Bangladesh Software Industry

Chapter One

Introduction

Software industry is labor-intensive, has relatively low-entry barriers and few economies of scale and so offers lucrative opportunities for developing countries to join the ranks of the developed world. The scale and pace of growth in this sector is faster than in any other industry, and a number of developing countries having cheap, talented labor are attempting to emulate the success enjoyed by countries such as China, Thailand and India. The government in 1997 identified the software sector as a thrust sector for the overall economic growth of the country. Accordingly, a commission was formed under the ministry of commerce (later called JRC commission) to formulate some recommendations for the rapid growth of the software industry in Bangladesh.

The commission identified four problematic functional areas namely: fiscal, human resource, infrastructure, and marketing, and provided some recommendations to overcome the barriers in software development in our country.

By accepting these recommendations (however, some of these recommendations are yet to be implemented), the government had set a target to export yearly software worth two billion dollar (Tk 14,000 crore) by the year 2006. However the statistics (BCIT) reveal that the total earning from software sector during 2004-2005 was approximately Tk 88.34 crore. No doubt, this achievement lies far behind as it has been envisaged.

In this research the main focus is to find the problems that exist in Bangladesh Software Industry so that it fail to achieve the success like that of India. It then draws some conclusions about recommended actions to overcome these problems and become a leading software exporters from in this region.

1.1—Problem statement and Rationale of the Research Study

The software industry in Bangladesh is small. Although Bangladesh's neighbor, India, is one of the most successful countries in the software industry especially in export, only a few firms in Bangladesh are involved in export of software and data entry services, and the total volume of revenue generated is negligible. Numerous articles on “software export “ are published in the daily, weekly, monthly newspaper together with lots of seminar, symposium on the prospects of this sector. But no comprehensive research study has been carried out so far to find out the problems and remedies in software export of Bangladesh.

In this research the problems encountered by software industries to become a successful software exporter, which may play a crucial role in the growth of country’s Software industry will be identified. And it will be followed by recommendations to overcome the problems.

The target audience of this research includes Bangladesh’s policy makers of IT department, Software companies, IT professionals, students of computer science and researchers.

This research will help the audience to gain exclusive insight into the Bangladesh Software Industry. This report will also help them to understand the driving forces of software industry and the future opportunities in the sector. Finally, this research could also be used by other researchers for further studies.

1.3—Objective of the research
Objectives of the research are specifically to look into the software industry of Bangladesh in order:

• To identify the problems and hindrances in Bangladesh for becoming a successful software exporting nation. • To recommends how to overcome these problems.

1.5 –Methodology
Data Collection and Analysis

Secondary Data Collection:

The secondary data was collected from books, newspapers, trade journals and white papers, industry portals, government agencies, trade associations, monitoring industry news and developments and internet.

Primary Data Collection

The Primary data for this research was collected in following ways:

1. Sending questionnaire by email directly to the company’s managing directors, project managers and senior software development professionals. 2. Taking telephone interviews with managers from three software firms.

1.4- Scope and limitation of the Research:

- The research only uses information collected from a few software firms of Bangladesh. Besides all the companies are very much export oriented. As a result the findings related to the problems and remedies are not general.

- There is lack of Personnel willing to share information and also inadequate printed data available related to the Bangladesh software industry.

1.6- Organization of the Research

1. Introduction- Chapter 1 will provide a brief discussion of the rationale of the study, the research questions, objectives, as well as the scope of the research. The remaining part of the report will be organized in four chapters.

2. Literature Review- Chapter 2 will present a review of the literature related to the software business, global software market, to form the conceptual framework for this research study which will later be used in Chapter 4.

3. Software industry of Bangladesh- Chapter 3 will give an overview of software industry of Bangladesh in terms of its domestic and export performance, infrastructure.

4. Survey findings- Chapter 4

5. Conclusion and Recommendations- Chapter 5 contains the conclusions and recommendations to the policy makers, producers and people involved in the

Chapter Two

Literature Review

3.1 Software Business
Software may be loosely defined, as an application run in a computer to give desired result that suit a particular requirement. Typical examples may be banking software which keeps track to transactions of all clients or payroll software which stores information about employees. The software industry started in the mid-1970s at the time of the personal computer revolution. Software development involves a number of stages: Conceptualization, requirement analysis, high-level design, low level design, coding, testing and support. These stages roughly correspond to stages described in the software development figure (Fig. 1)1. The value added is greater in requirement analysis and high level design that is at the earlier stages of development. The development has high offshore outsourcing potential.

Software development can be broadly categorized into custom developed software and packages or generic software products.

The software industry comprises businesses involved in the development, maintenance and publication of computer software. The industry also includes software services, such as training and consultancy. In general if any company does all the stages of a software development it is referred as full-packages software and then the company owns the code of the software. On the other hand if the company is doing only some parts of the development process it is called software services.2 Thus the offerings of the software company can be broadly categorized into: Full-Packages or product and Software services.

The products and services of a company can be offered for domestic market or it can be exported to other countries. So a company may have four types of offerings: Software services for domestic market, software product for export, software services for domestic market and software product for export.

Software Export:

Software services are labor intensive and require relatively little capital. The labor costs accounted for about 70% of all software costs in the early 1990s3. In the early 1990s, the demand for IT workers in the developed countries steadily surpassed supply due to the information technology revolution and in order to fulfill demand, these activities were outsourced. If a company can acquire good image then sometimes they can be offered for full-package also.

Software is a small part of ICT market. Within the global ICT market USA and Europe count for nearly 60% of the entire global sales.

| |2004 |2005 |2006 |
|Global ICT market |2434 |2541 |2662 |

Within the global ICT market software segment is about 11%.(1)

Concerning the global software markets, which is close to US $ 300 billions in 2006, over 85% of the market is formed by three regions (USA -30%; EU-29% and Japan with 14%). By software category over 50 % is formed by applications software. Major segment by customer category is the business sector which counts for ¾ of the global software market 1.

Opportunities for the Developing countries

There has been considerable increase in the interest in software industries within developing country contexts in the recent years. Experts see IT and software as a “great enabler” and it is their belief that developing countries can reduce the gap with the developed countries by taking the opportunities in software export. It is already mentioned that because of the low labor cost developing countries are participating in the software development process and this “globalization of work (or) production” provides an equal chance for everybody to participate in the global production and creative process. India, Ireland and Israel, famously known as the three Is of the global IT revolution are the examples to validate these prediction. (Carmel 2003).

Exporting Software services from developing nations such as Bangladesh is a complicated process (Tija, 1999; IBTCI, 2002). Exporting software products is even more difficult. It will always take a lot of time and effective marketing is essential for any successful market penetration. It is still difficult for Dutch or European clients to find suitable information about IT-sector of developing countries. One way to change this and to conduct marketing and sales activities is to open a marketing office abroad. More than 300 Indian software firms established offices in Europe especially in the UK. Only with a local presence can marketing be done at an optimal level. An alternative is to use local marketing partners or business agents.

Successful companies in developing nations usually start on a small scale and built their business up gradually. This should be the goal for other developing countries. Nevertheless, export promotion is both expensive and time-consuming. Firms must be prepared to invest in marketing, especially in fields such as commercial representation, pre-sales constancy, matchmaking, networking and advertising. Because of these factors, the market entry costs are high. These high costs are one of the main disadvantages of the export of IT-services (Heeks, 1992).

