The Sri Lankan IT-BPM Industry
Sri Lanka is emerging as a global IT-BPM destination of choice in number of key focus domain areas. Sri Lanka is ranked among the Top 50 Global Outsourcing destinations by AT Kearney and ranked among Top 20 Emerging Cities by Global Services Magazine. Sri Lanka has won the ‘outsourcing destination of the year’ accolade awarded by the National Outsourcing Association UK successively in 2013 and 2014.
The growing IT-BPM industry in Colombo offers a unique advantage for Small and Medium Enterprises (SME) to enjoy premium access to a high quality talent pool, which is becoming increasingly challenging in large established destinations such as India and China. The environment is also highly conducive for establishing high-in-demand niche competency centers out of competition for even larger global services companies.
The national level competency development programs focus on building Sri Lanka as a Center of Excellence (COE) for key focus domain areas. Software services sector focus on Telecommunication, Banking Financial Services and Insurance (BFSI) and Software Testing. The BPM sector focus on Financial & Accounting services, Investment research, Engineering services and UK based Legal services. The IT-BPM industry has been identified as a thrust industry by the government. Recognizing the potential of the industry, the government has taken number of positive steps by providing fiscal and other incentives and concessions to fast track the development of the sector.
Earnings from exports of IT-BPM sector have shown a steady upward trend during the past decade, and the 2014 IT-BPM exports have reached an estimated $850 million. The industry has set a target of $ 1bn in export revenue from IT-BPM sector by 2016.
There are over 300 IT and BPM companies that operate in Sri Lanka, mostly small and medium companies and few large global players. Among the several leading global IT-BPM companies operating in Sri Lanka include CMA-CGM, HSBC, WNS Global Services, Aviva, Microsoft, Industrial & Financial Systems (IFS), Copal Amba, RR Donnelley, Quatrro, Virtusa, Pearson, Valista, Millennium Information Technology and Innodata Isogen.
Colombo offers a rapidly growing niche workforce which is low cost, highly adaptable, English speaking and loyal. Currently, over 80,000 are employed in the IT and BPM industry in Colombo and the workforce is growing at over 20% year-on-year. The workforce is stable with very low attrition rates ranging from 10-15%.
Colombo is comparatively cost competitive and has a lower upward wage pressure than many established global sourcing destinations. A recent World Bank study revealed that the country’s labor costs ranked the lowest, in comparison to many other outsourcing destinations. The total cost per associate can be as much as 30% lower in many cases.
Sri Lanka has an established norm of early entry of individuals to the workforce soon after college. Many follow short diploma’s and certification programs which allow people to get in to the workforce early. The well developed work-study approach allows people to work and study at the same time. This result in dramatically low entry level wages compared to the traditional practices of hiring graduates.
Sri Lankans are noticeably friendly, highly productive, creative, and adapt very fast to different cultures and environments. This results in easy integration to operating units of other counties. The primary business language in Colombo is English with a high level of fluency.
Schooling up to secondary level is free and widespread, leading to the country’s high 91% literacy rate. Graduate and Postgraduate education is provided by the 15 state universities and numerous private universities and educational institutions, many of which award degrees from international universities.
With many incentives by the government, Sri Lanka is attracting leading foreign universities and many private investments in education. Students can study for degrees from leading global universities such as Monash, Curtin, Staffordshire, Manchester Metropolitan and many other universities from UK, Australia, USA and India while in Sri Lanka. Sri Lanka is also becoming an education hub for foreign students from neighboring countries.
With the national focus on niche competencies, Sri Lanka is aiming to become a center of excellence for several key sectors. Among the focused vertical sectors, Financial & Accounting services sector has shown a notable growth. Colombo now has the world’s largest pool of UK qualified English speaking accounting professionals outside UK itself. Many global companies have chosen to set up their niche COEs in Sri Lanka. Few notable among them include Accounting and UK Legal Services Center of WNS (NYSE:WNS), Investment Research Center of Copal Amba, PEGA & Testing Competency Centers of Virtusa (NASDAQ: VRTU), Accounting Process Outsourcing Center of Quatrro, UK Banking Center for HSBC and Finance & Accounting Center for Aviva.
Business Climate & Investment Incentives
Sri Lanka has an open market economy and is the first country in South Asia to liberalize its economy. Many global companies have been operating in Sri Lanka for decades. Chevron, General Electric, Citigroup, Hewlett-Packard, Microsoft, Pfizer, Intel, RedHat, Saatchi & Saatchi, IBM, 3M, Sara Lee Courtaulds, Unilever, British American Tobacco, Smith Kline Beecham, TCS, Indian Oil Corporation, NTT, Telecom Malaysia, WIPRO; are few global companies among them.
The Sri Lankan economy has proved to be resilient with the Central Bank of Sri Lanka projecting a growth rate of 7% in 2008 – one of the highest rates in decades. Sri Lankan government has identified the IT-BPM sector as a priority growth sector for economic development and provides many incentives to promote investments. In 2007, the country attracted the highest ever FDI of US$700m.
Tax holidays range from 5-12 years. In addition, a concessionary rate of income tax of 15% up to a maximum period of 20 years is also extended after the tax holiday period. Government also provides special assistance on real estate acquisition based on investment and employment generation potential.
Government also provides substantial cash grants for companies in the IT-BPM sector to support the business development and encourage investments. Grants are provided for Training, Consulting expertise, Marketing, Quality enhancements (CMMi, COPC, ISO etc.) and for a host of other developmental activities.
Sri Lanka has an independent judiciary and follows the British Commercial Law principles and practices in its legal system. Sri Lanka is a signatory to international treaties on Intellectual property rights such as the Berne Convention and WTO/TRIPS and adopted a comprehensive IP regime [Act No. 36 of 2003]. Sri Lanka also enacted an Electronics Transactions Act, Computer Crimes Act and is a signatory to the latest UN e-contracting convention. A Data Protection Code of Practice is also under preparation.
Tier 1 Infrastructure with a Tier 2 Cost Structure
Sri Lanka has eight telecom operators and is connected to the world with three international submarine cables providing ample redundancy. Broadband, Leased-line and Satellite connectivity are widely available.
Sri Lanka is among the first South Asian counties to establish a 3G network. The Telecom Regulatory Commission also provides special access facilities to IT and BPM companies enabling easy import of equipment and commissioning of international connectively.
Colombo has a well established road network with a quality supply of power, modern office facilities and a well developed set of support infrastructure services.
There are over 140 flights per week to most cities in India. Most Indian cities are less than 2 hours away from Sri Lanka. The modern international airport welcomes more than 20 international airlines with direct flights to many worldwide destinations weekly.
Living and Working in Sri Lanka
Sri Lanka offers ample recreational facilities within just 2 to 3 hours of driving from Colombo. Exquisite beaches, wild life sanctuaries, cultural heritage sites dating back to 500 B.C., beautiful hill country views, surfing, water sports, and exciting night life makes Sri Lanka a truly a tropical paradise to live and work in. Mixing business and pleasure has never been this easy for the discerning expatriate professionals or to the frequent business traveler.