Information Technology Enabled Services (ITES) – Bangladesh
ELEMENTS OF A NATIONAL STRATEGY FOR DEVELOPMENT OF AN INFORMATION TECHNOLOGY ENABLED SERVICES SECTOR IN BANGLADESH
USAID Bangladesh IT Enabled Services Project
SETA Task Order Number: 4002-345-001
Subcontract Number: 011227001/4000
Contract Number: GSOOK97AFD2185
Table of Contents
2. The Market for IT Enabled Services
Factor Requirements to be Competitive
3. Bangladesh Market Advantages and Disadvantages
19 Costs and Efficiency
General business environment
4. A Bangladesh ITES strategy
Potential ITES Market Segments
Building Productive Capacity
Building a Competitive Environment
Marketing of Bangladesh ITES sector
5. Recommended Actions
Improving Productive Capacity
Lowering Cost, Improving Efficiency
Marketing and Business Environment
Focus on Growth
Annex A: Analysis of Market Segments
Annex B: ITES Workshop Report
Annex C: The opinion surveys of this study
Annex D: Summary of the Philippines Case Study
Information Technology Enabled Services (ITES) is a large, fast-growing worldwide industry fueled by customers seeking efficiency and cost-savings from outside vendors, as well as rapid advancements in telecommunications and information technology. Offshore outsourcing of these services has become accepted and prevalent. Bangladesh has the potential to obtain a share of this market, which could result in a substantial number of jobs and meaningful export diversification for the country.
As a provider of ITES for (principally) overseas customers, Bangladesh meets the minimal requirements in terms of telecommunications infrastructure, labor costs, and government policies. However, there is a great need to focus on creating or promoting factors within Bangladesh that are competitive in the international arena. Other countries are already vying for their share by focusing on reduced costs, increased quality, and meaningful incentives for corporations to award their business to their locations instead of others.
The chief advantage of Bangladesh in this market is low cost labor. However, the high costs of telecommunications clearly constrain the potential and profitability of companies in this sector, which is critically dependent on information transfer. The small domestic market for IT related services also limits training and experience of local workers in order to gain expertise in higher value-added ITES. Lastly, there is the need to build overseas awareness of Bangladesh as a potential ITES provider.
Entering a new market such as ITES is always difficult, even more so with strong competitors from other countries. The Bangladesh IT sector is not currently competitive in the ITES market. Its only clearly identified market advantage is in low cost labor. However, this is balanced against high communications costs. Moreover, low cost is not a sufficient advantage if potential buyers are not confident of the ability of Bangladesh firms to deliver a high quality product.
It is important to recognize that with no fundamental market advantage, firms and the government of Bangladesh must be prepared for a relatively high risk and long term growth strategy. It is high risk because Bangladesh is not likely to be able to seize much of this market without beating competitors who are currently in better position. It is a long term growth strategy because beating those competitors will require steady and constant improvements in the capacity and marketing of Bangladesh firms.
The strategy must also be opportunistic, taking advantage of any openings in the market that...
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