3.3 Ranks of software exporting nations

High-exporting used to “belong” to the leading OECD countries (the most advanced economies) (Porter et al., 2001). The US is the “hegemonic” power in software argued Carmel (1997). This balance of power in software is changing however. Dozens of nations have begun exporting software products and services. These nations are newly –industrialized economies, transition economies, or developing economies. These nations are labeled “new software exporting nations” (Carmel, 2003).

The phenomenon- of the globalization of software development – has been of interest since the early 1990s (Jones, 1994; Press, 1993) and later (Heeks, 1999). With the growing extend of globalization more nations entered the marketplace; some observers started classifying software exporting nations. The most pervasive grouping was to combine the three most successful new software exporting nations of the 1990s- India, Ireland, and Israel- which conveniently were labeled the “Three I’s”. The second rising group of nations was china, Russia, and the Philippines (Steen, 1998). More recently industry researchers have begun expanding these tires even further (Overby, 2002). Heeks and Nicholson (2002) present two tiers in their analysis of software exporting nations. Madon and Bhatnagar (1997) take a somewhat related approach, describing nations as going through 4 stages of maturity transitioning from building skills and reputation, to building services, to building products.

As so many new entrants into the software industry, for comparative and benchmark analysis the creation of Ranks of software exporting nations were needed. This ranking is also needed to analyze the national impacts of these industries and to find out the success factors leading to a successful export industry. In “Taxonomy of new software exporting nations” Carmel presented a more comprehensive and rigorous in a number of respects than those tiers described above.

In the paper first the thresholds between the tiers were defined and then the discussion of each of the tiers was expanded.

| |Maturity |Cluster/ Critical mass (num. of |Export Revenues (US$) |
| | |organization) | |
|Tier 1 |>15 years |Hundreds |> $ 1 billion |
|Tier 2 |>10 years |100 |> $200 million |
|Tier 3 |> 5 years |Tens |> $25 million |

Table: Thresholds of the tiers in the taxonomy.

“The thresholds/ boundaries between each of the tiers are based on three criteria: maturity, clustering, and export revenues (table 1 quantifies the tier boundaries; the taxonomy details appear in table 2). Maturity refers to the number of years that the nation’s firms are exporting (a significant number of firms should be exporting for that period, not just two or three). In a deeper sense, maturity connotes the tradition of exporting software from the nation. Clustering refers to the critical mass of enterprises participating in the software export industry. In addition, clustering assumes a maturing agglomeration of secondary services, such as marketing consultants to aid local firms in foreign market penetration. Finally, the notion of a maturing cluster suggests, that at least some firms are clustering around an identifiable market niche.

The third thresholds, export revenues, are those revenues from products and services. This is the magnitude of national software exports, measured here in millions of US dollars.

| |Label |Nations |
|Tire 1 |Major software exporting nations |Mostly OECD nations such as : USA, |
| | |Canada, UK, Germany, France, Belgium, |
| | |Netherlands, Sweden, Finland, Japan, |
| | |Switzerland, Australia |
| | | |
| | |Includes entrants from the 1990s: |
| | |Ireland, Israel and India. |
|Tier 2 |Transition software exporting nations |Only Russia and China |
|Tier 3 |Emerging software exporting nations |Brazil, Costa Rica, Mexico, |
| | |Philippines, Malaysia, Sri Lanka, |
| | |Korea, Pakistan, Romania, Bulgaria, |
| | |Ukraine, Poland, Czech Republic, |
| | |Hungry, others. |
|Tier 4 |Infant stage software exporting |Cuba, El Salvador, Jordan, Egypt, |
| |nations |Bangladesh, Vietnam, Indonesia, Iran, |
| | |others. |
|Non-Competing |Non-competing |Most of the (smaller, least developed)|
| | |countries of the world. |

Tier 1 nations are the Major Software Exporting Nations. These nations have a tradition of exporting high tech and software products and services. The traditional software exporting nations have been the advanced industrialized economies. Until quite recently close to 100% of tradable software products and services came from G-7 nations. In particular the USA (with Microsoft and IBM) dominated world markets (Carmel, 1997). The other nations in this tier are Japan, Great Britain, Germany, France, and Canada, Italy, Netherlands, Sweden, Finland, Australia, Spain, Belgium, and the other Nordic countries.

The new member nations of Tier 1 are the celebrated cases of the three “I” s: Israel (Kaplan, 1998), India (Moitra, 2001), and Ireland (Borrell, 2002). Each of these nations has established itself, in very different form, as a major software exporting nation: India in offshore programming, Israel as an incubator of software products, and Ireland in programming services & localization services.

Tier 2 nations are the Transition Software Exporting Nations which include two particular cases- China (Ju, 2001), and Russia (American Chamber of Commerce report, 2001; Terekhov, 2001). These large, rapidly maturing national industries are likely to export USD 1 billion in software by 2010 and move into Tier 1. Embedded in the notion of maturity are the weaknesses in these nations firms relative to those in Tier 1 nations: in software management, quality management, and marketing.

Tier 3 nations are the Emerging Software Exporting Nations. These nations already have significant software export industries (most are in the $25 - $200 million range). They also have some or more small geographic clusters of successful enterprises SMEs (small and medium- sized enterprises), with a few large enterprises in a limited number of Tier3 nations. These enterprises of various sizes may be software subsidiaries of multinational enterprises, or home-grown, independent software firms.

Tier 4 nations are Infant Stage Software Exporting nations. These nations have little impact on the global market in software. While there is some foreign investment in a number of these nations’ firms, it is rare. Much of the software industry in these nations is still a cottage industry: firms are small, managerial processes are informal, and marketing is immature. Most Tier 4 nations are unlikely to move to Tier 3 because of their small size (which restrict their ability to grow large industries) and other unfavorable conditions (political instability, stage of economic development, etc.). However, many Tier 4 national industries have benefited from some recent governmental attention focused, specifically, on the software exporting sector.
Finally, most of the 200 nations of the world are Non-competing nations. These nations have few to no software exporting firms to speak of.”

3.4 The development and evolution of software development activity in developing country

Many researchers and analysts have tried to understand the dynamics of the Indian software industry (NASSCOM, 2001, 2002, 2003, 2004; Heeks et al, 1996, 1998, 2002; Bajpai and Shastri, 1998; Desai, undated; Arora et al., 2000). Software industries of other countries such as China (Tschang and Xue, 2003), Japan (Rapp, 1996), Iran (Nicholson and Sahay, 2003), Romania (Grundey and Heeks, 1998), Sri Lanka (Barr and Tessler, 2002), Korea (Barr and Tessler, 2002) and Malaysia (Mohan et al., 2004), among others, have also been documented in literature. Several researchers have attempted to take this knowledge and apply it to the context of other countries (UNCTAD, 2002, Tessler et al., 2003). Others have tried to develop policy frameworks and draw policy conclusions (Carmel, 2003b, Heeks and Nicholson, 2002) or develop generic analytic frameworks for analyzing the competitiveness of software industries (Heeks, 1999; andBhatnagar, 1997). Heeks (1999) describes a 2x2 theoretical framework that classifies software companies on the basis of their destination (domestic or export) and type of offering (product or service). Bhatnagar (1997), taking a different approach, describes nations as going through four stages of maturity transitioning from building skills and reputation, to building services, to building products.

