The government has been working relentlessly to build "Digital Bangladesh", an integral part of its "Vision 2021". The country's IT companies started exporting software around two decades ago, joining the Business Process Outsourcing (BPO) bandwagon.
The Bangladesh Association of Software and Information Services, which started its journey with 17 companies in 1997, now stands at 1,200 plus companies involved in software development and providing IT services.
The Information and Communications Technology (ICT) exports by 250 plus companies, to 60 plus countries around the world, accounted for $800 million in 2017, which was 2.2 percent of the country's total export value. According to USAID, North America is Bangladesh's main export destination.
Bangladeshi IT and IT-enabled services (ITeS) firms generate almost 35 percent of its export revenue from the US, 15 percent from the UK, followed by several EU countries such as Denmark and the Netherlands.
Some local enterprises also export IT and ITeS services to the UAE, Saudi Arabia, South Africa, Malaysia and Singapore. This is the result of one million people's hard work. The government had set an export target of $5 billion by 2021 for technology products.
In Bangladesh, there are more than 100 software houses, 35 data entry centres, thousands of formal and informal IT training centres and numerous computer workshops. Plus, the Bangladesh Hi-Tech Park Authority was formed with the vision to ensure sustainable development and proliferation of IT or Hi-Tech Industry in the country. Given the potential of the ICT sector in Bangladesh, it can work as a major economic driver.
During the late 90s, the e-commerce industry started its journey in Bangladesh. However, it did not witness any growth up until the last decade. The development of banking facilities, infrastructure, and electronic payment methods enabled the e-commerce sector to grow.
Over the past years, the country's shopping behaviour shifted dramatically with a change in the living standard of people. Now many are making transactions of products and services online.
In 2019, according to a German research firm, the size of Bangladesh's e-commerce market was $1.6 billion and it is expected to be $3 billion by 2023.
The government imposed a 7.5 percent Value Added Tax (VAT) on this sector. And the industry insiders say that this move may adversely affect the government's ongoing digitalisation agenda and hurt the employment rate in the sector.
In terms of revenue from e-commerce, Bangladesh is ranked 46th in the globe, according to market and consumer data provider Statista. Growing smartphone penetration and popularity of 4G networks along with the increasing purchasing power of consumers are driving the e-commerce industry across the world including Bangladesh.
With the advent of Covid-19, the e-commerce industry is witnessing an unnatural upsurge globally. But with the world heading into an inevitable global recession, the industry is bound to slow down.
Covid-19 possesses a unique challenge for the IT industry of Bangladesh as it is only in growth stage now. Industry insiders expect the overall revenue for the 2020 year to fall by 20-25 percent due to the pandemic.
Companies that deal with the BPO of medical and legislative data for North American companies – such as Therap, Augmedix – are somewhat stable in their business now, given the heightened respiration of the medical industry.
However, the industry players that mainly focus on outsourcing of software development are at a disadvantage. India, for example, serves 16 percent of the global market and is already predicting a lower growth rate than the previously estimated 7.5 percent for this year, says the Indian IT industry body Nasscom.
Although the industry can operate remotely by its nature, the impact of the pandemic is still felt due to stuttering business orders from the end clients. Since Bangladesh's ICT export is mainly dependent on businesses of North American and European companies, there has been a general fall in outsourcing given the spread of Covid-19 in these regions.
As most global tech companies are now shuttered with employees working from home, their business growth has stagnated and the ripple effect has been felt in the local outsourcing industry. Other than a few large tech companies in Bangladesh, most companies do not operate on a retainer basis and are dependent on project basis business generation.
Due to the cancellation or postponing of projects, business continuity is in serious trouble, resulting in local companies facing cash crunches. This applies to at least those companies that do not have a force majeure provision in their contracts.
Maintaining steady cash flow the biggest challenge now
Software companies that mainly serve the local market are facing more challenges compared to the ones focused more on outsourcing. Due to the economic halt, local clients are stalling payment, leading to cash flow challenges for these companies.
