Industry Information
Sri Lanka ICT Industry
Software Development
The service sector is the largest component of GDP (54%). In 2003, the service sector continued its strong expansion, fueled primarily by strong growth in telecom, tourism, and financial services. Public administration and defense expenditures have remained steady. Repatriated earnings of Sri Lankans working abroad continued to be strong. There also is a small but growing information technology sector, especially software development and exports.
The Sri Lankan software industry even though still small has grown quite impressively. Exports which stood at around US$ 5.0 million in 1996 increased to approximately US$ 58.0 in 2001 and were estimated to be about US$ 80.0 million at the end of 2003 according to the Central Bank report.
Growth of Software Exports
The Software Exporters Association (SEA) has targeted to achieve total exports of US$ 1.0 billion in 2012 and their growth plan is as follows:
- Work force to be increased from 5,000 in 2004 to 25,000 in 2012
- Exports to be increased from US$ 80M in 2004 to US$ 1,000M in 2012
- Yield per employee to be increased from US$ 20 in 2004 to US$ 40 in 2012
There are currently over a 175 software development companies in Sri Lanka actively involved in the development software products and providing services for both the export and domestic markets. Some of the Sri Lankan firms and their products that have made a mark on the international scene are; Millennium Information Technologies - who not only turned the Colombo stock exchange in Sri Lanka into the world's first ever "event-driven" exchange but with their versatile automated trading system have powered the Boston stock exchange among several other clients in the United States, as well as exchanges in Europe, Asia Pacific and African regions; Virtusa Corporation - one of the fastest growing software services firms in the US with seven years of consecutive growth and the largest technology center based in Sri Lanka and; Informatics - a local company whose telecom product is in operation at the regional sites of some of the world's leading telecom operators, such as Cable & Wireless of UK and Millicom of Luxembourg. Moreover international names like IFS from Sweden have set up their research and development center employing over 250 people and recently Microsoft and Oracle have also opened offices in Sri Lanka.
Open Source Software
Open source presents an opportunity to revolutionize Sri Lanka's IT industry and become a driving force in the global computing industry. The fact that most of the developers who participate in open-source projects are US-based and a very few from Asian countries, not only represents a significant opportunity for Sri Lanka but given the relatively small number of developers actively participating in each project would lead to Sri Lanka becoming the source of top open-source developers and leaders. Of the 800 committers worldwide 30 of them are based in Sri Lanka, which is well over 3% of the total.
The Lanka Software Foundation (LSF), a non-profit organization was formed to help Sri Lanka exploit the opportunities presented by the open-source world. They currently operate development laboratories at the Universities of Colombo and Moratuwa and the Sri Lanka Institute of Information Technology (SLIIT). The foundation currently participates in the Apache Axis project, which is building SOAP implementations in Java and C++. AxisMora is the Java implementation and the Axis C++ is the C++ implementation.
Given the size of the local IT industry, promoters of open-source feel that it is with this type of an approach that Sri Lanka can become a major player in the global software scene. This approach would provide a large pool of highly skilled, best-in-the-world quality software architects and engineers to the Sri Lankan software market who in turn will spur the required growth through existing and new software firms. This naturally would result in more participation in projects thereby resulting in top-of-the-breed high quality developers and institutions with global competitiveness.
IT Enabled Services
In order to meet the growing international demand for cost-effective, customer-oriented call centers, many organizations worldwide are outsourcing these services to various locations in the Southeast Asian Region. India has received the most attention in this area over the past few years whereas Sri Lanka has recently gained recognition as an excellent choice for top-quality IT outsourcing and call center operations at even more competitive pricing than its neighbors. However, Sri Lanka's strategy is not to compete on a) price and b) its neighbors - India but on quality and value addition.
Some of the internationally known names that have already set up operations in Sri Lanka include WPA, HSBC, Astron, Hellocorp, Office Tiger, WNS Global Services, etc.
David Tibble, Executive Director of WNS Global, India's leading provider of third party business process services who opened an office in Colombo says "Sri Lanka has a pretty good business climate and there is a tranche of people who are very well educated and widely traveled". With outsourcing of back office services which is currently largely concentrated in India worth US$ 1.6 billion globally, WNS has expanded into Sri Lanka to take advantage of this global demand using the availability highly qualified English-speaking staff with specific expertise in professional services such as accountancy and commercial law.