“Heeks’ (1999) analytic framework is interesting and useful and roughly forms the basis of this report’s analytic framework. The four resultant categories of companies from Heeks’ 2x2 frameworks are different in terms of their organizational characteristics, competitive strategies, and enabling conditions and requirements. While it is clear where most companies from developing countries would like to be (i.e. exporting products and services), Heeks (1999) argues that getting there is not all that easy. Very few companies have been able to successfully execute on strategies dictated by the needs of each of these four “quadrants” and Heeks (1999) claims that majority of what we see is a constrained kind of an optimization—he calls them “survival strategies”— rather than a free play within these categories. Drawing upon an earlier paper (Heeks, 1998) it also presents secondary and anecdotal evidence to support his conclusions.

That the much-touted success of the software “mini-superpowers” may not be as convincing as it is portrayed can be gleaned from the following facts. Firstly, developing country packaged software exports –the “24-carat gold” of the software exports business—are minimal—in the 5-10% range from even the best of the software exporters like India, with the sole exception of Ireland and perhaps to a lesser degree, Israel. Secondly, majority of the work done by the developing countries consist of low-skilled programming or coding services and while some countries, notably India, might have done well in this type of activity, it seriously suffers from issues of value-addition and scalability. Thirdly, majority of the work being performed by developing countries is located in relatively few concentrated enclaves of software development activity worldwide (e.g. India’s Bangalore), being performed by foreign-trained programmers working in subsidiaries of foreign companies who spend a major portion of the revenues onsite (in the country of their clients) to pay for the travel and living expenses of their consultants, leaving much to desired in terms of value gained by the developing country itself. Heeks (1999) describes major challenges (or bottlenecks) that a firm may encounter in each of these four product-market categories and describes the reasons of the type of performance we see in each of these categories.”

[pic]

Still other researchers have taken a multi-country view of software industries. Rubin (2000) is an interesting, though dated, overview of global software economics. It presents data on several interesting variables (e.g. labor productivity, size of software staff, size of portfolio, cost per delivered and documented line of code, cost per supported line of code, average salaries of developers and maintenance staff, and defects per 1000 lines of code etc.) for a large number of countries. Coward (2003) takes an “outsourcers’ view” of the software industry looking at the 14 factors that influence the decisions of American SMEs to outsource software development activity to developing countries. Cusumano et. al. (2003) is a review of global software development practices. Based on a study sample of 104 projects, it compares the software development practices of American, European, Japanese, and Indian companies.

This study finds that conventional software engineering practices (e.g. functional specs, design reviews, code reviews etc.) are popular in India, Japan, and Europe but not the United States where they are used less, across the board. It identifies Indian companies as especially adept in mixing these conventional approaches with the relatively newer approaches like daily-builds, tester-developer pairs, and paired programming techniques. Overall, the report finds Japanese and European software operations to be most productive (in terms of lines of code per average staff*calendar) followed by US and Indian operations. Japanese projects also produced the lowest number of defects, followed closely by Indian and US projects, and the Europeans finishing last on this metric.

This study confirms similar findings by other researchers that describe the technical quality of software development processes employed by Indian software companies (Dutta and Sekhar, 2004) and the adoption of standardized quality practices like Six Sigma methodologies (Radhakrishnan, 2004) and CMM certifications. These geographical differences in software development practices, however, maybe attributed to both cultural and type-of-work related factors. For example, Cusumano et al. (2003) observe that India and Japan significantly lag the American and European software operations in terms of the innovative quality of their work. Dutta et al. (1997) finds similar across-country differences within 16 different European countries.

Collectively, this constitutes a wealth of information about the development and evolution of software development activity in developing country contexts from multiple perspectives. They point towards a number of factors, environmental, policy-analytic (e.g. Carmel’s Oval Model, Heeks’ National Export Success Model) and organizational (e.g. Cusumano et al., 2003, and Cusumano, 2004) and identify major bottlenecks that might affect the execution of a particular strategy (e.g. Heeks, 1999). While development planners seek to extract prescriptions, this collective body of literature falls short of doing so hinting instead at the idiosyncratic factors and early-mover advantages that might distinguish some countries’ progress from the rest.

All the models and frameworks depict a complex picture. It draws attention to the significance of understanding a large number of policy, environmental, and organizational factors, and their interaction with each other. In addition to that it emphasizes the individualistic features of each of the countries and their target markets before a policy or an industry-wide prescription can be made. Every country that we looked at (e.g. India, China, Iran, Ireland, Israel etc.) is different from every other country and understanding these unique features is important before any lessons can be drawn and applied from other contexts.

Chapter III

Software Industry in Bangladesh

3.1 Background:
Bangladesh is one of the largest developing countries in the world with a population of more than 150 million. The software industry in Bangladesh has come a long way of over the last few decades. In the last six to twelve years, a good number of entrepreneurs and talented professionals have come forward to make the industry more dynamic and more vibrant.

3.2 Domestic market:
There are about 300 registered software companies in Bangladesh. In a online article, Mashroor (2005) indicates that total ICT (Information and Communication Technology) market of the country is roughly Tk. 1100 crore (near US$ 170 million) per year. The software segment comprising of customized and packaged software, is approximately Tk. 1700 million (near US$ 26 million) per year. For estimating the software segment different types of IT enabled service like desktop publishing, multimedia, animation, GIS, data entry, digitization etc. were excluded. So, software segment is around 15% of total ICT market of Bangladesh.

Fig:

3.2.1 Major components of the Software Market:
The international software giants (Microsoft, Oracle, Sun etc.) cater the lion share of the package/licensed software market segment. Local software companies mainly cater to the customized software development and maintenance segment of the market. Local companies share this segment with a number of international software vendors who have significant market presence in specific client segments like banks, telecom, MNCs and some large donor funded government projects.
As a part collection of information for “Bangladesh Software & ITES Directory 2005”, BASIS has done a business focus survey across all the participating companies (152 software companies including both BASIS member and non member companies) to identify the nature of products/services as well as client segments of the local software companies.
The following table (Table 1) categories the software products & services developed and maintained by the surveyed software companies by business application nature.
Table 1: Products/Service Category Range of Local Software Companies
|Products/Services Category |% of companies offering services in the particular |
| |category |
|Accounting & Financial Management |69% |
|Inventory Management |59% |
|HR Software |58% |
|Web Site/ Web Application Development |57% |
|ERP ( Enterprise Resource Planning) |48% |
|Software Implementation & Integration |46% |
|Billing |43% |
|Asset Management |38% |
|POS (Point of Sales) |37% |
|E-Commerce |36% |
|Data Entry/Data Conversion |34% |
|CRM (Customer Relationship Management) |32% |
|E-Governance Application |29% |
|SCM (Supply Chain Management) |27% |
|Data Warehousing |23% |
|Access Control |22% |
|Mobile/Wireless Application Development |18% |
|E-Learning |17% |
|Data Security |14% |
|Gaming Software |6% |

Information Source: BASIS Survey

The collected information shows very clearly that the main driving force for the software industry is the demand for the back-office automation (Accounting/Finance, HR, Inventory, Billing etc.) by organizational IT users. This is very natural for the early development stage of the software industry in any country. However, the good news is that a lot of companies have been involved in development of high value customized applications like of ERP, CRM, SCM etc. This underlines - on the one hand, the gradual maturing process of the software companies and on the other hand, higher level of client awareness of the potential value that can be generated through system automation across respective business organizations.
Another encouraging fact is that the demand for front-end business applications (web applications, e-governance application, e-commerce, POS) is substantial that demonstrates the high level of co-relation between increasing network access and use of software applications.
[pic]
Fig:
From the graph another thing to be noticed is that the process automation by the service sector enterprises is in motion. Among them, the financial service sector is the leading buyer thanks to the process of implementing online banking system in the banks. Telecommunication sector also contributes a lot as a number of software companies are developing specialized software (billing, SMS based application etc.) for this sector.

