"Bangladesh's IT industry is a tech tiger! Exporting billions and teeming with tech talent, this South Asian nation is the future of innovation. Software exports are surging, fueled by a massive talent pool."
The IT industry, as depicted in the image, is a complex ecosystem comprising three main categories: Software, Hardware, and Consulting.
The Software category is an integral part of the IT industry and includes System Software, Programming Software, Application Software, and Driver Software. System Software manages and controls computer hardware, serving as an interface between the hardware and end-users. Programming Software includes tools used by developers to write, test, and debug other software programs. Application Software is designed for end-users and includes programs like database programs, word processors, web browsers, and spreadsheets. Driver Software is a specific type of system software that allows interaction between the hardware and other types of software.
The Hardware category includes physical devices used in or with your machine, including the computer itself. It is divided into Computation Devices and Network Devices. Computation Devices include single-board computers and commodity products. Network Devices consist of gateways, routers, switches, and datacenter servers & equipment.
The Consulting category includes services that help businesses improve their performance through the analysis of existing business problems and the development of future plans. It includes BPO (Business Process Outsourcing), which involves contracting non-primary business activities and functions to a third-party provider. KPO (Knowledge Process Outsourcing) involves outsourcing core, information-related business activities. IT Consulting involves advising organizations on how best to use IT in achieving their business objectives.
The interconnections between these categories represent the interdependencies within the IT industry. For example, software cannot run without the appropriate hardware, and both software and hardware often require consulting services to ensure they are used effectively and efficiently. This model serves as a useful tool for understanding the industry’s dynamics and the various factors that influence its growth and development. It also provides insights into the industry’s future direction and the potential opportunities and challenges that lie ahead.
The revenue drivers of the IT industry in Bangladesh is influenced by the following factors:
1. Export of ICT Products and Services: More than 120 companies export ICT products worth nearly $1 billion to 35 countries. By 2021, it’s expected that this will increase to $5 billion.
2. Digital Transformation: The growing emphasis on digital technology, cybersecurity, artificial intelligence, robotics, healthcare, and IT is significantly driving the market's growth.
3. Government Initiatives: The government's 'Digital Bangladesh Vision' identifies human resource development, connecting citizens, digital government, and the promotion of the ICT industry as critical to meeting transformation targets.
4. Human Resource Development: The education system produces more than 500,000 university graduates every year, and several dedicated training programs have trained more than 65,000 IT/ITeS professionals.
5. Internet Connectivity: Bangladesh is committed to ensuring 100% internet connectivity by 2021. This has led to more than 93 million internet subscribers and 160 million mobile subscriptions.
Recent cost driving factors of the IT industry in Bangladesh include:
1. Human Capital: The IT industry in Bangladesh has grown to 250,000 people, with 1500+ companies. The cost of human capital, including salaries, benefits, and training, is a significant cost driver.
2. Infrastructure: Reliable communication and power infrastructure are essential for the IT industry. The costs associated with maintaining and upgrading this infrastructure can be substantial.
3. Technology Investments: Investments in frontier tech centers of excellence with global technology partners such as IBM, and training professionals in emerging technologies – the Internet of Things, blockchain, Artificial Intelligence, Big Data, and analytics are significant cost drivers.
4. Operational Costs: Among the top 250 IT delivery locations, operative costs in Dhaka are 16% to 20% cheaper than Bangalore in India, and 30% lower than Cebu in the Philippines. However, these costs, including rent, utilities, and maintenance, still represent a significant portion of the total costs.
5. High-Tech Parks: In order to ensure a cost-effective space for companies interested in investing in Bangladesh, the government is building 28 high-tech parks around the country and plans to increase this to 64.
The Porter’s Five Forces analysis for the IT industry in Bangladesh are outlined below. These factors impact how businesses compete and conduct business in Bangladesh's IT sector, hence defining the sector's strategic landscape.
Porter's Five Forces is a business framework that helps analyze the competitive environment of an industry. Here's how it applies to the IT industry in Bangladesh:
1. Threat of New Entrants: The IT industry in Bangladesh is growing rapidly, attracting new entrants, so the threat is low. However, the need for technological expertise and infrastructure can pose significant barriers to entry.
2. Bargaining Power of Suppliers: The suppliers in the IT industry are primarily the hardware and software providers. Their bargaining power can be considered low due to the presence of numerous suppliers and the availability of open-source alternatives.
3. Bargaining Power of Buyers: With the proliferation of IT companies, buyers have a wide range of options to choose from, giving them high bargaining power.
4. Threat of Substitutes: The threat of substitutes is relatively low in the IT industry. While there are alternatives like open-source software, they may not offer the same level of functionality, support, or user experience as mainstream products.
5. Competitive Rivalry: The IT industry in Bangladesh is highly competitive with many firms offering similar services. This leads to high rivalry within the industry.
The future outlook of the IT industry in Bangladesh appears highly promising, buoyed by several key factors driving its growth trajectory. Foremost, the Bangladesh ICT Market is poised for substantial expansion, with projections indicating a robust Compound Annual Growth Rate (CAGR) over the coming years, alongside significant escalation in market value. This growth is underpinned by a concerted effort towards digital transformation, wherein the country's focus on digital technology, cybersecurity, artificial intelligence, and other IT-related domains is notably propelling market dynamics forward. Moreover, pivotal government initiatives, notably the 'Digital Bangladesh Vision,' underscore the strategic importance accorded to human resource development, digital infrastructure, and ICT industry promotion. The concerted emphasis on fostering a skilled workforce is particularly evident, with substantial investments directed towards educational and training programs, reflecting the pivotal role of human capital in driving industry growth. Further reinforcing this trajectory is Bangladesh's commitment to universal internet connectivity and the impending advent of 5G services, poised to unlock new realms of connectivity and innovation. Envisioned as the 24th largest economy by 2030, Bangladesh's steadfast commitment to nurturing its ICT sector underscores its transformative potential, positioning it on a trajectory towards digital and knowledge economy paradigms by 2021 and 2041, respectively.
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