Local IT firms lose further ground in banking software market
Friday, 28 May 2010
Mehdi Musharraf Bhuiyan
Local IT companies have failed to cash in on booming banking software market in the country, allowing their more prominent overseas rivals to rule the roost.
Banks bought software worth Tk500 million last year, according to industry estimate, but more than 90 percent of the automation was supplied by foreign companies, making the year one of the worst for local firms.
Local software houses said banks' use of Bangladesh-made software has been dropping drastically over the years, despite relentless drive from the central bank and other regulators to turn the tide.
Bangladesh Bank has repeatedly urged local banks to use country-made products while science and technology ministry made similar calls, highlighting the need for a home-grown software industry.
But industry says the requests have fallen on deaf ears as "deep-seated mindset problem" among bankers coupled with "kickbacks" by foreign firms have almost sent the local software developers out of the market.
"We are fighting some shadowy monsters to make meaningful entry into the local banking system," said SM Waesh, Executive Vice President of Flora Systems, a leading IT solution provider.
"Five years ago, all but two or three of the local banks were using local software. But now almost two-thirds of our banks have switched to foreign made solutions", he said.
Waesh said the mindset still remains the main problem standing on the way to sale of local software as foreign products are perceived as more reliable and efficient.
"It is well-entrenched among some local bankers that foreign software is far better than local ones. They pick up holes in our products, without any real ground," he said.
Anisur Rahman Khan of Leads Corporation Limited, another top local software solution provider, said the trend is "disturbing".
"Five years back, we used to serve 18 local banks as our customers. But now only six banks use our software while the rest of them have switched to foreign solutions", he added.
"What is even more worrying is that lately two government owned banks have also tied up with a foreign software vendor, so there are wide chance that other government banks would follow soon", he added.
According to industry insiders, it cost as high as nine to fifteen times to install a foreign software solution. Maintenance of local products are also cheaper and easier.
They said minimum installation cost of foreign software could be well above Tk 300 million while installation of locally-developed solution requires only around Tk 40 million.
Waesh said although banks face difficulties in adapting foreign software to local practices, their managements still feel secure as these solutions are tested, accepted and developed based on better configuration.
He said over the years local banking software has gained in strength, narrowing the gap with their foreign rivals in areas such as customer centric database, open platform, high volume of transaction, value-added services, telebanking and SMS banking.
Top IT experts in local banks, however, defended foreign solutions, saying the money they invest ultimately yield better return.
"With the state of the art software we are using, almost 25 to 30 percent of the cost of manpower cost could be reduced", said Shamsur Rahman Choudhury, IT Head of Exim Bank Limited.
Exim and five other local private banks are using Temenos T24 - a software developed by a Swiss company.
"I also feel that there should be a homegrown software industry. Buy unfortunately local solutions still can't match the standard of foreign software. The gap is huge and, in some cases, is growing," he said.
Experts pointed that the entry of global players into the scene have also resulted in increasing competition at local stage which boosted efficiency level of domestic vendors.
"Years back when the foreign companies first entered the market, the local software were nowhere near their quality," said S M Mainuddin Chowdhury, Senior Executive Vice President of Southeast Bank Limited.
"But in recent months, some Bangladeshi companies have come out with better functionalities and integration. I think local banks should look to them as more viable but less expensive option", he added.
Local IT companies have failed to cash in on booming banking software market in the country, allowing their more prominent overseas rivals to rule the roost.
Banks bought software worth Tk500 million last year, according to industry estimate, but more than 90 percent of the automation was supplied by foreign companies, making the year one of the worst for local firms.
Local software houses said banks' use of Bangladesh-made software has been dropping drastically over the years, despite relentless drive from the central bank and other regulators to turn the tide.
Bangladesh Bank has repeatedly urged local banks to use country-made products while science and technology ministry made similar calls, highlighting the need for a home-grown software industry.
But industry says the requests have fallen on deaf ears as "deep-seated mindset problem" among bankers coupled with "kickbacks" by foreign firms have almost sent the local software developers out of the market.
"We are fighting some shadowy monsters to make meaningful entry into the local banking system," said SM Waesh, Executive Vice President of Flora Systems, a leading IT solution provider.
"Five years ago, all but two or three of the local banks were using local software. But now almost two-thirds of our banks have switched to foreign made solutions", he said.
Waesh said the mindset still remains the main problem standing on the way to sale of local software as foreign products are perceived as more reliable and efficient.
"It is well-entrenched among some local bankers that foreign software is far better than local ones. They pick up holes in our products, without any real ground," he said.
Anisur Rahman Khan of Leads Corporation Limited, another top local software solution provider, said the trend is "disturbing".
"Five years back, we used to serve 18 local banks as our customers. But now only six banks use our software while the rest of them have switched to foreign solutions", he added.
"What is even more worrying is that lately two government owned banks have also tied up with a foreign software vendor, so there are wide chance that other government banks would follow soon", he added.
According to industry insiders, it cost as high as nine to fifteen times to install a foreign software solution. Maintenance of local products are also cheaper and easier.
They said minimum installation cost of foreign software could be well above Tk 300 million while installation of locally-developed solution requires only around Tk 40 million.
Waesh said although banks face difficulties in adapting foreign software to local practices, their managements still feel secure as these solutions are tested, accepted and developed based on better configuration.
He said over the years local banking software has gained in strength, narrowing the gap with their foreign rivals in areas such as customer centric database, open platform, high volume of transaction, value-added services, telebanking and SMS banking.
Top IT experts in local banks, however, defended foreign solutions, saying the money they invest ultimately yield better return.
"With the state of the art software we are using, almost 25 to 30 percent of the cost of manpower cost could be reduced", said Shamsur Rahman Choudhury, IT Head of Exim Bank Limited.
Exim and five other local private banks are using Temenos T24 - a software developed by a Swiss company.
"I also feel that there should be a homegrown software industry. Buy unfortunately local solutions still can't match the standard of foreign software. The gap is huge and, in some cases, is growing," he said.
Experts pointed that the entry of global players into the scene have also resulted in increasing competition at local stage which boosted efficiency level of domestic vendors.
"Years back when the foreign companies first entered the market, the local software were nowhere near their quality," said S M Mainuddin Chowdhury, Senior Executive Vice President of Southeast Bank Limited.
"But in recent months, some Bangladeshi companies have come out with better functionalities and integration. I think local banks should look to them as more viable but less expensive option", he added.