3.3 Export Front

Though domestic software industry is growing significantly, exporting of software products and services is not significant. Mashroor (2005) presents, software export has been increased rapidly over the last four years in Bangladesh.

Table 2: Growth of Software Export during Last Four (4) years | |2000-01 |2001-02 |2002-03 |2003-04 |2004-05 |
|Export in US$ |2.24 |2.8 |4.2 |7.2 |9.64 |
|(in Million) | | | | | |
|Yearly Growth | |25% |51% |71% |33.89% |

Source: Bangladesh Bank Software and IT service export, though started from a very low base, has been growing at a very good pace during the recent years. The export stands at 9.64 million US dollar in FY 2004/5, a growth rate of more than 33% over the previous year.

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, European countries, Middle East, Japan, Australia, South Africa and some of the South East Asian countries.

The major export market is the United States, where most of the marketing activities are taking place. Firms from Bangladesh are regularly attending the Comdex exhibition, both as visitors and exhibitors. In May 21 2003, Ministry of Commerce in collaboration with World Bank has opened its own marketing office in Silicon Valley, California, USA (BASIS 2005) to make the export process more efficient. Apart from that, some of the big companies are in the process of opening their own marketing office in North America and Europe.

Apart from the United States, Bangladeshi companies also work for clients in various European countries, such as France, Germany, Italy, Sweden, Denmark, U.k., Switzerland and the Netherlands. The number of projects and the size of contracts however are limited, even though the working history is relatively long. Already in 1988, a software company was set up in Dhaka that exported software and IT services to Volvo Motor Company in Sweden. In 1989, another software company was started that had the large U.K. based ICT pharmaceuticals among its export clients. Unfortunately, the tempo of growth of this industry could not be maintained due to many factors- some political, some infra-structural and some due to lack of a facilitating policy framework (IBTCI, 2002).

The local companies that are aiming to export software also working for gaining certifications as international requirement and some of them are focusing on process/quality improvement as well (Mashroor 2005). These initiatives are expected to yield positive results in next few years.

3.4 Software Industry Infrastructure

3.4.1 Physical Infrastructure

3.4.1.1 Power

In Bangladesh, per capita energy generation is only 158 kilowatt-hours a year, among the lowest in the world. According to the World Bank, only 32 percent of the population has access to electricity, primarily in the more developed eastern zone of the country.

The country has a daily demand for over 5,000MW electricity while the production deficit is more than 1,500-2200MW. So electricity supply is interrupted several times every day. This continuing severe power crisis has affected the nation with all the consequences. In Global Information technology Report, 2006 electricity production is considered as one the weaknesses of ICT infrastructure in Bangladesh.

3.4.1.2 Telecommunications

3.4.1.2.1 Telecommunication Infrastructure

Telecommunication sector in Bangladesh has been experiencing a huge boom in the last few years. Several private and public telecommunication operators have established their network all over the country. Expansion of their operations to the rural areas contributes to the improvement of the network performance and to the introduction of latest technologies to the people. The present status of the telecommunication and data communication infrastructure can be summarized in Table-1 [3,4,5]:

Table 1: Summary of Tele and Data Communication infrastructure

|Category |Quantity |
|Fixed Phones Subscriber |1,007,450 |
|Digitized Districts Mobile |64 |
|Phones Subscriber |6,107,946 |
|Mobile operators |6 |
|Nationwide fixed Phone operators |2 |
|Telephone Density |5.15 (per 100 inhabitants) |

Bangladesh Telecommunication Regulatory Commission (BTRC) has granted 410 licenses so far. Details are shown in table-2 [4]:

Table 2: Telecommunication Licenses granted by BTRC

|Serial |Category |Total |
|1 |New Public Switched Telephone Network (PSTN) (15 Companies |37 |
|2 |Old PSTN Operator License |3 |
|3 |Cellular Mobile Telecom Operator Licenses |5 |
|4 |Internet Service Provider (ISP) |219 |
|5 |VSAT- User |88 |
|6 |VSAT- Provider |30 |
|7 |VSAT- Hub |4 |
|8 |Domestic Data Communication Service Provider (DDCSP) |24 |

Government of Bangladesh has recently approved Internet telephony in private sector for the first time. Using VoIP (voice over internet protocol) will lower the rate of international calls from Bangladesh. This technology will improve Bangladesh’s telephone penetration figure (average number of telephones in an area) which is extremely low. In Global Information Technology Report, 2006 telephone subscribers and availability of new telephone lines are considered as weaknesses of ICT infrastructure in Bangladesh.

3.4.1.2.2 Internet Infrastructure

By providing offline email services in 1993, Bangladesh has started giving the internet service. But Internet services opened to the public from1996 and Information Services Network (ISN - www.bangla.net) was the first organization to get license as an ISP (Internet Service Provider). They set up a VSAT on June’ 1996 and installed necessary machineries including the Internet Server and offered Internet services to the public through a dial-up network [6].

The public sector operator BTTB took Internet to the rural-semi urban areas of Bangladesh. Starting from Dhaka they have provided dial-up ISP services to all the 64 districts of Bangladesh. BTTB is using their countywide landline telephone exchanges to spread the Internet all over the country. Currently they have their DDN (Digital Data Network) exchanges at Dhaka, Chittagong, Rajshahi, Khulna, Barisal, Bogra, Comilla, Jessore, Rangpur and Gazipur and distributing bandwidth using DDN services too.
Currently ISPs are using only VSATs to connect with the rest of the world. Some private organizations have also got their own VSATs, while the rest get leased lines from the VSAT owners and provide Internet services.

Cost of accessing the Internet in Bangladesh is very high as compared to the average income of the people. Development of the software industry has suffered a lot due to the heavy charges of Internet and the slower data rate. ISPs are not capable of reducing the charges due to the higher cost of bandwidth. Having the submarine cable connection is supposed to solve the problem.

Mobile Internet has also been setup in Bangladesh. Grameen Phone, the largest mobile phone operator has already introduced WAP services. BDCom a local ISP has got WAP Internet services. WAP has not been popular as the charges are very high compared to the landline. Above all SMS and MMS are more popular to the mobile users.

Current status of computer and Internet infrastructure is summarized in table-3 [4]:

Table 3: Computer and Internet Infrastructure

|Number of ISPs |219 (80% ISPs are located in Dhaka) |
| | |
|Number of Internet Users |0.3 Million |
| | |
|Internet users |19.04 (per 10,000 inhabitants) |
| | |
|Computer ownership |0.782 (per 100 inhabitant) |
| | |
|No of active Cyber Cafes / Internet Kiosks |500 |
| | |
|Cyber Café’s / Internet Kiosks |0.19 (per 10,000 inhabitants) |
| | |
|Bandwidth provided by Cyber Cafes |32 kbps – 4 mbps |
| | |
|National bandwidth within the country |68 Mbps (data) |
| | |
|National bandwidth to and from the country |112 Mbps |
| | |
|Available Highest Bandwidth of link |10 Mbps |

Cost of bandwidth (as in Dhaka city) is summarized in table-4 [6]:

Table 4: Charges of Bandwidth

|Internet Access Charges (Dial –up) |1.50 Tk- 0.20 paisa/ Min |
| | |
|Unlimited Access (Dial-up) |Tk 1000/Month |
| | |
|Broadband – 64 kbps |Tk 10,000/month |
| | |
|Broadband – 128 kbps |Tk 15,000/month |
| | |
|Broadband – 512 Kbps |Tk 50,000/month |

3.4.1.2.3 Optical fiber link to the information superhighway

By the end of 2005, Bangladesh got connected to the global information superhighway through SEA-ME-WE-4 (SMW4) submarine cable [7]. Based on this the nationwide Internet backbone is going to be established.

