ICT

BPO is very much related to IT

Yasas V. Abeywickrama

Sri Lanka has been increasingly recognized as an attractive outsourcing destination. In 2005 HSBC established its captive call centre in Colombo and that was a milestone for this sector. By 2007, major BPO destination ratings such as AT Kearney had featured Sri Lanka top of their ratings. The environment is also highly conducive for establishment and growth of the outsourcing sector.

What is Business Process Outsourcing (BPO)

Outsourcing is to contract out an organization's operations and responsibilities to a third party through an agreement. If Business Processes are outsourced, then it is termed BPO.

When organizations outsource knowledge intensive business processes that require specialized domain expertise (rather than process expertise) and is called as Knowledge Process Outsourcing (KPOs).

BPO is very much related to IT - Information Technology. Business related processes cannot be outsourced to far away places if there is no IT. Computers, internet, networking and communication technologies play a key role when outsourcing business activities related to accounting, data processing, finance, customer service etc.

In BPOs, it is standard business processes that are being outsourced to another party. This could be standard data entry, financial data entry, basics financial accounts maintenance, medical transcriptions, call centres.

However, in the KPO scenario, it is not about standard business processes. It is about things like outsourcing the documentation of a market research report or asking a third party to do an analysis of your organization's financial accounts for the last five years. Now, these are not standard things.

Sri Lanka's Position

They are specialized, they are not repetitive and requires application of special knowledge. Hence they are knowledge based processes as opposed to standard business processes. At the last count (EDB Export Value Survey 2008) there were around 41 BPO/KPO companies that were operating in Sri Lanka, mostly small and medium companies and few large global players. Among the several leading global BPO/KPO companies operating in Sri Lanka were HSBC UK banking centre, WNS UK legal services centre, Aviva Finance and Accounting Centre, Industrial and Financial Systems (IFS), Amba Research, RR Donnelley, Aegis. In addition to those which were mentioned in the report there are many other BPO companies that operate below the radar and almost all of them are in the small to medium category.

Earnings from exports of IT-BPO sector have shown a steady upward trend during the past decade, and the 2006 BPO exports were at US $ 173 million and had grown close to US $ 400 million by 2010.

Given the circumstances prevailing in the past few years where global economy had slowed down, the BPO sector is one industry which was resilient to the adverse conditions and actually grew in terms of employment as well as export earnings. When recession hits, western companies are pressured to lower costs hence outsourcing grows even faster and deeper during such difficult times.

Currently, close to 15,000 are employed in the BPO industry in Sri Lanka. According to SLASSCOM (The IT/BPO industry chamber) during the past 5 year period it had grown at 26% Year-on-Year. Main services currently provided in Sri Lanka include back office data processing and administrative work, voice related outsourcing, medical data transcription, insurance claims processing, business integration, accounting and tax services, legal data base processing and e-commerce services. Legal services outsourcing is gaining increased prominence while for finance and accounting sector the potential remains intact. A recent PricewaterhouseCoopers survey has highlighted the fact that Sri Lanka and the Philippines together provide up to 20% of the total outsourced legal services worldwide.

Most of the work so far has been outsourced from USA and UK, but now other countries in Europe as well as the Australian market is picking up. In July last year, the SLASSCOM signed a MoU with Australian Information Industry Association (AIIA), which will strengthen relationships to bring more work from this segment.

The best thing with this sector from an economical perspective is the fact that it can bring foreign revenue to Sri Lanka. Even today, it stands as the fifth highest foreign income earner for Sri Lanka.

As the world continues to move towards a knowledge based economy, the potential of this sector is increasing and we need to capitalize on this trend. From a career perspective, it offers well paying salaries, professional working environments, international work exposure and a lift in the life style.

Finance, Accounting BPO sector

Large companies now tend to outsource their accounting functions to more specialized providers, in most cases at lower cost destinations. The idea is to concentrate on your core business and get routine standard work out of the way.

It could also mean that you get better accounting services as the BPO provider may be specialized in accounting while it may not be your area of strength.

This is an area where Sri Lanka is already doing well. Financial and Accounting services outsourcing sector has had a significant growth in our economy. Colombo now has the world's largest pool of UK qualified English speaking accounting professionals outside the UK itself, mainly through CIMA.

Many global companies have chosen to set up their niche centres relating to this area in Sri Lanka such as Accounting and UK Legal Services Centre of WNS and Investment Research Centre of Amba Research.

If we take Finance and Accounting BPOs, they provide end-to-end finance and accounting processes such as Purchase to Pay Cycle, Order to Cash Cycle, Account to Report, Banking and Treasury Cycle, Fixed Assets reporting, General Account Cycle and Management Reporting Cycle.

There are financial analysis, research and reporting related work also at the higher end of the BPO landscape. Companies such as Amba Research are more geared towards this end.

The Future

The BPO sector is here to stay and grow. In the new knowledge era, it is one of the best industries that a developing country like Sri Lanka could develop. Even during a recession it can sustain and can offer great careers to our young people while earning crucial foreign income. So, let's develop it together!

The Writer Yasas V. Abeywickrama is an entrepreneur, trainer, writer and speaker.