North American and European companies are sourcing locally for now – especially on security monitoring and disaster recovery – since delivery of work from offshore services, namely China has come to a screeching halt.
However, Raisul Kabir, co-founder and chief executive officer of Brain Station 23, says that there is a growth potential too if companies are agile and willing to pivot fast. "Video streaming, machine learning and online learning are strong business vertices to explore now. There has been a strong upsurge in demand for Moodle, an open-source learning platform, from clients in the education sector due to the sudden increase in online classrooms. Government contracts – where foreign governments are seeking software solutions about the pandemic – are also a potential growth area."
However, layoffs are yet to happen in the industry but smaller companies with limited cash-flows might have to rely on pay cuts to survive if the pandemic persists.
Most companies are having issues with remote work as loss and delivery of data over unprotected internet connections is a big challenge.
On a micro level, since tech companies operate on an agile methodology of delivering work in a predetermined deliverable schedule, accountability due to remote work has disrupted the delivery cycles.
However, large companies operate through their own protected servers and systems. But data sharing and assurance of data protection on an open system is a big challenge for most of them. In India, for example, some companies have begun to install corporate desktop computers at their employees' home. But this is hard to sustain and implement on an industry-wide scale.
Another systemic challenge reported by the industry is the lack of internet bandwidth when operating from home. Due to sudden upsurge of demand for home internet consumption, the infrastructure is strained and its impact is also being felt in the IT industry.
The only silver lining in such a situation is that the outsourced service desks will have to support huge volumes of end users trying to access systems remotely. But it also comes with a challenge for engineers to facilitate overwhelming demand for technology stacks with which they have no training or familiarity.
In a time such as this, the e-commerce and e-service industries are facing similar challenges. Initially, with most of the urban population of Dhaka put in isolation and following social distancing, the number of online purchases in the B2C e-commerce platforms including daraz.com, Pathao, and Chaldal.com experienced an unnatural spike.
However, food delivery services saw a sharp downturn in just last week with orders falling by 75 to 80 percent, an industry representative from Shohoz says. Consequently, 40 to 50 percent of restaurants also closed down, leading to the fall in business.
As per a Bangladesh Road Transport Authority directive, ridesharing by Uber and Pathao had been banned to limit the spread of Covid-19.
Deliveries of e-services have also come to a halt due to the enforcement of quarantine and social distancing.
Online grocery stores are experiencing double-digit growths in online deliveries with Chaldal's average 5,000 orders per day jumping to 10,000 to 15,000 on an average. And along with other food delivery services, it has replicated the contactless delivery system.
The digital e-health service industry is facing a sudden surge in phone call consultation with Telenor Health reporting a 30 percent increase in phone consultation services. Similarly, Praava Health launched a low-cost video consultation services to tackle the upsurge in healthcare advice demand.
As the e-services and e-commerce industries are highly dependent on daily-wagers or contractual earners, the sudden outflow of workers from the city also led to a serious workforce shortage.
With the challenges now apparent for the IT and digital sector, the government must pay significant attention to its third-engine in a post-coronavirus Bangladesh.
On a B2C level, e-service companies such as food delivery and ridesharing ones need to create a safe and hygienic environment in their operations by ensuring that all the delivery men, riders and drivers take safety precautions seriously.
On a B2B level, tech companies need to support their staff by providing proper work from home initiatives and creating accountability through better management and delivery techniques.
The companies also need to reassure their clients that the work from home will not impact business significantly and precautionary measures are being taken to ensure business continuity.
The coronavirus stands to wipe out 1.1 percent of Bangladesh's gross domestic product, resulting in 894,930 jobs being lost as per a projection of the Asian Development Bank.
It is highly likely that the IT and digital industry will fall into this crunch along with the readymade garment industry. And for long term growth assurance, provisions should be made for the industry in the recently sought $1 billion in support from the International Monetary Fund and the World Bank by the government.
Admittedly, it will be impossible to not feel the impact of the pandemic in any industry but precautionary and supportive policies will ensure that the tech and digital industry will not be crippled in a post-Covid-19 economy.
The author is Principal Business Consultant, LightCastle Partners