SMW4’s main specificity is flexibility. Up to 20 million voice calls or 60,000 broadcast television channels at the same time can be accommodated due to the modern DWDM technology, which is capable to transport 64 wavelengths at 10 Gbps. Full-circuit routing, whether the operator owns a license in the destination country or not, is going to be the key feature of SMW4. An equipped capacity of 160 Gbps that will be upgradeable up to 1.2 Tbps, which guarantees enough capacity to meet the needs of Middle East, India, and other key destinations for the next decade. The project is going to support telephone, Internet, multimedia and various broadband data applications. The 14 countries linked are Singapore, Malaysia, Thailand, Bangladesh, India, Sri Lanka, Pakistan, United Arab Emirates, Saudi Arabia, Egypt, Algeria, Tunisia, Italy and France with an extra landing station in Chennai, India.

The private cellular phone operators are currently utilizing nationwide 1800-kilometer long optical fiber network under Bangladesh Railway. Bangladesh Telegraph and Telephone Board (BTTB) have already established optical fiber link in most cities. The nationwide optical fiber backbone connected with the SMW4 submarine cable is the first step towards the next generation network in Bangladesh.

Internet hosts and internet hosts are indicated as weaknesses of ICT infrastructure in Bangladesh in the Global Information Technology Report, 2006.

4.3.2 Institutional Infrastructure

4.3.2.1 Manpower
It is estimated that around 5,500 software professionals are employed in more than 300 registered software firms in the country (the total number of IT professionals available in the country would number more than 25,000, a large portion of which are working in IT responsibilities at different government and non-government organizations as well as hundreds of large and small private business enterprises).
The technical job distribution in the 55 surveyed software firms has been displayed in the following graph.
Pie chart

According to the graph, a significant portion of technical professionals in the surveyed firms are involved in the non-code activities (e.g. project management, system analysis, system architecture, Quality Assurance etc.) which are very much important components of project life cycle for any software project. This underlines the commitment and seriousness of the local software firms in the process improvement initiatives. It is expected that as more and more of the large projects will be available on board, the role of these important non-code activities will increase further as it should be in a matured stage of any software company.

The lifeline of a knowledge industry like software is the availability of qualified human resources (HR) in the market. The following table shows the academic background of the technical professionals employed in the 55 surveyed software firms.

Table 4: Academic Qualification Breakdown of Technical professionals
|% of total technical staffs in the surveyed software firms | |
|Graduate in Non-IT subjects |19 |
|Masters in Non-IT subjects |23 |
|Computer Science/Engineering Graduates (3/4 years) |35 |
|Masters in Computer Science/Engineering |9 |
|Diploma/Certificates courses in IT |12 |
|Other |2 |
|Total |100 |

It is interesting to note that though more than 85% of the total technical recruits in the software firms have a minimum graduation degree, a large portion of them do not have institutional IT degrees (graduates or masters from non IT subjects comprise more than 40% of the workforce).

Supply:

At the present time 21 public universities, 52 private universities, 31 colleges under the
National University and a number of foreign affiliated universities/institutes are offering computer science courses, producing about 5000 computer science graduates per year.

2. IT Education at different levels

Formal education in computer was first started in 1984 with the foundation of Computer Science and Engineering Department in Bangladesh University of Engineering and Technology. The IT education thereafter gradually extended to Bachelor, Higher Secondary and Secondary levels.
2.3 Diploma Level and Training Institutes

Twenty polytechnic institutes of the country are offering three year Diploma course for SSC passed students in Engineering subjects. Bangladesh Open University is now offering three semester Diploma in computer applications. In the recent years Ministry of Youth has established 69 computer training institutes over the country under a project for self employment generation of the educated unemployed youths in the field of IT.

There are more than 1000 training institutes at private sector initiative producing different categories of IT professionals. Many of them are franchised institutes of NIIT, APTECH, CMC, TULEC, NCC and many other foreign institutes. It is reported that many of these institutes are taking high fees from the students and are not maintaining minimum standard. To prevent this BCC is planning to introduce IT diploma Central Certificate Examination system to establish a standard in the country. She is also thinking of introducing affiliation and accreditation system.
2.4 Undergraduate and Post Graduate Level
2.4.1 National and Public Universities and Institutes

Bangladesh University of Engineering and technology (BUET) first introduced the formal education in Information Technology in 1984 by launching the Masters program in Computer Science and Engineering. Undergraduate courses started from 1986 with the first intake in 1987 with 30 per year which has been subsequently increased to 60 and now the intake is 120 per year. Masters program in BUET attracts 50 students per year and until now around 70 students have completed their postgraduate curricula.

Following the introduction of formal courses in Computer Science in BUET, other public Universities came forward to start undergraduate curricula.
Besides Bangladesh National University is now offering four year B.Sc. Honours course in Computer Science for a total of 1250 students at 25 colleges and institutions. Additional 300 IT graduates are expected to be produced by the six proposed science and technology universities by the year 2010.

2.4.2 Private Universities and Institutes

Recently a number of private universities have been established with Computer Science as their major department because of the tremendous demand of this subject among the college passing students.
Private Universities are seriously suffering from an acute shortage of teaching stuffs. They are mainly run by part time teachers

ICT policy

IPR

Bangladesh is a member of the World Intellectual Property Organization (WIPO) and adheres to Berne Convention for the Protection of Literary and Artistic works, and Paris Convention for the Protection of Industrial Property. Bangladesh has never been mentioned on a the U.S. Trade Representative's "Special 301" Watch List which identifies countries that deny adequate and effective protection for intellectual property rights or deny fair and equitable market access for persons that rely on intellectual property protection. However, copyright piracy is extremely high in Bangladesh due in large part to a lack of enforcement of Bangladesh’s Copyright Act. In IIPA 2006 "SPECIAL 301" RECOMMENDATIONS which finds out estimated trade losses due to copyright piracy (in millions of U.S. dollars) and estimated levels of copyright piracy, Bangladesh is under special mention. In the report no data available for the piracy level and losses for software but it is mentioned that for music and records estimated levels of piracy is 85%.

4.4 Bangladesh’s strengths and prospects in software business

Company Survey

4.1 Data Collection

Sample selection
Sending questionnaire

4.2 Data description

4.3 Research Findings
4.3.1 Company Profile
4.3.1.1
Experience
The surveyed companies were asked about their experience in software export business. 38.89% respondents have the experience of more than 2 to less than 5 years, 50% of the respondents have the experience of more than 5 to less than 10 years and 11.11% of the respondents have the experience of more than 10 years.

[pic]
Fig:

4.3.1.2 Revenue in 2006

We asked the companies about their revenue in 2006.

[pic]

We also asked about the export revenue structure of the companies. For 4 companies full-package is more than 40%.

4.3.1.4 Marketing Expenditure

There was a question regarding the marketing expenditure in 2006. 88.89% of the respondents spent less than 10% of their revenue in Marketing.

[pic]

4.3.2 Capability

4.3.2.1 R&D Expenditure

The next question was asked to know about the expenditure in research and development. 50% of the respondents spent only 5% of their revenue in R&D, 44.44% of the respondents spent more than 5% to less than 10% of their revenue in R&D while 5.56% of the respondents spent more than 10% of their revenue in R&D.

