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  • 1. IT / ITeS outsourcing to BangladeshChallenges & OpportunitiesWhitepaper sponsored by UN/WTO ITCDecember 2011 www.e-asia.org
  • 2. Agenda • Objectives of study • Methodology • Findings - Global Benchmarking • Findings - Bangladesh • Challenges as we see it • Conclusions www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 1
  • 3. Objectives of studyThis study was commissioned by the United Nations/World Trade Organization International Trade Centre (ITC), Geneva and was carried out on an independent basis by KPMG Bangladesh in association with KPMG India• Develop a benchmarking database, on key factors related to the IT SW& ITES industry, to enable comparison of Bangladesh with 27 other countries• Develop a report providing key information and figures on theBangladeshi IT & ITES sector and comparative analysis www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 2
  • 4. The Benchmarking Exercise - about the database • Benchmarking for IT/ITeS business enablers, inter-alia  Quality of resources Language Skills Overall Graduate Pool Infrastructure Current State of IT Industry Cost of resources Salary Cost Cost of Operations Business And regulatory costs www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 3
  • 5. Countries Compared - 27 key outsourcing destinations Europe  Bulgaria  Czech Republic  Hungary  Poland  Romania  Russia  Slovakia Asia  Ukraine  China  India  Indonesia Americas  Malaysia  Argentina  Pakistan  Brazil  Philippines  Chile  Sri Lanka  Costarica Africa  Mauritius  Thailand  Mexico  Vietnam  Ghana  Panama  Egypt  South Africa www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 4
  • 6. Key Findings from Global BenchmarkingQuality of Resources across Outsourcing Destinations www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 5
  • 7. Pool of Resources - Population with English as first or secondlanguage 100 90 80 70 60 50 40 30 20 10 0 www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 6
  • 8. Pool of Resources - Young population in age group 20-34 (in 2010) 350 300 250 200 150 100 50 0 www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 7
  • 9. Pool of Resources - Graduates every Year 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 8
  • 10. Availability of Engineers and Scientists - Industry Perception 5.5 7 - Most Favorable 0 - Least Favorable 5 4.5 4 3.5 3 2.5 www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 9
  • 11. Quality of Education System- Industry Perception 5.5 7 - Most Favorable 0 - Least Favorable 5 4.5 4 3.5 3 2.5 2 www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 10
  • 12. ICT Development Index - Access and use of ICT in the country 7 10 - Most Favorable 0 - Least Favorable 6 5 4 3 2 1 0 www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 11
  • 13. Key Findings from Global Benchmarking Cost of Business across Outsourcing Destinations www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 12
  • 14. Annual Salaries for Resources - Entry level & Experienced 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Average Annual Salary for a fresh Resource Average Annual Salary for a 5 year experienced Resource www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 13
  • 15. Cost of Internet for Business 70 60 50 40 30 20 10 0 www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 14
  • 16. Average Office rentals 100 90 80 70 60 50 40 30 20 10 0 www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 15
  • 17. Intellectual Property Protection 6 5 4 3 2 1 0 www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 16
  • 18. Introducing Bangladesh How Bangladesh measures up www.e-asia.org© 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 17
  • 19. The Bangladesh story - Some key facts • Stable democracy - population approx 160 m. • Economy has been growing @ 6% per year for last 5 years • Recognition of growth potential of Bangladesh: • J P Morgan : “Frontier Five economies” • Goldman Sachs: “Next 11 after BRIC” • S&P : Placed Bangladesh ahead of all South Asian countries, except India • FDI in 2010 - US$ 913m. (doubled in last 7 years) • Textile and readymade garment industry very strong www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 18
  • 20. Bangladeshs Information Economy • Mobile phone penetration - amongst highest in developing world at ~50% • Internet penetration - around 4% • International bandwidth availability rising rapidlyThe IT/ITES industry • Over 850 enterprises across IT/ITeS - almost one third target global markets • Over US$ 35 million exports - by business enterprises • Over US$ 7 million exports - by “freelancers”, 7th largest revenue in the world from this segment • Global High-Tech giants investing in R&D centres- Samsung , AMD • Multinationals investing in existing operations - WPP/ Graphics People, Viz RT / Escenic • Adopting Quality and Security certification standards like CMMI, ISO 27001 etc www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 19
