A baseline sector analysis of the Business Process Outsourcing industry of Sri Lanka

1
A baseline sector analysis of the Business
Process Outsourcingindustry 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 Lankas 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
  Lankas 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 256 - 2048 24
Shared leased line 256 -4096 19
Dedicated leased line 45 - 2560 67
VSAT 72 - 512 10
Other Not mentioned 5
30
Growth plans
31
Expansion plans

• 95 plan to increase employment
• Employment growth of 30 in 2006-7
• 76 stated expansion plans out of which
• Physical exp. 50
• Market expansion 13
• New partnerships 6

32
Conclusions
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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

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