Sri Lanka’s ITES Sector: People are still the problem

July 4, 2011 (LBO) – In post-war Sri Lanka the hopes placed on IT enabled services (made up of software exports and business process outsourcing (BPO) are second only to those placed on tourism.

Not only are these service industries seen as quick wins in terms of immediate creation of jobs and exports, they are also seen as the anchors of Sri Lanka’s medium-term growth.
From revenues of USD 392 million (made up of 294 million in software sales and 98 million in BPO revenues) in 2010, the government and industry hope to reach total revenues of USD 1,000 million by 2015. By 2020, ITES is expected to be the highest export earner for Sri Lanka.

The good news is not limited to earnings. According to a yet unpublished survey conducted for the ICT Agency, jobs are growing too. In 2010, 62,000 persons were said to have been employed in the ICT sector, compared to just over 30,000 in 2006.

If 62,000 people produce USD 392 million in revenues, it is not unreasonable to assume that over 100,000 people will be needed to produce USD 1,000 million in 2015. Does Sri Lanka have the people? Not just people, but skilled people?

Cheap is not enough

The Global Services Location Index produced every two years by the consulting firm, AT Kearney, is often cited by the ICT Agency and by SLASSCOM, the industry organization, suggesting that it is a valid indicator. The composite score is made of scores for financial attractiveness, people skills availability and business environment. Here is how Sri Lanka performed in 2009 and 2011 in relation to its major Asian competitors:

Source: http://www.atkearney.com/index.php/Publications/global-services-location-index-gsli.html

Sri Lanka is now cheaper than India and the Philippines and has shown the largest improvement.

Source: http://www.atkearney.com/index.php/Publications/global-services-location-index-gsli.html#

Vietnam has held steady whole everyone else saw their scores decline. Sri Lanka’s decline was modest compared to India’s.

Source: http://www.atkearney.com/index.php/Publications/global-services-location-index-gsli.html#

Here, everyone else increases performance while Sri Lanka is static.

What is the end result? Sri Lanka drops from 16th place to 21st and drops out of the Top 20.

Making the target

It is true that Sri Lanka has advanced from 29th place in 2007. It is also true that Sri Lanka has fallen back five places from 16th place in 2009 to 21st in 2011. It has become cheaper, but cheap is not enough. Because it could not improve the vital people skills availability score, the gap between Sri Lanka and the key Asian competitors has widened even further.

What does this portend for the USD 1 billion target sought to be achieved in four years? What does the ICT Agency plan to do about improving the quality and quantity of potential employees for the ITES sector?

Rohan Samarajiva heads LirneAsia, a regional think tank. He was also a former telecoms regulator in Sri Lanka. To read previous columns go to LBOs main navigation panel and click on the ‘Choices’ category.