A.T. Kearney identifies Sri Lanka as a top global outsourcing destination

By Cassandra Mascarenhas  

The ICT Agency of Sri Lanka understanding the importance of the knowledge services sector as a crucial and critical driver for economic prosperity in the country, commissioned global management-consulting firm A.T. Kearney to conduct a competitive benchmarking of the knowledge services sector in Sri Lanka and the findings from the report have identified the country as being a ‘hidden gem’ for outsourcing.

From left: A.T. Kearney Global Business Policy Council Fellow Simon Nihal Bell, ICTA Chairman Prof, P.W. Epasinghe, ICTA CEO Reshan Dewapura and A.T. Kearney Global Business Policy Council Manager John Gott – pic by Upul Abayasekara

It was identified that Sri Lanka offers a unique mix of extremely low costs, high quality educated English-speaking population and a business environment and infrastructure superior to most low-cost countries. The country is also among the safest lowest-risk emerging markets contrary to popular perception, scoring better than the UK on the business cost of terrorism index.

A.T. Kearney was selected to conduct this study through a competitive procurement process in which they came out on top. The study compared Sri Lanka with competing countries based on a set of criteria important to investors and customers when choosing locations for outsourcing of IT and other knowledge services. The objectives of the study were to conduct a benchmarking of Sri Lanka’s relative strengths, weaknesses and opportunities as a location for offshore IT/BPO and knowledge services.

The resulting report compiled through a series of interviews, secondary research and industry experience which will be published within the next couple of days, identifies Sri Lanka’s areas of competitive advantage in these sectors, providing a platform for effective communication of Sri Lanka’s advantage to global companies. The study also identifies areas of relative weakness that need to be addressed through policy initiatives and other interventions.

However, the interviews conducted during the course of the study showed that many international executives are still not aware of Sri Lanka’s advantages as an outsourcing location.

“The report will act as a guide for government strategy for the knowledge services sector. I believe that this sector is the most important for economic prosperity of Sri Lanka. Knowledge services can now be delivered remotely from anywhere in the world and this is a real opportunity for the country,” stated A.T. Kearney Global Business Policy Council Fellow Simon Nihal Bell at the revealing of the results of the study yesterday. “As Sri Lanka becomes richer, to move to the next level, there needs to be a transition into more higher value added industries and the country should become known for producing a high value product.”

Bell also stressed on the need of maximising the capacity of the tertiary educated people within the country, with a heavy focus on quality and not quantity.

“We were surprised at the breadth and depth of the existing industry – the quality available here is remarkable,” he expressed. “Thanks to India’s success, the industry has become very competitive and every country is trying to tap into this market. It is not good enough to say that we have clever people and a good business environment. You also need to work on a strategy in order to make maximum use of these factors.”

He went on to say that although most companies are very happy operating in India at the moment, they are now looking to diversify their risk and are on the lookout for a second outsourcing location. The country also has a very strong position in certain niches such as accounting, financial and legal services and certain areas of IT.

While highlighting these strengths, the study also noted areas where the Government and industry need to work together to improve the competitiveness of the industry. These include the need to accelerate the supply of knowledge workers by continuing the expansion and modernisation of the education sector and promotion of overall IT literacy and English language skills.

The Government also needs to continue to streamline regulations and stimulate increased competition and efficiency in key sectors such as telecom and electricity, in order to ensure that Sri Lanka offers an investment climate that is on par with regional leaders such as Singapore, Malaysia, Dubai and Mauritius.

“Understanding that the knowledge services sector is a crucial and critical driver for economic growth, the Government undertook this effort at finding out our relative position in the global market and identify areas we need to work on in order to further improve our rankings,” explained ICTA CEO Reshan Dewapura. “It is very important to have a clear picture of where we stand in the global outsourcing industry and we are doing many things to further the implementation of the recommendations made in this report.”

Sri Lanka currently ranks as the 21st in the A.T. Kearney Global Services Location Index, having entered the index just two or three years ago. As of now, there are more than 300 IT/BPO companies with operations in the country, employing more than 60,000 people and generating more than $300 million in exports.

Although the growth of the outsourcing industry has slowed down dramatically from previous years, from around 20 per cent over five years ago to about eight to 10 per cent as of now, it is however an enormous industry, in fact one of the fastest growing in the world.