[pic]

4.3.2.2 Workforce & others we asked several other question regarding the capability of the companies. The result is summarized below:

4.3.2.3 Code Reusability:

The last question in this part was to know what percentage of code is reused last year. 33.33% of the respondents reused more than 20% to less than 30%, 38.88% of the respondents reused more than 30% to less than 40% and the rest 27.78% reused more than 40% of code.
[pic]

4.3.3 Human Capital

4.3.3.1 Turnover

4.3.4 Marketing

The first question was asked to know whether the company has a website.
66.66% of the respondents have website and the rest 33.33% do not have website.

The next question was asked regarding the services given from the website. It is found that the companies that own website are only for providing information to clients, service users and other people.

4.3.5 Financing

4.3.6 Infrastructure

4.3.7 Problems in software export

In this research study our main objective was to find the problems in software export the respondents are facing. The survey questionnaire contained a question asking the respondents to identify what they perceived to be the topmost three problems. The results of the survey are tabulated in Table‐XI (below).

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Chapter 5

Conclusion and Recommendations

In the previous chapter the problems of Bangladesh software export are listed according to the surveyed companies. The problems indicated by the companies reflected the companies’ individual view towards the problems. The focus of this chapter is to recommend some implications for the development and implementation of a software export strategy which aims to leverage the potential of the industry based on the strengths and weaknesses of the Bangladeshi software industry. In other words, what should we do to build an export oriented software industry in Bangladesh that will be able to compete and survive in a fiercely competitive global software development market?

Before proposing any solution, we must identify and select our strategy. To ensure success, all our activities must be focused and coordinated through the strategy. If we fail to identify the right strategy, all our efforts will be wasted. If we consider the success factor model discussed in chapter 2 it can be found that in all areas, the role of government is seen to be crucial. Some neo- liberals, of course, dispute this. They argue that governments should not intervene in industrial development, and they particularly identify the risks, costs and market distortions of having the state try to pick sectoral winners (O'Keeffe 1992, Jackson 1998). Others, however, see government as always having played an essential interventionist role in industrial development (Lipsey 2000). The value of such a role is emphasized by almost all analyses of software export development in DTEs (e.g. Press 1993, Correa 1996, Heeks 1999).

National Strategy:

In chapter 3 we have seen that Bangladesh is at the bottom of Quadrant-1 and based on this position we must build a strategy. To ensure success, all our activities must be focused and coordinated through the strategy. There are broadly four kinds of competitive strategy that can be used in a competitive situation. These are:

1 Defensive strategy- Only market leader should consider playing defense
2 Offensive strategy- It is for the No.2 or 4 in the competitive spectrum. The offensive strategy is for those competitors that can mount a sustained offensive against the leader
3 Flanking Strategy- It is applicable when the attacker has adequate resources and able to sustain an attack.
4 Guerrilla Strategy- In a competitive environment and in a given segment there is only one leader and two or three No.2 and 4’s. All the rest are small competitors that must compete with the larger competitors and strive to survive. Naturally, these smaller competitors can not survive by emulating the leader or other large and powerful contenders and therefore, needs to have strategies that are different.

Depending on the position of Bangladesh, it can only go for Guerrilla strategy. The argument in favor of the guerrilla strategy can also be arrived through the following logic:

a. We are definitely not the leaders and therefore the applicability of defensive strategy is out.

b. We are not also No.2 or No.4 and therefore, can not follow an offensive strategy.

c. We can not have a flanking strategy since this strategy assumes availability of abundant resources.

Consequently, we are left with only one strategic alternative, the guerrilla strategy.

There are two basic principles of the guerrilla strategy:

First of all, find a segment of the market small enough to defend.

First task is to identify a small market that can be defended. We should identify at least two but no more than three thrusts sectors as going for only sector can be too risky. It is very difficult to identify the potential segments and it is beyond the scope of this research study. However, the author will make some guesses that seeks further confirmation.

The Object Oriented technologies can be one attractive but broad field. All indications suggest that the world surely moving toward objects.

Next, attractive segment could be the universe of Java and technologies related to the Web, and the third segment could be the world of multimedia related services.

Second principle is: “No matter how successful you become, never act like the leader.”

This is a very critical element of the strategy. It means that never follow the leader, never act like the leader. Our primary competitor is India and we can not follow the same strategy that has led India to success. If we try to follow the Indian strategy, it is extremely likely that we will fail as India will always keep the distance till eternity.

But our “advantage of backwardness” which is sometimes called “technology leapfrogging” is the most powerful weapon and this advantage must be leveraged to its fullest potential. Our target should not be where India is today, but where India hopes to be 7-10 years from now. India would take 45 years to reach that point, but by leveraging our “advantage of backwardness” we should plan to reach that in only 10 years.

5.1 The strategy for Bangladesh

Based on the discussions and analysis so far presented, we are now in a position to formulate a set of strategies for Bangladesh, as given below:

1. National Software Vision/Strategy:

I. Identifying market segments and selecting the target markets.

2. National Software Related infrastructure:

People:

II. Find out the skill requirements for the target markets and make the skill development plan.
III. Implement skill development plan.
IV. Build up institutions to support the development of the skills.

Technology:

3. National Software Industry:

V. Develop domestic market with two objectives:
a. Domestic market for software houses, and
b. Skills transfer
VI. Take necessary arrangements to establish software companies in the country.

4. International Linkages and Trust:

Encourage Foreign Direct Investment (FDI)
VIII. Develop monitoring, measuring and feedback system

I. Identifying market segments and selecting the target markets.

This is the most important step and the chance of success depends, to a large extent on this activity. As the resources are limited, unnecessary risks should be avoided. There should be proper research to find out the target markets.

II. Find out the skill requirements for the target markets and make the skill develop plan.

This is a very long-term step. In the previous chapter it is found that retention of the talented employee and availability of qualified programmers are two problems mentioned by the surveyed companies. Actually in Bangladesh so many programmers are being produced but most of them are not acquainted with the latest programming concepts. So the company has to invest lots of time and money to train them and when they become experienced enough they become the target of top-line companies in the country. To get out of this problem it is necessary to prepare appropriate skill development plan to produce the programmers who can work for the targeted market.

Another important thing is that the skill development plan should be targeted towards a sustainable export-oriented software industry. There are four levels of skills that is needed:

Awareness and Basic Knowledge

Awareness building refers to the characteristics of the general environment where the population develops a realistic idea about Information Technology such as, appreciation of the industry, its potential and limitations, the basic concepts, applications, opportunities, etc.

Newspaper articles, television programs, etc. are most effective for building this awareness.

Besides it is very important to develop basic computer and programming concepts at primary and secondary level so that by the time someone graduates from the secondary level, he/she must be able to write an entry-level computer program. This basic part includes English skill, basic database management, and entry-level programming knowledge. It is already mentioned in the government ICT policy and included in the curriculum.

Low-level talents

This skills refer to customer service, commercial planning, programming at the bottom level that is entry level database design skills, entry level user interface programming, entry level multi-user programming, entry level security concepts, understanding of the application development life cycle, entry level systems analysis, basic project management, understanding of operating systems and operating system functions, and intermediate level programming skills.

All public and private universities including technical colleges are offering some form of IT education. In all cases there is an acute shortage of qualified teachers/instructors and equipment. An effort should be made to upgrade the standard of education by providing grants for equipment and training of teachers.

