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

A baseline sector analysis of the Business Process Outsourcing industry of Sri Lanka. Harsha de Silva, Sriganesh Lokanathan, Dilshani Samaraweera. 27 September, 2006. Agenda. Overview of BPO sector Obstacles to growth and operations Growth plans Conclusions. Overview of BPO sector.

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

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  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 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

  6. Offshore/ Onshore Investments

  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 • 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

  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

  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) +94 11 493-992 (f) +94 11 494-0290 asia@lirne.net www.lirneasia.net

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