Sri Lanka “The rising Offshore Destination”

Sri Lanka is accelerating in to an emerging destination of choice for the ITO and BPM market. In the last fiscal year Sri Lanka was ranked 16th in A.T. Kearney’s Global Services Location Index (GSLI) 2014, ranking as an increasingly attractive offshoring destination. Sri Lanka’s capital city, Colombo has been recognized as a global center of excellence for Finance and Accounting, with Global Services Magazine ranking the city in the top 25 in the world.

Sri Lanka moves up five places in this year's index (2013:21st Vs 2014:16th), as it develops a successful but relatively unknown knowledge services industry. With a highly educated talent base and sophisticated technical skills, Sri Lanka-based firms are providing advanced services to clients such as Google, Nokia, JPMorgan, and the London Stock Exchange. Offerings extend beyond software development and transaction processing to offshore legal services, architectural drawings, and medical diagnostics. – (See more at: https://www.atkearney.com/research-studies/global-services-location-index/full-report)

The vision of the Sri Lankan Government is for the ITO/BPM industry is to become the top revenue earner for the country by 2022, with a target of US$5bn in export revenue and direct employment to increase to 200,000 and indirect to 150,000. Today, more than 300 IT and BPM companies have operations in Sri Lanka with more than 60,000 people earning more than US$400 million in exports.

Key Factors Influencing Sri Lanka as a popular offshoring Location

Education

  1. Government support for education in Sri Lanka is very high with 6.0 percent of GDP being spent on primary education.
  2. Sri Lanka has approximately 10,000 state schools, 23 universities with international degrees and agreements with other universities including Monash, Curtin, Staffordshire, Manchester, University of London and Metropolitan
  3. Sri Lanka has a 92 percent literacy rate, the highest in South Asia and the United Nations Human Development Index
  4. The education system is based on old-style UK GCSE “O” and “A” levels
  5. Sri Lanka produces 50,000 CIMA and ACCA qualified accountants and 70% of this pool is prepared for BPM work
  6. Strong career guidance, training and vocational studies
  7. The ICT Agency of Sri Lanka (ICTA) initiative “Nenasara” mobile library for digital content for villages was launched

Excellent Language Competences

  1. English is the primary language of higher education, the scientific community and the commercial sector.
  2. All graduates are fluent in English
  3. Sri Lankans offer a neutral English accent

Skilled Workforce

  1. Sri Lanka offers a rapidly growing skilled workforce. Sri Lanka’s 75,000 IT/ITES (2013) strong workforce is growing at a rate of 14.4% per annum
  2. 50,000 new accountants per annum. Colombo has the largest pool of UK certified accountants outside of the UK
  3. Sri Lanka produces 30,000 graduates per annum, many of whom have international exposure
  4. Sri Lanka enjoys a low attrition rate compared to other offshore destinations, at 7%
  5. Sri Lankans are noticeably friendly, highly productive, and creative and adapt very fast to different cultures and environments. This results in easy integration to operating units of other countries
  6. Heavy emphasis on size of workforce and size of existing IT/BPM industry in the country is an advantage with Sri Lankans holding IT or BPM jobs has almost doubled from 34,000 in 2006 to 63,000 in 2011 according to A.T. Kearney’s Global Services Location Index (GSLI) 2011 and National ICT Workforce Survey
  7. Sri Lanka Software Service Companies (SLASSCOM) launched “Future Careers” with high focus on Capacity building. The platform is focused on creating awareness among youth about the benefits of selecting IT or BPM as a career path
  8. “e-diriya” initiative aims at providing a basic computer knowledge to underprivileged students in the country

Financial Appeal

  1. Sri Lanka is a highly cost competitive destination and was ranked equal 4th in terms of financial attractiveness on A.T. Kearney’s Global Services Location Index (GSLI) 2009
  2. Sri Lanka has little wage appreciation unlike many established global sourcing destinations such as India. With wages ranging from US$60 to 1500 per month, a recent World Bank study revealed Sri Lanka’s total cost per associate/worker can be as much as 30 percent lower than other offshoring destinations
  3. Sri Lanka has an open market and was the first country in South Asia to liberalize its economy.
  4. Sri Lanka’s business environment is favorable to outsourcing, by allowing Total Foreign
  5. Ownership and no restrictions on repatriation of earnings. Safety of foreign investment is guaranteed by the constitution
  6. Tax holidays range from 5-12 years. In addition, a concessionary rate of income tax of 15 percent (up to a maximum of 20 years) is also extended after the tax holiday period.
  7. The Government provides special assistance on real estate acquisition, based on investment and employment generation potential
  8. Grants for training and marketing
  9. As of April 2011, the standard corporate income tax rate is 28% down from 35%

Government Provision

  1. The Sri Lankan government is one of the biggest catalysts for driving its outsourcing growth and has publicly shown its commitment by setting the target for ITO and BPM being the country’s largest revenue earner by 2022
  2. The government declared 2009 the year of English and Information Technology, with the goal of improving the knowledge of English and IT in young adults and school children to ensure they have the necessary skills to meet future outsourcing industry demands
  3. The government also provides substantial cash grants for companies in the ITO-BPM space to support business development such as: training, consulting expertise, marketing, quality enhancements
  4. The President of Sri Lanka is directly supervising Industry Capacity Building Program set up to boost the country’s ICT industry

Legal System

  • Sri Lanka has an independent judiciary system and follows the British Commercial Law principles and practices in its legal system, giving peace of mind to UK investors and outsourcers, as well as facilitating the setup of contracts
  • Sri Lanka is a signatory to international treaties on intellectual property rights such as the Berne Convention and WTO/TRIPS and adopted a comprehensive IP regime. Sri Lanka also enacted an Electronics Transactions Act, Computer Crimes Act and is a signatory to the latest UN e-contracting convention. A Data Protection Code of Practice is also under preparation
  • Sri Lanka has a strong enforcement unit which ensures that all regulations are fully adhered to
  • Sri Lanka is the second highest reduction worldwide in recorded software piracy over the past year
  • Infrastructure/Telecommunication

    1. Sri Lanka has eight telecom operators and is connected to the world with three international submarine cables providing ample redundancy. Broadband, Leased-line and Satellite connectivity are widely available
    2. Sri Lanka is among the first countries to establish a 4G network. The Telecom Regulatory Commission also provides special access facilities to IT and BPM companies enabling easy import of equipment
    3. Colombo has a well-established road network with a quality supply of power, modern office facilities and a well-developed set of support infrastructure services
    4. An IT park is being built over 17 acres of land at Katunayake, 18 miles north of Colombo and The Hambantota IT/BPM Park opened recently to provide 100,000 employment opportunities including over 40,000 seats in direct IT/BPM related jobs in the Southern Province
    5. An additional 110 acres have been earmarked for IT campuses at Biyagama
    6. Commercial grade real estate is very favorable, with rent ranging from $0.85 to $1.20 per month

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