FAO sector industry report released:

Skills overtake low cost labour

Big change in outsourcing landscape:

SLASSCOM (Sri Lanka Association of Software and Services Association) has published an industry report on the FAO sector in Sri Lanka. The report is titled Sri Lanka Finance and Accounting Outsourcing Overview. Here are some of the in depth extracts from the report.

Rapid transformation is taking place in the global BPO market. It is accompanied by increased spending in BPO services. Most of the leading business companies of the world are adopting BPO as a strategic business solution. According to Business Insight the Global BPO market is forecasted reach $300b by the year 2011.

Finance and accounting and Human resources are expected to be the fastest growing service lines.

Scale advantages and availability of low cost labour are no longer the prime decisive factors in the global outsourcing landscape; rather it is the access to a skilled workforce. Upon reflection of its present capabilities, Sri Lanka has selected a downstream approach of focusing on selected areas of specialization that complement its inherent strengths; i.e the availability of a young and educated workforce specialized in niche service segments such as finance and accounting.

With this national focus on building niche competencies, Sri Lanka is emerging as a Center of Excellence (‘COE’) for verticals such as Finance and Accounting services. The attractiveness of this sector is underscored by the availability of a sizeable skilled workforce of finance and accounting professionals, Sri Lanka now has the second largest pool of CIMA trained students and members outside of the UK.

The aggregate pool of fully qualified accounting professionals in Sri Lanka (including accounting technicians) is estimated to be around 25,000. Sri Lanka is fast emerging as a top destination for Finance and Accounting Outsourcing (‘FAO’) services. Many global companies have chosen to set up their outsourcing operations in Sri Lanka.

A few notable among them include UK Accounting and Legal Services Center of WNS, Investment Research Center of Amba Research, UK Banking Center of HSBC, and Finance & Accounting Center of RR Donnelley. Mphasis, the fifth largest BPO operator in India, commenced its operation center in Colombo in August 2010.

Sri Lanka has been featured in a number of international studies as a promising destination for outsourcing services. Global consulting firm, AT Kearney has ranked Sri Lanka amongst the Top 20 outsourcing destinations in their Global Services Location Index Report. Between 2007 and 2009 the country’s ranking moved up 13 positions to number 16, showing a significant improvement in location attractiveness, backed by its potential for growth in a new post-conflict era of economic prosperity.

The climb in ranking was assisted by its low cost base despite the rising costs worldwide.

The report also highlighted that Sri Lanka’s advantages lie in its proximity to India, and availability of UK qualified Accounting and Finance professionals, which allowed the country to function as a backup to Indian outsourcing centres. The Global Services Location

Index analyzes the top 50 service locations worldwide against 43 measurements in three major categories: financial attractiveness, people skills and availability, and business environment.

Global Services Magazine together with Tholons, a US based boutique outsourcing consultancy and investment firm, in its survey of the top 50 emerging outsourcing cities, ranked Colombo at number 17 in its 2009 publication. As per the survey, the city’s geographical location,

Infrastructure facilities, direct access to the Indian market, high standards of the work force, open economy and various free trade agreements made it an attractive outsourcing destination.

The report also highlighted that the city is also well known for its finance and accounting knowledge process outsourcing services because of its high availability of UK qualified accountants. The Tholons rankings are based on the scale and quality of workforce, business catalyst, cost, infrastructure, risk profile and quality of life.

Outsourced investment research services firm - AMBA Research was ranked among the top three global vendors for financial services analytic and corporate finance categories in the 2009 Black Book of Outsourcing Survey carried out by a division of the Datamonitor Group. The survey is recognized as an independent industry standard for customer satisfaction in the global services industry,

Sri Lanka Association of Software and Service Companies (‘SLASSCOM’) is the leading industry body representing the IT & BPO industry in Sri Lanka. SLASSCOM provides much needed leadership and unified focus for the industry and plays the role of a strategic advisor to the Government on public policy and trade development. The association’s primary focus is to promote Sri Lanka as a niche global sourcing destination whilst enhancing the professional capacity of its member organisations.

Sri Lanka has a vibrant and young BPO industry. Prior to the global financial crisis, the industry grew at around 23 percent year-on-year (‘y-o-y’), even despite a significant negative risk perception that had been placed on the country. Now, in a post-conflict era of renewed economic prosperity and the recovering global economy, Sri Lanka is poised for a significant growth trajectory.

The FAO industry in Sri Lanka offers a wide range of services including basic processes such as accounting and book keeping, accounts production, receivables and payable administration, payroll processing, tax filing, financial reporting and management accounting, as well as high-end knowledge driven services such as financial analytic and investment research.

With this national focus on building niche competencies, Sri Lanka is emerging as a Centre of Excellence (‘COE’) for verticals such as Finance and Accounting services.

The attractiveness of this sector is underscored by the availability of a sizeable skilled workforce of finance and accounting professionals, Sri Lanka now has the second largest pool of CIMA trained students and members outside of the UK.

The aggregate pool of fully qualified accounting professionals in Sri Lanka (including accounting technicians) is estimated to be around 25,000. Sri Lanka is fast emerging as a top destination for Finance and Accounting Outsourcing (‘FAO’) services. Many global companies have chosen to set up their outsourcing operations in Sri Lanka.

A few notable among them include UK Accounting and Legal Services Centre of WNS, Investment Research Centre of Amba Research, UK Banking Centre of HSBC, and Finance and Accounting Centre of RR Donnelley. Mphasis, the 5th largest BPO operator in India, commenced its operation centre in Colombo in August 2010.

The FAO sector is dominated by a young and educated workforce. An estimated 68 percent of the present workforce comprise of employees below the age of 30, with 24 percent being between the ages of 18 - 24 years and 44 percent being between the ages of 25 - 30. Around 23 percent fell into the 30 - 40 year age bracket, while only nine percent exceeded 40 years of age (end-2009). Gender wise, male employees accounted for 48 percent of the total workforce, while females accounted for 52 percent (end-2009).

Average salary scales for entry level positions in basic F&A processes lie in the range of Rs 15,000 per month, going up to Rs 30,000 per month for senior grades, depending on experience and qualifications. Average salary scales for entry level positions in the higher-end knowledge driven services meanwhile, range from Rs 25,000 - 60,000 , rising up to Rs 120,000 for senior grades, commensurate with experience and qualifications.

The aggregate student population of the above five professional accounting bodies is estimated to be around 86,000 (end-2009), growing at a CAGR of approximately seven percent over the past five years, i.e over the period 2005 to 2009.