The Competitiveness Context of the Sri Lanka Information and Communication Technology Association (SLICTA)

ICT Rapid Conversion Project	Young Computer Scientists

An immense opportunity exists for Sri Lanka to participate in the global market for knowledge-based services including software development, programming and business process outsourcing. This is particularly so given that competitive pressures are driving large corporates to seek high-quality, cost-effective sources for these services in new and emerging markets.

Although Sri Lankan firms have made headway in offering IT based services to a variety of international customers, counterparts in India, Israel, Ireland and other countries have progressed far ahead of Sri Lanka over the last several years. Revenue generated by Sri Lanka on software exports is currently estimated at US$80 million. The local software industry believes that Sri Lanka can achieve US$ 1.0 billion in total ICT related export services by 2012 – with the right mix of industry coordination, support from academia and establishment of a policy environment conducive to ICT growth. The ICT Industry Cluster, which has now been formally incorporated as the Sri Lanka ICT Association (SLICTA) is committed to transforming Sri Lanka into a sustainable, world-class center for high-value, rapidly evolving IT services.

1. Socio-economic overview

Sri Lanka has a multi cultural population with an ambitious development program to regain economic growth and social stability. Per capita income, which was estimated at US$ 120 in the early 1950s, has now reached US$ 900; showing an annual increase of approximately 11%

In 2002, the agricultural sector accounted for about 20% of the gross domestic product (GDP) while the services and industrial sectors constituted 54% and 26% respectively. Sri Lanka is currently heavily dependent on the apparel and tea sectors, which are both, export oriented industries.

Human development in Sri Lanka is relatively high compared to other developing countries, and Sri Lanka’s ranking in the human development index (HDI) compares well with developed nations.

Figure 1

Human Development Indices

The welfare policies practiced in the country for several decades have established far reaching education and healthcare networks that contributed to Sri Lanka’s ranking in the Human Development Indices. Sri Lanka’s literacy rate stands at 91.6% and health indicators are at satisfactory levels. The provision of free education up to graduate level at State universities also resulted in the availability of a large pool of graduates. In recent years the number of ICT graduates produced within the country has more than doubled.

2. 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. 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 of Sri Lanka.

Figure 2

Growth of Software Exports

Source: Software Exporters Association (SEA)

The Software Exporters Association (SEA) has targeted to achieve total exports of US$ 1.0 billion by 2012 and their growth plan is as follows:

Figure 3

There are currently over 175 software development companies in Sri Lanka actively involved in the development of software products and provision of services to both the export and domestic markets. Some of the Sri Lankan firms that have made a mark in the international arena are; Millennium Information Technologies - who not only turned the Colombo Stock Exchange into the world’s first ever “event-driven” exchange but also introduced versatile automated trading systems to the Boston Stock Exchange and several other clients in the American, European, 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 used by some of the world's leading telecom operators, such as Cable & Wireless, UK and Millicom, Luxembourg. Moreover, international names like IFS, Sweden have set up research and development centers in Sri Lanka employing over 250 people and recently Microsoft and Oracle also opened offices in Sri Lanka.

Open Source Software – Open source presents an opportunity to revolutionize Sri Lanka’s IT industry, particularly given the fact that most developers who participate in open-source projects are US-based and there is little participation at present by regional competitors. Of the 800 committers worldwide, 30 are based in Sri Lanka.

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 (Simple Object Access Protocol) 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 believe that this is the type of approach Sri Lanka must use to become a major player in the international market for software services. This approach would help develop a large pool of highly skilled software architects and engineers who can in turn lead the industry towards greater heights and increased competitiveness.

IT Enabled Services - In order to meet 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 for the provision of such services 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 price 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, is quoted as saying:

”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 ( worth US$1.6 Million globally) , WNS has expanded into Sri Lanka to take advantage of this global demand using the availability of highly qualified English-speaking staff with specific expertise in professional services such as accountancy and commercial law.

Sri Lanka’s intrinsic strengths as a call center outsource destination includes:

	A rapidly growing domestic IT industry with increasing global recognition
	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 the United Kingdom (approx. 30,000 qualified accountants with another 40,000 in training)
	Presence 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, 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 software and hardware 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
	Public policy support- 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

Telecom Infrastructure - Information technology companies increasingly gain access to international markets through broadband telecom networks and Internet-based capabilities. In order for the ICT 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 growth and development of Sri Lankan IT companies therefore depend greatly on the quality and cost of services provided by domestic telecommunications operators.

In keeping with the above, significant changes have taken place in the local telecom sector since the 1990s. 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 as of June 2004. However, the most significant trend in the local telecom sector has been the phenomenal growth in cellular connections, which increased from a mere 1800 in 1991 to a staggering 1,801,392 by June 2004. The overall “tele-density”, which stood at around 3- 4% a few years back, had increased to 14.2% by June 2004. Nonetheless the usage of satellite phone services, which were first introduced to Sri Lanka in 2002, has remained small due to high hardware and operational costs.