Sri Lanka has intrinsic strengths reiterating further the above which could make it a major success as a call center outsource destination:
- A rapidly growing IT industry, with IT strengths becoming recognized globally
- A competitive workforce of educated, English-speaking, tech-savvy personnel -- of tremendous importance in a high-growth industry faced with a shortage of skilled workers
- Second largest number of Accountants outside of the United Kingdom (approx. 30,000 fully qualified with another 40,000 in training
- The establishment of ICT Agency accredited IT-Enabled Services training centers to ensure human resource supply is continued into the future
- Cost-effective manpower: In a call center operation, manpower typically accounts for 55 to 60 percent of the total cost. In Sri Lanka, the manpower cost is approximately one-twentieth of what it is overseas. Entry level agent cost in USA is approximately $40,000 per year while in Sri Lanka it is only $2,000 (approx. US$ 150.00 per month plus ancillary costs such as taxes, etc.).
- Technical support: Sri Lanka graduates hundreds of engineers each year who can be used in call centers for troubleshooting/tech support given that their salaries are much lower than in Europe or the US.
- The Government of Sri Lanka has recognized the potential of IT-enabled services and has taken positive steps in marketing Sri Lanka's potential by providing numerous incentives.
- The presence of many international technology vendors and solutions would enable creation of the most advanced set-ups in this technology- intensive segment
- With disaster recovery and business continuity solutions account for approximately 10% of all ITES offerings. Sri Lanka is handily placed geographically and culturally to be the prime disaster recovery location for Indian ITES operators.
Telecom Infrastructure
Information technology companies increasingly gain access to international markets through broadband telecom networks and through the use of Internet-based capabilities. In order for the information technology and services industry in any country to develop and sustain a competitive market position, the available communications infrastructure must provide high-speed digital transmission services priced at rates that mirror international benchmarks for comparable services. Successful development growth of Sri Lankan IT companies therefore depended in significant degree on the quality and cost of services provided by the telecommunications operators.
In keeping with the above, drastic changes have taken place in the telecommunications sector since 1990s. The fixed access (both wire-line and WLL) telephone connections have risen from 121,388 in 1991 to 958,832 in June 2004 - a growth of over 700%. The number of wireless local loop (WLL) connections by the two operators; Suntel and Lanka Bell stood at 121,606 in June 2004. The most significant trend in the local telecom sector has been the phenomenal growth of the number of cellular connections. It increased from a mere 1800 in 1991 to a staggering 1,801,392 in June 2004. The overall tele-density, which stood at around 3 to 4% a few years back, has increased to 14.2% by June 2004. Usage of Satellite phone services, which were introduced in 2002, has remained small due to high hardware and operations costs.
Growth of Telecommunication Services
| Year | Wire-line Connections | Cellular Connections | WLL Connections | Public Payphone Booths | Radio Paging Services | Internet & e-Mail |
| 1996 | 254,522 | 71,079 | 527 | 3,002 | 10,721 | 2,504 |
| 1997 | 315,241 | 114,888 | 26,381 | 3,682 | 10,829 | 10,195 |
| 1998 | 455,598 | 174,202 | 67,931 | 4,761 | 10,511 | 18,984 |
| 1999 | 580,199 | 256,665 | 88,914 | 5,799 | 10,300 | 25,535 |
| 2000 | 653,144 | 430,202 | 114,267 | 8,222 | 7,009 | 40,497 |
| 2001 | 708,200 | 667,662 | 118,995 | 6,801 | 6,178 | 62,159 |
| 2002 | 768,620 | 931,580 | 114,488 | 6,681 | 3,541 | 75,000* |
| 2003 | 822,992 | 1,393,403 | 116,021 | 6,440 | 2,851 | 85,500* |
| 2004 | 837,226 | 1,801,392 | 121,606 | 5,378 | 2,200* | 87,150* |
* Provisional
Source: 2004 Telecommunication Regulatory Commission of Sri Lanka
The opening of the international market has seen two more companies viz. MTN Networks and VSNL of India having access to the international undersea cable SEA-ME-WE-3. In addition Sri Lanka Telecom is also in the process of commissioning a link with BSNL to India. The SEA-ME-WE-4 cable, which is due in the 2nd quarter of 2005, would provide a third international landing point in the country. All of the above would enable Sri Lankan operators to provide true dual diverse redundancy connectivity to their operational sites.