  • 21. Government Focus on IT - Digital Bangladesh “Make Bangladesh fully digitized by 2021” • Countrywide High Speed Network Access • E-Gov / e-Commerce / e-Banking • Strong impact on education and health sectors • Develop marketing skills for freelance work - “Own your laptop” Amongst other things, will greatly increase Bangladesh’s competitiveness Other Policy initiatives: • Enhancing global linkage through more international cables • Updated IT act to enhance IP protection • Guidelines and support for Voice and Data BPO • Tax breaks for IT/ITeS companies - Income and corporate tax, low import duties on capital equipment www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 20
  • 22. Key Findings from Global Benchmarking How Bangladesh measures up www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 21
  • 23. ANALYSIS OF BANGLADESH - QUALITY of Resources Comparative percentile score across 28 leading outsourcing destination 1 - Most Favorable 0 - Least Favorable English Speaking Population 1.0 0.8 Relevant Experience of 0.6 Labour Force Population in the age 20-34 0.4 0.2 0.0 Quality of Educational Tertiary Education System Enrolment Availability of Engineers and Scientists Source : ITU World Telecommunications indicator 2010, Doing Business Report 2011, Global Competitiveness Report 2011, KPMG Analysis, UNDP Database www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 22
  • 24. ANALYSIS OF BANGLADESH - COST of Business Comparative percentile score across 28 leading outsourcing destination 1 - Most Favorable 0 - Least Favorable Salary Competitiveness - Entry Level 1.0 0.8 0.6 Rental Costs Salary Competitiveness - Experienced 0.4 0.2 0.0 Premium for Night Shift Work Internet Cost - Monthly Rental and weekend work Wage Inflation Source : ITU World Telecommunications indicator 2010, Doing Business Report 2011, Global Competitiveness Report 2011, Paymaster Database, KPMG www.e-asia.org Analysis, UNDP Database © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 23
  • 25. Challenges as we see them • Bandwidth availability: • Redundancy not there now • Costs still high • However, three new terrestrial connections and one sub-sea cable under implementation •IT / ITES eco system development • Marketing - Leverage relationships and expertise • Graphic Design/Islamic Banking/Telecom • Bengali diaspora / professionals working overseas • Middle East / Gulf markets/ Freelancing • Execution capability development • Management skills • Quality of deliverables- Certification like CMMI etc. • Aim to get into large outsourcing deals - Build scale www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 24
  • 26. Challenges as we see them • Infrastructure • Perennial Wish list - “world class infrastructure at very cheap prices” • Time bound Infrastructure delivery • Development of IT Parks • Fiber optic backbone • Availability of power • Continued importance of the role of Government • Industry will need “hand holding” and active nurturing for at least a decade • Holistic approach to IT/ITES sector • Single point of contact for the industry • IPR enforcement Success and speedy implementation of Digital Bangladesh will be critical www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 25
  • 27. Key Findings from Global Benchmarking In Conclusion www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 26
  • 28. Illustrative Cost of a 25 people software development center -Comparative 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Contact center with 20 junior resources, and 5 experienced workers, 1500 sq ft of space and 5 MB connectivity for a year . All values in USD Source : ITU World Telecommunications indicator 2010, Doing Business Report, Paymaster database, KPMG Analysis www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 27
  • 29. Illustrative Cost of a 250 people software development center -Comparative 12 10 8 6 4 2 0 Contact center with 220 junior resources, and 30 experienced workers, 15000 sq ft of space and 10 MB connectivity for a year . All values in USD Source : ITU World Telecommunications indicator 2010, Doing Business Report, Paymaster database, KPMG Analysis www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 28
  • 30. In Conclusion - Cost vs Value addition Size of bubble reflects the High population having English as their first or second language India China Philippines Malaysia SriLanka Czech Republic Thailand Argentina Hungary Russia Poland Brazil Chile Romania Bangladesh Pakistan Mexico South Africa Slovakia Bulgaria Low Low Cost of Operations High www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 29
  • 31. In Conclusion - The Bangladesh proposition • Bangladesh offers attractive cost benefit ratios to potential outsourcing customers / investors • Potential focus areas of work: • Non voice based ITeS /BPO • Graphic Design / Desktop Publishing • Mobile Application /Web Development • Software Product based work - using domain expertise like textile industry, Islamic banking, micro finance etc. • Enhance scale of Freelancing Although challenges exist, it is heartening to see that significant steps have been / are being taken to overcome these www.e-asia.org © 2011 Rahman Rahman Huq (KPMG in Bangladesh), the Bangladesh member firm of KPMG International Cooperative (“KPMG International“), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International“), a Swiss entity. 30
  • 32. Thank YouKPMG Bangladesh Ali Ashfaq aashfaq@kpmg.comKPMG India Dr Rajiv Nag rajivnag@kpmg.com www.e-asia.org