Sri Lanka set to gain from IT value arbitrage
COLOMBO, Dec 11, 2014 (EconomyNext) – Sri Lanka is well placed to ride the next wave of IT outsourcing which will come from value arbitrage, given its competitiveness in software engineering and high-end financial services, an industry official said.
Madu Ratnayaka, Vice President of Virtusa (Pvt) Ltd., a software firm, said several multinationals were already doing product development in the island or providing outsourced services, two niche markets in which Sri Lanka is now globally competitive.
"Sri Lanka is emerging as a software product engineering destination. In BPM (Business Process Management) Sri Lanka is emerging as financial services outsourcing hub, among the top five, having the second largest pool of UK-qualified accountants after the UK."
These sectors will see more business with the trend towards consumerisation of information technology, greater activity by small and medium enterprises and the shift to the four SMAC (social, mobile, analytics and cloud) technologies currently driving business innovation.
"The next one hundred billion will come from value arbitrage, not cost arbitrage," Ratnayaka declared.
Sri Lanka’s strategy is to look at markets with cultural affinity to Sri Lanka like Australia, Japan and Canada, he told Tuesday’s Hambantota Conclave 2014, a forum to promote investment in the new southern port city which is being designed and built from scratch.
"Our vision is to be a five billion-dollar industry by 2020 creating 200,000 direct jobs and 1,000 startups – a large number of small companies versus a few large ones."
The consumerisation of IT, where information technology is accessible to anybody, is driving the leverage of IT for enterprise competitiveness.
"We see an increasing amount of SME activity which are leveraging it, not looking for huge markets but more focused on high quality products and services."
The shift towards SMAC will shift the advantage towards those who can provide high-end outcomes rather than low-end services on a mass scale like India and the Philippines did.
The synergy created by social, mobile, analytics and cloud working together creates competitive advantages for businesses, improving operational efficiency and customer reach with minimal cost increases.
"The first 100 billion dollars, especially in outsourcing, happened through cost arbitrage with countries like India and the Philippines riding the first wave," Ratnayaka said.
Companies like Aviva, HSBC and WMN were already in the island operating not at the low-end but at the higher-end, such as technology-driven analytics, along with the likes of Microsoft, Intel, LSE and IFS doing product development.
"Unlike software services where the Philippines took lead, product engineering is of higher value and higher quality. You don’t need hundreds of thousands of people to build products. We’re more like Israel and Ireland."