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Sri Lanka ranked 16th IT/BPO destination

Slasscom takes initiatives for further growth

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Sri Lanka is relatively a new kid on the block in the IT BPO industry. BPO Voice had a detailed conversation with General Secretary, SLASSCOM Madu Ratnayake on various issues including the post conflict business scenario, upcoming challenges and various initiatives taken by them. Here are the excerpts:

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Tell us something about the Sri Lankan IT BPO industry?

Sri Lanka has a vibrant young IT-BPO industry which is poised for rapid growth. It is currently about 250 million dollars and grew at over 23 percent YoY prior to the global recession. This level of growth was achieved while a significant negative risk perception prevalent due to the LTTE terrorist activities in the north.


Madu Ratnayake

We have sound basics in place for growth. Now that the war is behind us, as the global economy bounces back, Sri Lanka will take off on a significant growth trajectory. In fact, Sri Lanka must be the country with the highest growth potential in Asia.

AT Kearney Global Location Services Index is a well known index, which indicates where a country stands in terms of its attractiveness as an IT and BPO destination. In 2007 Sri Lanka was ranked 29th and in 2009 the ranking has significantly jumped to 16th. The 2009 ranking was done “before” the war ended, so in the 2011 index this will further climb up. Only one or two other countries had 13 points jump in the AT Kearney Global Location Services Index during 2009. This is a great testament to the potential of Sri Lanka as an IT/BPO destination.

What is the USP of Sri Lanka as an outsourcing destination?

We don’t have millions of people like India or China. Sri Lanka is a small country with 21 million people. So our focus clearly is on few key niche areas.

First is Finance and Accounting (FAO) BPO. Sri Lanka has the second largest pool of UK qualified accounting professionals outside the UK.

This makes it very attractive for BPOs who are looking for FAO. We have some early movers like WNS, RR Donnelly, Amba Research, HSBC etc. taking advantage of this.

There are several other verticals we are focusing on to build Centres of Excellence where we will be able to command a lead position globally. Mobile and Telco Engineering, Software Testing, Travel and Leisure sector are the core verticals Sri Lanka is focusing on. So, city Centre of Excellence is one of the USP.

We are actively working to bring in leading global players, international conferences in these verticals to create awareness.

Sri Lanka also offers a unique advantage for SMEs who are looking to outsource. In a larger market like India, SMEs will not have the right level of service and attention. Our market being small, matches very well with the needs of the SME sector. SMEs are also a growth sector for offshoring.

Many SMEs who have not looked at outsourcing, now look at offshoring as an option to reduce costs, due to the global slowdown. We see an increasing number of


IT/BPO industry

new SMEs are looking to take advantage of offshoring.

Sri Lanka is an ideal place for an SME to outsource their services or for an SME who is looking to set up a small BPO or a R and D Centre. SMEs will have premium quality resources at affordable prices and above all a superior service.

Third area that Sri Lanka has an advantage is its low attrition (typically 10-12 percent for IT and BPO). In other well developed markets IT attrition is as high as 20-23 percent and BPO attrition can go as high as 40 percent.

Even the larger global players such as Infosys, Cognizant, IBM etc can take advantage of this low attrition environment by locating their high investment competency centres in Sri Lanka. For example, if you are building a global sourcing center for SAP skills, which is a high cost investment, if the centre is set up in Sri Lanka, your chances of losing people will be limited as not many other players will be in the same space. Many companies have taken advantage of this and built their niche competency centres in Sri Lanka out of harm’s way.

Your nearest neighbour is your biggest competitor. How do you plan to edge them out?

We don’t intend to compete with our neighbor on general outsourcing. In fact we look at them as a great market and a source of investment in to Sri Lanka. Many Indian companies can set up their centres in Sri Lanka as they look to move out to Tier II cities to deal with congestion and rising wages. Sri Lanka offers a Tier I city infrastructure with a Tier II cost base and a quality of life which is outstanding.

Also our focus is niche. In our selected areas we will lead globally. FAO is a great example of that. Colombo is clearly emerging as a one of the top destination for FAO outsourcing. Global Services Magazine rates Colombo among the 15 emerging cities for FAO.

There is also a lot for us to learn from what India and NASSCOM has done. We have great relationships with India and we would continue to collaborate and support each other.

What are the different initiatives that SLASSCOM has taken?

SLASSCOM has taken number of key initiatives to accelerate the growth of the industry in a very short time frame. Almost all the companies in Sri Lanka have come under the SLASSCOM umbrella to drive the industry. Also the war just ending has created an enormous interest and a national pride among our companies to come together to build the country.

