Despite the presence of significant growth potential and growing investment in developing human resources, through both public and private initiatives, our success in software and IT services in increasing export as well as serving local market does not appear to be encouraging yet. In July-April (over 10 months) of the fiscal year 2014-15, Bangladesh earned $109.10 million from export of software and IT (information technology) services, which is 2.95 per cent higher compared to $106m over the same period in FY2013-14, when Bangladesh fetched $124.72m from the IT sector. Such numbers are not certainly comparable with those of the neighbouring India which earned more than US$100 billion during the same period.
In spite of such a small export figure, Bangladeshi entrepreneurs have proved that they are capable of adding US$12,000 value per employee in generating export revenue. The per capita earning has further room to increase. For example, Indian icon Infosys had per employee revenue of US$50,000 in 2014. More encouraging is that Infosy's CEO Vishal Sikka has recently said that the company should comfortably achieve its target of revenue productivity of $80,000 per employee by 2020. The scope of such high per person value addition to meet growing demand of software and IT service certainly is an opportunity for us to tap in. We have the prospect of becoming a rich nation by engaging a small fraction of our 40 million students to generate such high per capita revenue.
Over the last 30 years, we have used many instruments to develop IT capacity. We have opened office in Silicon Valley of California, but could not attract prospective clients. Our investment in equity and entrepreneurship fund (EEF) has not produced any success story to report. We used to complain in the past about broadband connectivity, both speed and cost, as the barrier to export, but that problem has been resolved. The electrical power issue has also largely been addressed. Some foreign IT training institutes trained a large number of our youths about a decade ago, but most of them did not get the opportunity to build lucrative career in the local industry. Over the years, our participation in foreign trade shows has not produced desired results as well. Despite the offering of computer science degree by virtually every private university and many public universities, we are still complaining about the shortage of proper human resource. Recently, the government has taken loans from major foreign lenders to provide IT training to people with the hope that enhanced IT skill will spur growth to generate export revenue of several billion dollars within the next few years.
Despite numerous steps and long track record over last three decades, neither domestic nor foreign direct investment has succeeded in developing large IT delivery centres in the country, serving the export market. The image aspect of the nation is well understood. But overcoming the image issue, our textile, ready-made garments (RMG) and ceramic tableware sectors have been growing and the pharmaceutical industry has been showing tangible progress as well. The challenge of addressing image issue to establish Bangladesh as an IT hub is a daunting task. But we need to make progress to establish Bangladesh as a strong delivery brand in the global value chain of software and IT service. The obvious question is: how should we progress?
Here are two major messages to deliver to others about our attractiveness as a future IT hub. The first one is about delivering the message that all our major IT projects, for both the public and private clients, are delivered by foreign providers, having no development centres in Bangladesh. But trust us, we can do very good job in delivering your challenging IT projects; so partner with us. The second one is about showing demonstrated competence by making claim that by competing with foreign providers, we have delivered higher value at lower cost than reputed foreign providers could have done in serving all or most of the major clients of Bangladesh.
It seems that instead of spending money in recruiting foreign consultants, organising foreign trade shows, opening offices across the world, or running ad campaign to deliver the first message, we should rather focus on creating delivery track record serving our home market, to create the confidence among foreign clients about our potential to be their partners of choice for doing business.
Although our export has been growing at snail's space reaching to just over USD100 million (USD124.72 in 2013-2014), but we have lost our domestic market at an accelerated rate to foreign providers. What are the policy options we have to establish our track record in serving local market by competing with foreign providers to prove that we can deliver higher value at lower cost than our foreign competitors? One of the major challenges appears that local firms are facing significant difficulty in winning government projects. According to recent media report citing BASIS leader, only giant foreign companies can take part in the government's ICT procurement processes under the current policy. It has been reported that in most cases, procurement agencies fix condition for eligibility of transaction at $100 million, and a local firm does not have that much of financial strength.
Policy of purchasing finished software solutions, without having the strategy of maximising local value addition, through international competitive bidding appears to be a concern. History indicates that the policy of public procurement to support the growth of capacity of private software enterprises in delivering solutions to the government in an incremental manner played an important role in the success of software industry of the USA. Pursuing the incremental delivery strategy, the public procurement policy could have been supportive to the capacity growth and track record development of successful delivery for local software firms. Such policy could have been the enabling factor for local software firms to play more value additive role, than before, to government's programme. Moreover, track record of successful delivery in local market could have made it easier for local firms to enter export market. According to the theory of strategic management, local market should be the spring broad for domestic firms to enter international market. Instead of taking the role of simply being buyer of software, the government should take the strategy of developing capacity of local software firms through smart public procurement policy. Particularly, there is a concern of public procurement policy of buying best-of-breed enterprise applications and implementation services, primarily from foreign firms, without paying attention to local value addition and capacity development.
Here are a few major policy options to enable Bangladesh to demonstrate competence to be a major delivery centre in the global value chain of software and IT services: 1. Public procurement to be used as a tool to empower local firms to improve their competence to be globally competitive and compel foreign providers to set up global delivery centre in Bangladesh to qualify for public projects; 2. Investment in academic R&D in partnership with local IT firms to innovate next generation IT solutions and provide incentive to both government departments and private organisations to improve the quality and reduce the cost of their delivery by adopting those innovations; 3. Improving intellectual property culture to encourage legally defendable intangible assets development and valuation, not only to protect and defend themselves in ownership dispute, but also to enable local firms to raise much needed risk capital finance.
In the age of seamless information flow over the Internet, it's wise not to tell what we can deliver--if chance is given-- rather to showcase what we have done to create the brand value: proven confidence of delivery. Instead of just setting up foreign offices or organising trade shows in foreign land, or recruiting foreign consulting firms to tell stories about our unproven export potentials, the brand value development should focus on local market as the spring broad to develop and demonstrate competence to qualify for export market as well as to attract foreign firms to set up their global delivery centres in Bangladesh. The software and IT service sector of Bangladesh has the potential to grow as the heart of the Bangladesh's economy-through spillover effects to local economy and export earnings. Software sector is not only the potential large-scale employment generator but also the dream of technopreneurship of the new generation Bangladeshis. Therefore, it should be branded accordingly-with care and charisma.
M Rokonuzzaman, Ph.D, researcher and activist on Technology, Innovation and Policy, is Professor, Department of Electrical and Computer Engineering, North South University, Bangladesh.