Currently there are no standards of IT education. Many IT education vendors are making exaggerated claims and branding their product as “Internet Education”, “E-Commerce Course”, and many similar jargons. This abuse must be stopped. Any advertising based on industry name or jargon must be banned. There is nothing wrong in advertising as long as it is not used to deceive consumers. Given the inchoate nature of the IT industry and consumers in Bangladesh, any jargon-based advertising must be banned. In a matured market consumers are well informed and can differentiate between hype and reality.

Medium-level software talents

Medium level software talents are the people who understand software technology and who have advanced programming skills, advanced database design and programming skills, skills in writing complex communication programs, advanced skill in designing user interfaces, detailed understanding of the application development life cycle, ability to use CASE tools, intermediate level of system analysis skills, detailed understanding of operating systems and operating system functions, project management, basic organizational psychology, organization of software houses, understanding of skill matrix, and careers in information technology.

High-level software talents

They are versatile talents with both technological and managerial ability, and system analysis and design skills.
9.8 Implementing the skill development plan

Having identified the required skills, the next critical challenge is to develop these skills locally.
Local generation of these skills entails some adjustments to our current national education and skill development system.
The diagram below shows a mapping of the required skills into different levels of our current education and skill development system:
Figure 9.3: Mapping of skill hierarchy

The skill development plan must be highly focused and based on the requirements of the identified target segments. In other words, it may not allow us to copy curriculum from other countries. Our IT curriculum must be tailored and consistent with our strategy.
Once we complete our design of the curriculum (the basic input will come from the consulting report as proposed before) for the various levels, we will need to prepare the resource plan. This plan will include the text books, requirements for teachers and associated training or retraining, the requirements for IT equipment for Schools, Colleges, and Universities, preparation of standard teaching materials for both the instructors and students (extremely important to maintain consistent quality of education), teaching aids, etc. To encourage this program, the IT teachers may also be given some incentive in the form of skill pay on top of standard remuneration.
To obtain the advanced skills, it may help us to take lessons from Singapore. Singapore in 1984 set up the Institute of System Science in collaboration with HP, IBM and other leading IT companies and this institution played an extremely important role in developing the skill level of Singaporean professionals. Today, the role of this institution is not as important as it used to be as Singapore has already developed a self-sustaining critical mass.
However, developing competitive professional skills can not be achieved only through the education & training system. We also need experience that can be attained only by developing close links with the global industry leaders. This will also have a tremendous positive impact on our ability to market our software skills internationally. We will have to market our ideas to these companies and ask them to participate with us in building these critical institutions.
Also, to enhance the skill of the existing IT professionals, especially in the government sector, the government can issue a budgeting directive to spend at least 30% of respective IT budgets on IT training.
To encourage skill development, the government can also consider personal and corporate income tax exemptions on expenses related to IT training. This will encourage the local businesses and individuals towards obtaining these skills.

9.9 Developing the required supporting institutions
What are the supporting institutions that we need for the planned export oriented software industry?”
To answer this question, let us review the function and services that will be needed for the industry:
Table 9.1: Functions and facilities that need to be institutionalized
|What we need? |Why? |Comments |
|Standards |Software development standards, | |
| |standard course curriculum, | |
| |System analysis standards, | |
| |interface standards, | |
| |standard job descriptions for software| |
| |companies, | |
| |standards for model software | |
| |companies, electronic repository of | |
| |industry standards, | |
| |etc. | |
|Certification |Certification of software houses, | |
| |certification of training facilities, | |
| |certification of professionals, | |
| |certification of quality, etc. | |
|Monitoring of intellectual property |To enforce patents and copyright laws.|The current curriculum of colleges / |
|rights and other legal issues. | |universities that offer courses on law|
| |To enact various laws that will be |will have to be suitably updated. The |
| |required for the new environment. |country will need lawyers familiar |
| | |with the international laws governing |
| |Some existing laws will need to be |e-commerce and the internet. These |
| |modified. |issues must not be neglected. |
|Industry monitoring and intelligence |To monitor the global IT industry, | |
| |identify trends, monitoring of | |
| |competitors, etc. and a newsletter for| |
| |the software company informing them | |
| |about the industry. The newsletter | |
| |could be electronic. | |
|Statistics |Gathering and dissemination of IT | |
| |statistics | |
|Library facility |To provide a library facilities to be | |
| |used by the software houses; both | |
| |electronic and conventional. | |
|Software Industry forum |An electronic forum for software | |
| |houses to discuss issues problems, | |
| |opportunities, observations, opinions,| |
| |etc. | |
|Marketing and Promotion |Internal: | |
| |Prepare media plan and materials | |
| |Prepare appreciation sessions for | |
| |decision makers | |
| |Prepare briefs for politicians | |
| |Prepare awareness campaign for local | |
| |investors | |
| |External: | |
| |Promotion of Bangladeshi software | |
| |houses to potential markets, | |
| |preparation, dissemination of | |
| |promotional materials, and | |
| |coordination with different Bangladesh| |
| |diplomatic missions, | |
| |promoting Bangladesh in international | |
| |events that relates to the software | |
| |industry, | |
| |Preparing advertising plans for | |
| |international magazines, journals, and| |
| |other international media. | |
| |Identifying potential foreign | |
| |investors, marketing to foreign | |
| |investors, and arranging evaluation | |
| |tours for them. | |
|Setting of national skill development | |This is not a one-time job. The |
|curriculum (primary, secondary, | |software industry is extremely dynamic|
|intermediate, and advanced) | |and requires continuous adjustments, |
| | |especially for the high and advanced |
| | |levels. |
|Training of instructors for various | |This is also a continuous process. The|
|levels | |key challenge will be to find those |
| | |skilled personnel who would initially |
| | |train the trainers. |
| | |To initiate this program it may be |
| | |necessary to obtain skilled personnel |
| | |from abroad. |
|Monitoring of enabling infrastructure |To monitor internal environment such | |
| |as, telecommunication, electricity, | |
| |political situations, etc., and advise| |
| |the government for corrective or | |
| |remedial actions. | |
| | | |

The question now is “how do we institutionalize these functions?” Frankly, I do not have the answers but I have some general observations.
a. These supporting institutions will play an extremely important tactical role in the development of the industry and we must find appropriate institutional umbrella for them.
b. Bureaucratic structures tend to quickly transform themselves into “activity” based organizations rather than “results” oriented[10]. Therefore, alternative organization structures may be investigated.
c. In Bangladesh, we may not have many of the critical skills required to build these organizations. It may be necessary to hire expatriate skills for these positions. However, there is a serious problem with expatriate skills. Competent professionals do not want to come to Bangladesh and consequently we end up with expatriates with questionable or substandard skills and qualifications. Most globally competent professionals will expect a premium[11] of 100-200% to relocate themselves in Bangladesh, even for short term (less than six months). Therefore, it is absolutely necessary to consider these expenses in light of the expected benefits.
d. Whenever expatriates are involved, our conditioned response appears to be seeking funds from the donor agencies. A much sensible approach would be to prepare the groundwork, formulate appropriate strategy (ies) and seek donor participation at the tactical level (in the implementation).
e. We may have to design a new organization to perform these functions under one roof, rather than add them to the existing structures. A word of caution while designing new institutions; responsibility without authority will not produce results.
9.10 Developing the domestic software market

