Sri Lanka realizing potential as an offshore destination

Ravi LADDUWAHETTY

A presentation themed - Sri Lanka as a Finance and Accounting destination was organized by the Sri Lanka Association of Software and Service Companies (SLASSCOM).

It was delivered by Hayleys Business Solutions Managing Director Dr Arul Sivagananathan.

Dr Sivagananathan was previously the Senior Vice President overlooking the Sri Lankan and Indian Finance and Accounting Operations of WNS Global Services, a BPO company listed on the NewYork Stock Exchange.

A pioneer in setting up end-to-end finance and accounting outsourcing in Sri Lanka, Dr Sivagananathan set up the first shared services in WNS for a global multinational company, consolidating over 12 locations across multiple countries in to one centre in India. He has built several centres of excellence in Finance and Accounting in India and Sri Lanka. A qualified Engineer from the University of London and a member of the Institute of Engineers - Sri Lanka, he commenced his professional career as a Civil Engineer, leading the World Trade Centre Project in Sri Lanka as the Project Engineer from inception to completion.

As post war Sri Lanka makes efforts in the international arena to establish the country as the next Singapore of South Asia, along with it comes high expectations. Traditionally Sri Lanka's export income was earned through tea, rubber and coconut until apparel and tourism became big earners. With the end of the war, tourism seems set to be a bigger foreign currency earner than ever before.

Another potential high foreign currency earner is BPO. The global outsourcing industry was worth around US$ 450 billion in 2010 and it is expected to grow by 10-15 percent year on year. Not surprisingly, the giant share was taken by India, Philippines and China. Sri Lanka managed to capture just around 0.1 percent of this business, which brought around US$ 450 million in 2010.

In a recently published report, Sri Lanka was ranked ninth in the destination for outsourcing. So what is it that we need to do to get to the top of the list? Chances are that Sri Lanka will not be able to make it to the top but we can definitely be one of the top five offshore-outsourcing destinations.

If we are to achieve this then we need to change our mind set from being an agricultural and manufacturing to a service orientated country.

There are many reasons why we will never make it to the top. The key reasons being non-availability of English educated work force in huge numbers and lack of infrastructure, in the scale in which it is available in places like India, China and South America. However, Sri Lanka is best placed to be a niche player such as in finance and accounting, legal, analytics and other high-end work. In this context the Sri Lanka Government has taken many steps to help the BPO industry by announcing year 2009 and 2010 as the year of IT and English.

They have also given special tax concessions for employees of IT enabled services (ITeS) sector (which BPO comes under).

They have formed SLASSCOM as a regulatory body and have been actively marketing Sri Lanka as a BPO destination.

However there is lot more work to be done locally and globally to claim our spot in the top five destination table. We need to have state-of-the-art building and infrastructure along with lower telecommunication backbone.

In India, everyday a new city is born, not just buildings but a whole zone with all the required modern amenities and transport. The difference in these state-of-the-art buildings are that they are especially built for the BPO industry to work 24x7, with adequate back-up systems, plug and play internal networks, built in canteen, gym, recreation areas and training centres.

Above all, low cost apartments and housing for the thousands of employees expected to work in these buildings are all in the vicinity. In Sri Lanka the industry requires quick turnaround of the lack of space or we will lose the business to the emerging countries which are already steps ahead of us.

If the technology and telecommunication is provided at low cost then like the apparel industry, this industry can also be easily taken to the rest of Sri Lanka to places like, Hambantota, Kandy, Galle, Anuradhapura and Jaffna.

With technology advancements like cloud-sourcing and ERP solutions, sky is the limit for this industry. We will need to invest more in subsidised training and development but organisations needs to be mindful when poaching trained staff or else we will lose the labour arbitrage advantage that we currently enjoy compared to India.

Sri Lanka's strategy should be to capture the untapped market of the developed countries. This can be done by tapping the SME (Small-Medium Enterprises) sector globally and the multinationals which has already outsourced to India and other destinations.

The second approach can be to take on sub-sourcing ie. taking on work from other BPO companies in India and Philippines that are already outsourced. This can be done because Sri Lanka will be able to do the same work at a lower cost and better quality. However, personally I believe Sri Lanka should concentrate purely on high-end, value adding, niche work than mass transactional work which is done by China and India due to their size and availability of resources.

Sri Lanka has abundance of qualified accountants and hence concentrating on Finance and Accounting or analytics work would be the best strategy.

To do this, the government can help the industry take off like Philippines did by forming a ministry to support the ITeS industry. They should provide special tax incentives for BPO industry and help promote the industry as a career option.

The government itself can form a shared service centre for all its public sector corporations in Hambantota providing employment and improving the services to the public.

If the BPO industry is to succeed in Sri Lanka and become a billion dollar revenue earner in the next few years, there is greater emphasis on transforming our thinking than just following the other destinations like India, China and Philippines. We have a lot of work to do and if we don't get our act together, we will miss the bus.