1. Harsha de Silva, Sriganesh Lokanathan, Dilshani Samaraweera
A baseline sector analysis of the Business Process Outsourcing industry of Sri Lanka
Harsha de Silva,
Sriganesh Lokanathan,
Dilshani Samaraweera
27 September, 2006

2. Agenda Overview of BPO sector Obstacles to growth and operations
Growth plans
Conclusions

3. Overview of BPO sector Composition Investment BPO entry and reasons
Services
Export markets
Employment
Skill requirements

4. Composition of Sri Lanka’s BPO industry
Equal proportion of captive & non-captive operators (48%)
While majority are offshore, value of total offshore investment is low = USD 4.3 million (out of USD 13.2 million)
86% have BOI status

5. BPO Investments with BOI status
Type of BPO investment
In millions (USD)
BOI investments
11.8
Non -BOI investments
1.4
Total investment in the sector
13.2

6. Offshore/ Onshore Investments
Type of BPO investment
In millions (USD)
Offshore investments
4.3
Onshore investments
7.8
BPOs that are both onshore and offshore
1.1
Total investment in the sector
13.2

7. BPO entry by year

8. Reasons for locating in Sri Lanka

9. Operating costs of BPOs

10. Government incentives used by BPOs
Tax incentives is the third most frequently cited reason for locating in Sri Lanka

11. Most popular services Accounting = 43% of the companies
Call centre services = 19%
Medical insurance processing = 14%
Non-captives offer more services than captives (avg. of 3.5 vs. 1.4)

12. BPO service offerings

13. Main export markets

14. Employment Total employment (21 BPOs) = 3,700
50% have up to 62 workers
Avg. workforce at offshore BPOs = 265
Avg. workforce at onshore BPOs = 78
Avg. workforce at captive BPOs = 228
Avg. workforce at non-captive = 134
The average monthly salary of a BPO worker = USD 270 (inclusive of bonuses and commissions.)
95% provide training

15. Age distribution amongst BPO workers (excluding largest BPO)

16. BPO employees by educational qualification (excluding largest BPO)

17. Workforce composition of the largest BPO
The largest BPO reported a workforce of 1,700
Degree holders = 25%
Advanced Level qualified = 75%

18. Turnover in 3, 6 and 12 months (includes largest BPO)
Avg. 1-year turnover = 6%
Avg. 6-month turnover = 4%
Avg. 3-month turnover = 3%

19. Skill requirements – Primary Skills
Spoken language proficiency in English considered an important requirement by 95%
Written proficiency in English considered important by 66%

20. Satisfaction on availability & quality of personnel

21. Obstacles to growth and operations

22. Leading obstacles

23. Operational stability
Civil/political instability is the leading threat to operations and growth – 67%
Further more:
67% expressed concerns about the state of law and order.
57% expressed concerns about maintaining Sri Lanka’s image abroad.
33% of the companies do not think that interpretations of regulations applicable to BPOs are consistent and predictable

24. Regulations
Taxes are not considered an obstacle but tax administration is seen as an obstacle by 38%
Labour regulation are considered a difficulty by 38%
Customs/trade regulations are seen as obstacles by 10% but 67% do not think they pose a problem
Environmental regulations are not considered problematic

25. Regulations

26. Delays due to regulations/procedures
% of BPOs that experienced delays
29%
Reported delays (in days)
21, 60, 90, 99, 210, 240
Reasons for delays
Regulation payments
Company incorporation and BOI procedures
Registration procedures
Formalities
All of the companies that experienced start up delays are BOI companies

27. Public/Mass transport system
Mass transport is the second most frequently cited obstacle to growth and operations
57% said mass transport is an obstacle
38% said transport infrastructure (roads) is an obstacle

28. Telecommunications facilities
Reliability of leased lines and telephones

29. Types of Internet access used by BPOs
Type of connection
Bandwidth (Kbps)
% of companies
ADSL
24%
Shared leased line
19%
Dedicated leased line
67%
VSAT
10%
Other
Not mentioned 5%

30. Growth plans

31. Expansion plans 95% plan to increase employment
Employment growth of 30% in
76% stated expansion plans out of which:
Physical exp. = 50%
Market expansion = 13%
New partnerships = 6%

32. Conclusions

33. Primary requirements for BPO sector growth
Capacity expansion
English
Telecommunications (+land)
Mass transport
Feasibility of setting up a dedicated BPO zone with enhanced transport and telecommunications infrastructure should be considered.
Facilitation of entry & operations
No specific regulatory changes
facilitation mechanisms - investment entry & operations
Marketing and promotions

34. 12 Balcombe Place,
Colombo 8, Sri Lanka
(v)
(f)