M Abu Eusuf, PhD, is Professor, Department of Development Studies and Director, Centre on Budget and Policy, University of Dhaka & Executive Director, Research and Policy Integration for Development (RAPID), Nazneen Ahmed, PhD, is the Country Economist and Head of Policy & Strategic Advisory Cluster, UNDP Bangladesh, and M M Zimran Khan, is Head of Exploration, UNDP Bangladesh Accelerator Lab.
Rapidly growing information and communication technologies (ICTs) have brought new dynamism in access to health and education services, creating new sources of income and employment. Being able to access and use ICTs has become a major factor in driving competitiveness, economic growth, and social development. This sector also has great potential in terms of export diversification.
There is a great deal of optimism that the ICT sector, especially the outsourcing-related segment, can emerge as the next export growth engine for Bangladesh. The growth of this sector can also help generate employment opportunities, particularly for the youth. In recent years the outsourcing related segment of the ICT sector has achieved rapid growth with promising efficiency improvements in the supply chain.
Outsourcing services comprise a plethora of activities using a range of technologies, from the low-end ones to the high-end. Low-end services generally include front-office activities (e.g., customer support), back-office activities (e.g., invoice scanning, data entry, and accounting services), and creative content development (image, video, and audio).
Higher-end services include software development, cloud services such as Amazon Web Services (AWS), Microsoft Azure, Google Drive, and Dropbox, artificial intelligence (AI) services such as digital virtual agents, chatbots, automated financial investing, and image processing, and data analytics which is the analysis of data-sets to find trends and draw conclusions.
The COVID-19 pandemic has accelerated digital transformation at both the business and consumer levels throughout the world. According to the 2020 McKinsey Global Survey of executives, companies have significantly accelerated the digitalisation of their customer and supply-chain interactions, as well as their internal operations, with Microsoft's CEO stating that they have seen two years' worth of digital transformation in just two months of 2020 (January-March period).
Companies had already been implementing 4IR (4th Industrial Revolution) technologies before the pandemic. While a lot of businesses worldwide were shut due to COVID-19, many have taken advantage of the rather unusual times by digitally modernising their organisations to prosper. Digitalisation is expected to boost productivity, reduce labour costs, and improve returns. Businesses have increased their expenditure on technological improvements significantly.
There are projections that the spending on cloud services and other digital services, including analytics, artificial intelligence (AI)/machine learning (ML), cyber security, and user interface (UI/user experience (UX) is likely to expand dramatically over the next few years.
Though Bangladesh has achieved impressive advancement in digitalising the society, acquiring skills for technological catch-up and expansion are yet to go a long way. In this context, Bangladesh needs to consider undertaking serious policy measures and firm-level preparations to promote competitiveness. The Kearney Global Services Location Index (GSLI) 2021, which evaluates the competitiveness of outsourcing locations, ranks Bangladesh at 33rd out of 60 nations. In contrast, comparator countries such as India, Malaysia, and Vietnam are amongst the top performers ranked at 1st, 3rd, and 6th, respectively. Bangladesh had the lowest score in workers' skills and availability component among the mentioned countries. Industry stakeholders in Bangladesh also noted the lack of skills (both technical and soft), as well as an out-of-date curriculum as notable reasons for this deficiency. Overall, Bangladesh offers a very low cost of operations but lags in other areas.
To identify the useful technical and soft skills demanded by Bangladesh-based IT outsourcing firms to supply high-value and high-growth (in terms of revenue) services to the global outsourcing market, Research and Policy Integration for Development (RAPID) with the support from United Nations Development Programme (UNDP), Bangladesh Accelerator Lab recently surveyed 54 firms which are either members of Bangladesh Association of Software and Information Services (BASIS) or Bangladesh Association of Call Center and Outsourcing (BACCO).
The exercise divided the IT outsourcing industry into three segments: i) BPO (business process outsourcing services), ii) KPO (knowledge process outsourcing), and iii) IT and ITes (information technology and information technology-enabled services). BPO usually comprises low-end services, and IT and ITes medium-to-high-end services, with KPO being at the top of the spectrum. The survey assessed the skills required by the firms operating primarily in the IT and ITes and KPO segments. Some interesting results have been noted from the survey, and these have great importance for adopting policies for improving the competitiveness and efficiency of the sector.
Around 65 per cent of the surveyed firms export at least one service within the 4IR areas (such as ML/AI, cloud computing, data science, and big data analytics). On the other hand, about 95 per cent of the surveyed firms that have not yet exported such services aim to do so within the next two to three years. This finding indicates the intention of the surveyed firms to provide high-end services.
Most clients of the surveyed firms operate in the IT, telecom, e-commerce, and retail industries. A considerable portion of the firms are taking concentration risk, putting their investments/services in just a few industries; however, they positively view such concentration, considering it as a reflection of specialisation leading to attracting new clients.
Employee attrition, i.e., the departure of employees from the firm for any reason, has been identified as a major concern for Bangladeshi outsourcing firms. As firms invest a substantial amount of resources in training new employees, especially freshers, a high attrition rate is costly for them. Over the past year, the average attrition rate for the surveyed firms is estimated at 22 per cent. For the mid-level manager group, this figure is slightly higher, at around 26 per cent.
The surveyed firms have differing opinions on the range of technologies/languages that they should use. While some believe that clients prefer a proven track record in a limited number of technologies/languages (a proof of specialisation), others argue that expanding the technologies/languages benefits larger customer bases and is good for securing revenue consistency.
Taking a look at the most popular programming languages in India, the IT outsourcing leader, provides some clue to what Bangladesh might be missing. It is found that Kotlin, R, and ABAP are among the most used technologies/programming languages among Indian IT firms; however, it is not the case for their Bangladeshi counterparts, indicating that the former provides more high-end services. The use of Kotlin by Indian firms shows that they are strongly involved in various Android and cross-platform mobile app development in the IT and ITes segment, and the use of R and ABAP suggests their substantial involvement in market intelligence and asset management related KPO services.
When it comes to recruiting freshers, a considerable gap between the skill levels demanded by the employers and the level of skills possessed by the freshers has been found. The gap becomes more profound when only firms operating in the higher-end segments are considered. A similar trend has also been observed for employees with a few years of experience but to a lesser degree. The experience and skill gap for mid-level managers has been also found to be significant.
Soft skills such as English fluency, teamwork, effective and engaging presentation skills, and problem-solving are critical in the outsourcing market. According to most firms in the survey, when freshers are employed, they typically lack two soft skills: English speaking and presentation skills.
The surveyed firms believe that government training aids and incentives can be highly beneficial to businesses since they save them a lot of resources (money and time). They also suggest that it is important to strengthen the industry-academia collaboration with the objective of designing a labour-market-responsive curriculum.
Women's participation in the IT sector is quite low-the survey found that only around 15 per cent of the employees were female. Segment-wise, the share was found to be the highest for BPO and the lowest for KPO. This participation issue could be due to their lesser representation in science, technology, engineering, and mathematics (STEM) subjects, particularly IT. How the ensuing gender gap in the digital workforce market can be addressed thus constitutes one crucial policy issue.
Industry stakeholders believe that accreditation of online courses is needed to enhance access to high-quality education and training. To strengthen accreditation and ensure the smooth operation of online courses, an online education institute could be established that integrates both the industry and academia and would be responsible for the design and delivery of online courses as well as the online course marketplace. However, employers think that blended courses (which include online and offline learning activities) are better than fully online courses; they prefer some level of in-person interactions, especially in the case of assessment of the participants. Hence, blended courses should be provided instead of fully online courses.