The opening of the international market has seen two more companies - MTN Networks and VSNL of India gaining 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 to be place in the 2nd quarter of 2005, would provide a third international landing point for the country. All of the above would enable Sri Lankan operators to provide true dual diverse redundancy connectivity to their operational sites.

Figure 4

GROWTH OF TELECOMMUNICATION SERVICES

Figure 5

3. E-Sri Lanka Initiative

The Government of Sri Lanka, private sector and other stakeholders in the nation’s development share a belief that information and communications technology (ICT) is a foundation for the equitable distribution of opportunity and knowledge within society and a key determinant of a country’s level of development.

This belief has resulted in a shared vision for an e-Sri Lanka – a vision that will take the dividends of ICT to every village, citizen, business and also transform the way Government works. ICT will be used to develop Sri Lanka’s economy, alleviate poverty and improve the quality of life and opportunities for all Sri Lankans.

The first phase of the e-Sri Lanka program focuses on rural connectivity and re-engineering Government. Priority projects for re-engineering Government include e-Motoring, e-Pensions, e-HRM and e-Foreign Employment.

e-Sri Lanka Strategy

In July 2003 the Government of Sri Lanka created the Information and Communications Technology (ICT) Agency to not only spearhead the implementation of the e-Sri Lanka initiative but to be the apex body of all ICT development in the country. The ICT Agency’s core mandate is to create a national ICT Plan that is both visionary and realistic in implementation. Overall, it aims to enhance the efficiency of Sri Lanka’s private and public sector and bring ICT into the decision making process of Sri Lanka’s government and business leadership. The ICT Agency’s program areas are given below:

Figure 6

Pilot Project Program

The pilot project program is a key component of the e-Sri Lanka vision and would provide valuable input for program implementation. Components of the pilot project include:

	Vishva Gnana Kendra (VGK)
	Sinhala fonts
	Government Printer Online
	National Operations Room
	Empowering the Workplace
	Distance e-learning
	Govi Gnana System
	E-Money Order
	SME portal
	Internally Displaced Persons
	Legal Draftsmen
	e-Cabinet
	e-Parliament
	e-Office of the President

Sri Lanka Information and Communication Technology Association (SLICTA)

The Sri Lanka Information and Communication Technology Association (SLICTA) was incorporated on November 19, 2003. It is the culmination of the ICT Industry Cluster formed with the assistance of the United States Agency for International Development (USAID) funded project- The Competitiveness Initiative (TCI)

.SLICTA stands at the forefront of the local ICT industry and is aware of the need for effective lobbying, consensus building and strong policy advocacy, in developing Sri Lanka’s capabilities in ICT products and services.

SLICTA’s Five Working Committees are:

	Government Interface
	Market Promotion
	Human Resource & Workforce Development
	Competitiveness Assistance
	Finance & Administration

SLICTA’s Board is represented by the following organizations:

	Association of Computer Training Organizations (ACTOS)
	British Computer Society - Sri Lanka Section (BCS SLS)
	Computer Society of Sri Lanka (CSSL)
	Information Systems Audit and Control Association - Sri Lanka Chapter (ISACA SL)
	Licensed Internet Service Providers Association (LISPA)
	Software Exporters Association (SEA)
	Sri Lanka Association for the Software Industry (SLASI)
	Sri Lanka Computer Vendors Association (SLCVA)
	Telecom Providers Association (TPA)

In addition, the following institutions/associations play a consultative role to SLICTA

	INFOTEL Society
	ICT Sub-Committee of the Ceylon Chamber of Commerce
	ICT Sub-Committee of the National Chamber of Commerce
	Venture Capital Association of Sri Lanka
	University Grants Commission Standing Committee on IT

SLICTA’s Mission/ Objectives:

	Promotion – to create and develop market opportunities for the ICT industry and foster and develop Sri Lankan ICT firms
	Human Resource Development – to guide and encourage the development and sustenance of required human capital
	Competitiveness Initiative – to facilitate the development and sustenance of companies competitiveness
	Government Interface – to advocate the development and sustenance of an effective policy environment

Key Strategic Initiatives

1. National Information Technology Workforce Survey
2. Increasing Competitiveness of Small & Medium Scale Enterprises through ICT
3. Last Mile Initiative
4. National ICT Survey

Contact Information

Offices:
Sri Lanka ICT Association
C/o Computer Society of Sri Lanka
275/25, Prof. Stanley Wijesundara Mawatha
Colombo 7
Telephone +94-11-2592762
Fax +94-11-2508009
Email: sg@searcc.org

Contact:
Yasa R Karunaratne
Chairman
Sri Lanka ICT Association
Website: www.slicta.lk