Opportunities & Challenges – Bangladesh as a destination for BPO

Towhid Hossain, Secretary General, Bangladesh Association of Call Center & Outsourcing

IT Enabled services (ITES), also called web enabled services or remote services or Tele-working, covers the entire gamut of operations which exploit Information Technology for improving efficiency of an organization. These services provide a wide range of career options that include opportunities Call Centers, medical transcription, medical billing and coding, back office operations, revenue claims processing, legal databases, content development, payrolls, logistics management,GIS (Geographical Information System), HR services, web services etc.

The key ITES include: Call Centers, Electronic Publishing, Medical Transcription, Data Centers, GIS Mapping, Portals, ERP( Enterprise Resource Planning ), Knowledge Management & Archiving.

Bangladesh and the current ITES scenario

According to studies by Bangladesh Association of Software and Information Services (BASIS), there currently are over 800 IT and ITES companies registered in Bangladesh. The total industry turnover is estimated around 250 million USD. In 2012 BASIS carried out a survey among its member companies showing that over 75 percent of the member companies are involved with customized application development and maintenance. Almost half of them are offering ITES to its customers.

The survey also shows that the majority of the BASIS member companies focus largely in the local IT market. As per BASIS statistics, the Bangladeshi IT service industry has grown at a 20% to 30% per annum during the last few years with banking and other financial sectors being the primary domestic target group for Bangladeshi ICT sector.

Despite strong presence of foreign software solutions in the market, local companies are working on maintenance and implementation of this software. Several companies have also developed software solutions, providing a range of ancillary services related to banking. There is also substantial demand for ITES in manufacturing sectors. RMG industry, textile and pharmaceuticals have created sustainable demand for IT solutions like ERP, HR information systems, and production and financial management software.

Studies estimate that around 200 Bangladeshi ICT companies serve international markets by offering outsourcing services and project delivery models. The BASIS survey shows that out of the exporting member companies the revenue of around one third of these companies is fully export based. In terms of export destinations North America (Canada and the US) dominates, whereas European countries like the UK, Denmark, the Netherlands and Germany have emerged over the last few years to become major export destinations

IT Worker Force and Bangladesh

Bangladesh has a population of over 150 million. A significant portion of the population belongs to the productive age group between 16 to 35 years. Therefore, Bangladesh has prosperous population distribution in terms of workforce. The education system of the country is also particularly conducive to producing IT workers. Already, over 15,000 IT engineers are employed in over 400 software and IT service companies, around 150 of these companies are specialized in serving overseas clients.

Specialized IT Education in Bangladesh is well established at the graduation and post graduation levels. Bangladesh now confers academic degrees including postgraduate and doctoral degrees in the ICT subjects in more than 100 institutions including universities, colleges and institutes. Moreover, the 90+ universities in the country produce close to 200,000 graduates each year of which around 14,500 have completed their graduation/ post graduation in IT related disciplines.

In order to communicate with international clients, learning English is a major requirement. In this regard, Bangladesh is already at an advantage. English is taught in schools from the primary level, and is the main medium of education in most universities. As a result, the graduates are well versed in both English and Bengali making them more capable of communicating with clients at both home and abroad. However, certain challenges need to be overcome in order to take full benefits of these advantages that Bangladesh already has.

Challenges

For starters, more emphasis should be given on teaching the basics of computer programming at the early academic stages. Computer education in schools is mostly limited to simply word processing, internet browsing etc. A new curriculum should be introduced that incorporates lessons on computer programming that become increasingly advanced as a student progresses into the higher classes.

Also in the university level, IT courses should be introduced for non IT students as well to provide a more comprehensive academic experience. More IT training institutes should also be set up modeled on the pilot programs adopted by the ICT Division.

To ensure that the training is up to the mark, there is no alternative but to issue certificates for programs that are both nationally and internationally recognized and accepted. There is also a need to train instructors who can then impart their knowledge to the students.

A significant proportion of students drop out of schools and either join vocational training institutes or join the informal work sector. By providing English lessons at the vocational institutes alongside IT courses such as programming, graphic design, web development etc, these financially underprivileged students can be given a chance to become important ITES workers and improve their lives as well as contribute towards the country.

Opportunities for Bangladesh in BPO

Bangladesh is at an advantageous position in terms of geographical location as well as demographic structure to capture a significant share of the global BPO industry. According to a study by Gartner, the total value of the global BPO market comes up to $300 billion. India is currently the top BPO destination with a market value of $80 billion. Two other Asia nations- Philippines and Sri Lanka are in second and third position, with market values of $16 billion and $2 billion respectively.

Becoming a top BPO destination means Bangladesh has to capture this market currently which is currently under control of these nations.

As mentioned earlier, Bangladesh already has a large pool of skilled outsourcing workers and more international firms are coming to the country seeking an outsourcing solution. Training sessions, workshops, seminars are increasingly being organized by both public as well as private initiatives to encourage more from the young generation to come into this sector, and the response so far has been overwhelming.

With fast pace of change in workplace technology, businesses need to devise newer and innovative ways to streamline their operational processes. Businesses are increasingly switching from having in-house IT Departments to Buying IT As A Service from third party contractors. Moreover, companies are also implementing components of IT to make their operations more flexible and agile.

There are increasing demands for development of SaaS, Platform as a Service etc infrastructure and these are key areas where Bangladesh can venture into and set itself up as a BPO destination.