A domestic software market will become an extremely important ingredient in our recipe to build an export oriented software market for Bangladesh.
This domestic market has two implications. First, it offers relatively easy opportunities for the fledgling software companies that are not yet ready for the highly competitive export software market and second, building and transfer of skills.
By combining these two objectives we are able to narrow down on our selection of options and following is the recommendation:
For a given period (say 3 to-5 years), competent international software companies must be encouraged to participate in public sector software development opportunities, but with certain conditions. These conditions are:
(a) At least 20% of the software development must be done using local skills under the supervision of these international companies, and

(b) Once developed and commissioned, the local companies will be responsible for the maintenance of these applications and the international companies, as part of the contract must transfer necessary skills.
Please note that the cost will increase for the solutions but the country will achieve the objective of transferring the critical skills. Interestingly, this was the strategy that was (and is still being) followed by China.
On the other hand, if we allow the unskilled local companies to develop these applications, not only the applications will be substandard[12], but also there will be hardly any skill transfer.
A list of the potential applications is proposed in Chapter-8.
To further encourage and develop the domestic IT market, the government can, for a certain period of time, allow IT related investment to be written off in two years (accelerated depreciation).
9.11 Accelerate formation of the Bangladeshi software companies
This activity is meaningful only after (or concomitantly) we have the first batch of graduates coming to the market. These people who are skilled in theory but lack experience will need guidance to become software developers. Also, to form software houses they will need financing, equipment, additional training, training facilities, access to standards and procedures, standard process definitions, various certifications, a place to locate their business, access to telecommunication facilities, etc. This is where they will need venture capital fund, special incentives, technology villages, special marketing, etc.
Also, to help formation of these companies we can create some standard models that can include among others, standard company profiles, detailed job descriptions, responsibilities, work plan, etc. For example, a ten person software company specializing in Java programming must have a certified systems analyst, four certified Java programmers, one certified documentation specialist, one certified database analyst/programmer, one communications programmer, certified accounting professional(s), one or two certified marketing professionals[13], and management.
Similarly the necessary equipment such as workstations, servers, networking equipment, printers, etc., can also be provided through broad guidelines (as opposed to standardization[14]).
Also, academic performance can be linked with priority in financing and availability of other facilities. For example, we can design a policy where priority is based on the combined merit score of the proposed (new) software company. This will obviously entail assigning some score to academic performance (and experience), which would be a trivial exercise.
9.12 Encourage foreign direct investment (FDI)
The process of attracting FDI is similar to other industries and additional discussion is not necessary.
9.13 Develop supporting infrastructure.
The most important infrastructure that will be needed is telecommunications and stable electricity. Chapter-7 has been dedicated to telecommunications.
9.14 Develop measuring and feedback system
We will need to develop a system to monitor progress and identify problems before they become serious. Any plan however comprehensive or sophisticated will have problems. Therefore, a monitoring and feedback system becomes a mandatory requirement.
9.15 Role of government
What should be the government’s role in shaping a software and services industry in Bangladesh. Similar to the initial development of the garment’s industry should it leave it to develop by itself? If it must participate what should be its role?
It is obvious that the answer is yes. Without active government participation this sector will not develop. Below is a suggested framework for the government’s role in developing the IT sector in Bangladesh.
Before developing the framework, it’s necessary to list down the implicit and explicit assumptions behind the model (framework):
1. Resource constraint: As a developing country, Bangladesh will never have adequate resources to pursue all possible solutions and will be forced to select a few from the solution-set.
2. Skill: Currently Bangladesh does not have statistically significant number of skilled persons to take advantage of the export software market (ESM).
3. Bureaucracy: Government is bureaucratic and resistant to change.
4. Institutions: Bangladesh do not have the required institutions needed for ESM.
5. Telecommunication: Bangladesh do not have required telecommunications infrastructure for ESM.
6. Governance is not about running commercial enterprise. Government’s role should be to create the proper environment so that business and commerce can flourish in the country and must not compete with the private sector.
7. Government must enforce the “Rules of Competition[15]”.
8. Government’s role should be to facilitate and not to regulate.
Infrastructure Building
The government must take responsibility to build the basic infrastructure in the following areas:
Education and Skill.
As mentioned previously, developing skill is a long-term process and developing sustaining skill base requires addressing the entire education and skill development system. However, technological development gives us the opportunity to find innovative solutions for leapfrogging.
We will face five important technical challenges and they are:
1. Financing for facilities, equipment, organization, and training
2. Skill and required resources for curriculum preparation for various levels.
3. Training of the instructors (teach the teacher)
4. A delivery mechanism to reach the target audience.
5. A measuring and feedback system.
The delivery system is where a number of innovative approaches are feasible. This report can not go into details but we can consider, among other solutions, a separate TV channel (or satellite) dedicated for education and training. In this case each of the classrooms using this facility will need a TV set. Each of the participants in a course may be provided with free course materials or depending on the nature of the course, a fee may be charged. It is also possible to conceive of Internet based distance learning and may be gradually incorporated as the technology becomes generally available in Bangladesh.
We have a number of technical colleges and universities in the country but the quality of instruction varies widely. The government may actively consider financing them to improve the quality of instruction. They will need financing particularly in equipment, training and retention of qualified instructors. The government should also increase the number of scholarships related to IT.
To encourage private sector participation in skill development, direct and indirect benefits in the form of tax exemption, accelerated depreciation, financing without or with minimum collateral, etc., may be considered.
Telecommunications
Since telecommunication is an integral part of computing, the government should remove all restrictions from private investments in telecommunications. It is recommended that all telecommunication equipment be treated as IT equipment and similar to computing, all duty and taxes should be removed from them. The government must actively encourage private investments in telecommunications, including building of infrastructure.
It’s not clear what is transpiring under the hood. It seems that the decision-makers understand the overriding importance of telecommunications. However, the action or rather inaction is difficult to understand. Revenue contribution to the exchequer can not be the primary issue since the government stands to earn more revenue in the form of taxes, VAT, airtime, etc. Given the current global scenario, insipid arguments favoring protectionism in the guise of national security are also obsolete.
Telecommunication is one of the most critical area where drastic changes are required to sustain our aspiration to build an export oriented software and services industry. If we fail, all our dreams and aspirations will be futile.
Seeding the Institutions.
We will need a number of supporting institutions for the software and services industry. To expedite formation of these institutions, the government can start seeding them in close association with the private sector.
9.16 Role of the Private Sector
We often limit our discussions to the role of government but refrain from discussing the inherent responsibilities of the private sector. If the private sector demands increasingly responsive conduct from government, it must also play its part to develop the IT sector.
The private sector needs to understand that the days of protectionism are over and success in a globally competitive market requires a balanced mix of inputs in the form of technology, skill, management, human resources development, competitive compensation and socially responsive behavior. Also, the fat profit margins characteristics of closed markets are no longer sustainable. Interestingly, removal of government barriers does not automatically translate into benefits for the consumers. A perfect example would be the banking sector of Bangladesh. There was a time when Bangladesh Bank used to control the interest rates that could be charged by banks. For quite some time Bangladesh Bank has withdrawn this practice but none of the banks have lowered their interest rates! The average spread in Bangladesh (lending rate minus borrowing rate) is 6-7% whereas in Singapore it is only 2%! It is even more interesting that banks are mutually fixing the rate (in any competitive economy this would be considered a serious crime) and many Chairmen and Directors of these institutions may not even be aware that they are violating the law

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Average Project Manager: Programmers: 5.9.

Average Experience:
Project Manager: 4.2 years
Programmers: 2.5 years.
Failed to get required Workforce: 14
% companies with ISO: 39%
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