate at the lower strata of outsourcing. As a result, Bangladesh gains an edge on this segment of market. 22

Favorable government policies

As was explained above (please see section 1.9), the government of Bangladesh has declared the ICT sector as one of the major thrust sectors. Added to special policy benefits for the ICT sector, the favorable investment policies for FDI should encourage companies from other nations to venture into the Bangladesh ICT industry.

Availability of financially capable investors

Local business investors in Bangladesh are well equipped to invest in strategic alliances and partnerships. The willingness of the investors combined with their local business knowledge could be utilized for better return on the investment. Another aspect of these local investors is that they have proven records of accomplishment in international businesses in other sectors such as textile. These people have funds and are ready to invest money in new industries. As a result, the foreign investors feel comfortable working with them. However, in this regard, the local investors have more or less never favored the IT investment, as intellectual investment in IT businesses sometimes make the return invisible.

English proficiency
Bangladeshi people have higher competencies in English compared countries like China and Vietnam. However, the language proficiency is some extent skewed towards professionals with better schooling. general, the English skills need to be improved for Bangladeshi professionals to be able to compete in the global market. to to In IT

New outsourcing destination

Bangladesh is relatively new as an outsourcing destination. This means many unexplored areas of business. More and more investments are coming in and the industry is experiencing growth. The attractive business prospects are bound to encourage local and international investors in the near future.

Software application competencies

In response to the question regarding the specific software application competencies for Bangladesh ICT industry, the respondents of the interviews were of the opinion that Bangladesh is not yet ready for complex outsourcing support. They think that any for- 5 Key competencies in Bangladeshs ICT sector eign company intending to enter Bangladesh IT sector, should start with small projects such as web development, desktop publishing, data entry, 3D animation and back office development. For venturing into more critical software solutions such as ERP and CRM, the proper resources 23

need to be built gradually. However, all the respondents were very optimistic about the potential of ICT in Bangladesh.

Potential/upcoming
The telecom sector in Bangladesh is rising at great pace. The number of mobile phone users in Bangladesh has crossed 15.50 million in August 2006 with Grameen Phone as the leading operator31. An encouraging fact about the mobile phone usage is Bangladesh is that it is not restricted to the urban areas only; rather it is wide-spread throughout the country. The booming mobile communication has provided new business opportunities for software companies. The concentration of these opportunities at present lies within value added services. However, the assurance of local support would definitely influence the major telecom companies to procure their operational software from local market A similar segment that came right after the telecom boom is mobile content development opportunities. Many of the local companies are capable of providing support to the local and international telecom companies. The government commitments/initiatives towards e-governance have provided a very important opportunity for the software companies. Additionally, the ICT 4D propositions though not directly designed with a business focus would result in new business opportunities for IT companies.

International:
The international threats from the neighboring countries (especially India) have always been present. Recently, the business threats coming from India has changed. India is going into an upper segment of the outsourcing/IT support market, which has created an even field for the second category countries. In this regard, countries like Vietnam and China could become large threats for the Bangladesh IT industry.

CONCLUSION AND RECOMMENDATION

Bangladesh poses some advantages regarding software development, which is very important to compete in global arena. One of them is low labor cost. Tjia 10 reports that cost per programmer is much lower in Bangladesh, which is more than 50% including overhead compared to India. High programmer productivity and wide spread of English have significant influence in software industry of Bangladesh. According to our survey 54% of the workforces are graduates from non-IT subjects and diploma/certificate courses in IT. Generally, they are trained in professional IT courses from different internationally recognized IT institutions established in Bangladesh. This justifies the analytical and technological ability of Bangladeshi people. With this competency, Bangladeshi software companies have to exploit the advantages of having no major cultural differences with other client countries as have reflected so far. Software process and process improvement is the key to success for a software company in

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software business. Without a process, a software organization is not capable of producing high quality software. Without defined and measured software process, a software company fails to determine its business goal. Software companies of Bangladesh are facing the problem of adaptation of specific software process model. Our research has identified some problems. These are lack in target set for software process and improvement, lack in involvement of quality control activities, and lack of standard business expertise practice. This paper is a quantitative study and is based on questionnaires and interviews of software companies personnel. The total amount of software companies in Bangladesh is more than 250 if we include the software company those are not enlisted with BASIS and we have collect data from around 50 companies. Our result does not show the whole picture of Bangladesh. Therefore, the study is exploratory. The results are not conclusive at this stage. A further study is needed to explore the extensive scenario of the software development standard of Bangladesh.

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