There are seven key areas we are focusing on:

* Global Trade forum focus on positioning Sri Lanka in the global markets for attracting business as well as companies in to Sri Lanka. We are currently focused on the European SME sector and we have been doing number of initiatives to build partnerships with companies and industry associations in Europe to help bring our value proposition to European SMEs. In fact large numbers of our business are focused on Europe and SME sector. Board of Investment, Export Development Board and Information Communication Technology Agency (ICTA) of the government is partnering us in these efforts.

* Domestic Trade forum is focused on increasing the IT BPO usage in Sri Lanka to improve competitiveness of our businesses thereby creating opportunities for service companies to serve the local market.

* Capacity forum focus on building human resource capacity. Large scale initiatives are under way in collaboration with the government to train more professionals in our key niche focus areas.

* Policy forum dialog with the government continually to create a more attractive policy and investment climate to attract new investment and to help existing companies to grow. We have some innovative schemes such as lower PAYE for people employed in IT-BPO companies; these schemes are not commonly available in the other countries in the region. Our incentive schemes are also very attractive with 100 percent FDI permitted and with 0 percent tax holidays for extended periods of time for IT-BPO projects.

* HR forum focus on building strong world class employees practices among our companies. IT BPO being highly people driven, to be innovative, we need to ensure our HR practices are world class. We don’t drive sweat shops. If you visit many of the companies you will see the HR practices and culture of the companies are very much like our western counterparts.

We being a small country help to get things done fast. Government also has given grants under a World Bank project to help train people. Almost all HR managers of IT BPO companies gather under one focus to share best practices and address challenges.

* Quality forum focus on helping companies to drive improvement in quality and productivity. We have grant programs to help companies to do CMMI, ISO, SixSigma, COCP and other quality certifications. The costs of achieving the certifications are subsidized by a government grant program. Information Communication Technology Agency (ICTA) of the government is working very closely with the industry to support these programs by administering the grants.

* Entrepreneurship and Innovation forum focus on building entrepreneurship among the youth. Our aspiration is to create a Silicon Valley type environment which will be home to many tech startups.

The world now being a truly flatter place, there is no reason why the next Google or Facebook can come out of Sri Lanka. With the shifting of world’s consumer base to Asia, we will be able to innovate more globally inclusive manner compared to our western counterparts, who many not have the same level of understanding of this part of the world.

We are working with universities to integrate business and entrepreneurship in to the curriculum; we are doing workshops and competitions to inspire graduate entrepreneurs. The current global slowdown is ideal for us to focus on building entrepreneurship. Cost of experimenting is coming down and we see lot of enthusiasm from new techies to start businesses. If you look at last year Google Summer of Code competition, Sri Lanka tops the list globally by a large factor.

We have built strong focus on Open Source which is helping our students to work with the leading minds across the world.

They are innovating neck to neck with some of the veterans around the world. This is our future and long term focus. We clearly want to be an innovator of value and serve the markets globally.

How much business used to get affected while the conflict was on? Now that it’s over how much do you stand to gain? What other measures is the Govt. taking to ensure peaceful and conducive business environment.

War was a real dampener on the industry. The negative perception that was created about Sri Lanka has been a major barrier for us.

It was very difficult to fight against that kind of global media attention on war, although this was only happening in the north of the country.

If you watch news any time during last year, it would be hard for you to not to think Sri Lanka is a war zone.

However the reality was something quite different, we had an IT BPO industry which grew at 23 percent during the war time. We never had any company shutting down even for a day due to a terrorist activity. In fact our western offices had more closures due to snow storms. During this time we mainly had Sri Lankan Diaspora investing in the country. They had relationships and a better understanding of the reality on the ground.

These companies now will have an early mover advantage as the industry begin to grow. This has also given us a strong focus on Business Continuity Planning (BCP) which will serve us better any time as we are lot more prepared to address any global issue. So as the global economy picks up we are now in a great place to grow.

What led to the initiative of Graduate Enterprise Challenge? Tell us more about it.

Graduate Enterprise Challenge is one initiative of our Entrepreneurship and Innovation forum. We partnered with the British Council in this program.

We had graduates from all universities competing on a business plan competition related to tech businesses.

The winners went on a residential camp on polishing up their business plans and then given the opportunity to pitch for investors SLASSCOM brought together. Senior managers from SLASSCOM member companies are also assigned to mentor the new start ups.

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