To avail these opportunities, Bangladesh, as stated earlier, holds certain key advantages.

These include:

• A large number of young IT skilled workforce conversant in English, Bangladesh is one - Asia’s most attractive IT outsourcing destinations after India-particularly for Anglophone countries.
• Several IT companies in Bangladesh have already built successful track records of working for reputed clients over the world. Currently around 150 IT companies in Bangladesh are exporting to over 30 countries. Out of these IT companies, nearly two-thirds service clients in USA.
• Bangladesh offers significant cost advantages for IT outsourcing-both in terms of worker-wages as well as cost of infrastructure.
• Salary of programmers in Bangladesh is 50% of that in India, 40% of Philippines and 70% of the Vietnam.
• Charges for Internet bandwidth in Bangladesh is currently the lowest on South Asia (50% of that in India).
• Rent for office space in Dhaka(Capital) is below 20% of that in Delhi and 40% of Manila.

Moreover, the government has declared BPO a thrust sector and has taken several positive steps in promoting the development of this industry. This, coupled with the developments in ICT as part of the government’s vision of a Digital Bangladesh mean that the country has a bright future in BPO. The Bangladesh Government has taken initiatives to build an ICT-driven nation comprising a knowledge-based society. In view of this, a countrywide ICT infrastructure is being developed to ensure access to information by every citizen to facilitate empowerment of people, and enhance democratic values and norms for sustainable economic development. Information technology has become one of the thrust sectors of the government’s short and long-term planning. 

Government and private sectors are increasingly going for mass automation with an aim to embrace e-Digital Government with its huge base of skilled resources. Cyber Law and Intellectual Property Rights Law are well-defined, up-to-date and have been formulated in the parliament to cover the agreement required in most outsourcing projects. Moreover, the policy makers are emphasizing on the necessity of financing ICT ventures by banks and other institutions. EEF, a unique venture capital projects finance the ICT and ITES venture with interest free equity partnership. Banks also provide soft-loans for export projects.

European Union’s recent investment in technology infrastructure in Bangladesh has given rise to a wave of start-ups specializing in web and software development.

Incentives for working in BPO

BPO can be used as an umbrella term that includes several areas of operation. Typically, salaries and other work incentives vary depending upon the task in question and also the experience of the worker, number of hours worked, level of skill required etc.

A beginner at a Call Centre, for example, can earn around BDT 10,000-14,000 per month initially. With time, this can increase up to BDT 30,000 and above. The pay scale is higher for back office outsourcing such as Finance and Accounting.

A worker providing Finance and Accounting outsourcing services can expect to start with BDT 13,000 per month. Gradually, as the worker becomes more experienced, the salary range could well increase above BDT 60,000.

Similarly, in other BPO areas such as Parma/ Health Care, Supply Chain etc, it is possible to start with a monthly compensation of BDT 10,000-11,000 and gradually earn upwards of BDT 50,000 within relatively short periods of time.

Apart from the attractive salary range, a major incentive of working in outsourcing is the flexibility. Workers can choose their preferred working hours and can also work in outsourcing part time. Students in particular, will find this flexibility specifically beneficial.

It is relatively easy to work for a few hours in outsourcing alongside studies, and many students are increasingly becoming self sufficient through working in this sector.

Those seeking to earn a little more also have the option to set up their own Outsourcing venture after working for a certain period of time. This way, more jobs will be created, and overall contribution to the BPO sector as well as the national economy will increase.

Concluding Remarks

Global IT outsourcing industry has been growing steadily in the last decade. The current global economic crisis has led to shrinking IT budgets for corporate, but there has been a continual growth in demand for global sourcing of IT services, with cost minimization being the primary incentive for offshoring services.

The increasing cost pressures, coupled withthe emergence of new service delivery platforms like cloud computing and multiple sourcing, is set to transform the outsourcing industry globally. Over recent years, Bangladesh has made major progresses in laying the groundwork for a diverse and successful outsourcing market. The IT services industry within Bangladesh has been serving international clients and domestic clients in banking and telecom sectors. The industry now employs over 23,000 people, and is exporting services to European, North American and East Asian clients.

The Bangladeshi freelancer community has further supplemented the IT exports by close to US$7 million in 2010 - with Bangladesh appearing consistently in top freelance work locations. Bangladesh offers a vast pool of young, trained and English speaking resources – available at costs almost 40% lower than established destinations like India and Philippines.

Government authorities have demonstrated a determination to promote IT services industry in the country – providing cheaper bandwidth and alternate international cables, setting up Technology parks and providing tax holidays for export oriented industries. The “Digital Bangladesh” initiative of the government is helping setup infrastructure for enhanced connectivity, ICT based citizen service delivery and ICT based Education system.

The domestic market is set for growth to support the government initiative of a digital economy, allowing the existing companies to gain scale and expertise in large project execution and services delivery. This would allow Bangladeshi companies to move up the value chain, offering the benefit of operating cost arbitrage to a larger set of services and clients.

In the global marketplace for outsourcing destinations, Bangladesh has positioned itself as a key location for consideration, by enhancing skill availability, investments in infrastructure development, making focused investments and most importantly, by creating success stories.

With all these factors working in Bangladesh’s favor, it is now time to see whether the country can actually seize the opportunities and fully realize its potential in the IT/ITES sector.