Sri Lankan IT BPO Industry Grew At 23% Even During The War Time- Madu Ratnayake General Secretary, SLASSCOM

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

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% 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. 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 of on a significant growth trajectory. In fact right now, Sri Lanka must be the country with the highest growth potential in Asia. AT Kearney Global Location Services Index is a well known index of where a country stand in terms of its attractiveness for IT and BPO services. In 2007 Sri Lankan was ranked 29th on this index and in 2009 the ranking has significantly jumped to 16th. This was also done “before” the war ended, so in the 2011 index this will further climb up. Only one or two other counties had 13 points jump in the AT Kearney Global Location Services Index during 2009. This is a great testament to the potential.

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 21million 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 of 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 Centers of Excellence where we will be able to command a globally lead position. Mobile and Telco Engineering, Software Testing,

Travel and Leisure sector are the core verticals Sri Lanka focus on. So, city Center of Excellence is one of the USP. We are actively working to bring in leading global players, international conferences in these verticals to Sri Lanka 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 earlier now look at this as an option to reduce costs, due to the global slowdown. We see an increase number of new SMEs are looking to take advantage of offshoring. Sri Lanka is an ideal place for an SME to outsource it’s services or for an SME who is looking to set up a small BPO or a R&D Center. 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% for IT and BPO). In other well developed markets IT attrition is as high as 20-23% and BPO attrition can go as high as 40%. 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 centers in Sri Lanka. For example, if you are building a global sourcing center for SAP skills, which is a high cost investment, if the center is set up in Sri Lanka, your chances of loosing people will be very very limited as not many other players will be in the same space. Many companies have taken advantage of this and build their niche competency centers in Sri Lanka out of harm’s way.

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

We don’t intent 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 centers 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 the seven key areas we are focusing on:

1. 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 has been doing number of initiatives to build partnerships with companies and industry body’s in Europe to help bring our value proposition to European SMEs.
In fact large number of our business are out of Europe and SME based. Board of Investment, Export Development Board and Information Communication Technology Agency (ICTA) of the government is partnering us in these efforts.

2. 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.

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

4. 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 which is commonly not available in the other countries in the region. Our incentive schemes are also very attractive with 100% FDI permitted and with 0% tax holidays for extended periods of time for IT-BPO projects.

5. 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 us to execute these fast.
Government also has given grants under a world bank project to help train people. All most all HR managers of IT BPO companies gather under one focus to share best practices and address challenges.

6. 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 cost 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.

7. 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 fatter 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 build 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% during the war time. We never had any company shutting down even for a day due to a terrorist activity. Our western offices had more closures due to snow storms J. During this time we had Sri Lankan Diaspora mainly investing in the country as they had relationships with the country and had a better understanding of what was going on, on 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.

What do you think are the immediate challenges?

Our immediate challenge is to overcome the negative perception which were build over many years about the country risk. We need to work hard to help our potential investors and potential clients understand that Sri Lanka is a great destination for outsourcing. Some of the softer factors such as, friendly nature of our people, great cultural adoptability, attractive tourist destinations and quality of life offers a wonderful experience. Many clients who come to visit Sri Lanka fall in love with the country immediately. Our challenge is to get them to come!

About Madu Ratnayake

Madu Ratnayake, heads Global Quality and Sri Lanka Center for Virtusa. Madu has over 14 years of experience in global IT service delivery, quality and operations management. He is a core member of the Management Team at Virtusa from its inception and plays a number of leadership roles for Virtusa in multiple areas.

Madu is an active industry leader and represents the IT industry in a number of forums. He is the General Secretary of SLASSCOM, the national association of the IT/BPO Industry in Sri Lanka. He also plays an advisory role in a number of government forums and represents the IT industry on a number of Boards of leading Universities. Madu is also a board member of the Sarvodaya Fusion Organization, which is the ICT for Development arm of Sarvodaya.

Madu is a Charted Engineer, holds an MBA from The Postgraduate Institute of Management (PIM) and an Honors Degree in Software Engineering from City University, London.