Technology

Capital a drawback in software growth

by Gamini Warushamana

Lack of capital is still a big issue to the growth of the software industry in Sri Lanka, said Director, Ashique M. Ali of Mindspring. Mindspring, a software company specialises in software engineering and software development services and focuses mainly on the Singapore and UK markets.

Ali said, Our banks are still not ready to finance the investment needs in this lucrative and emerging sector and this is one challenge we face. We have set targets to achieve a US$ 1 billion software export by 2010. The industry is stagnant or behind its growth potential due to issues in capital and human resources.

Many initiatives have been launched for human resources development in collaboration with all stakeholders but capital issues still remain unsolved.

All successful software companies started with venture capital from foreign countries. Most of the entrepreneurs studied, worked and initiated their businesses in the United States or Europe and they have overcome capital issues. However, small local companies such as ours are stagnant due to lack of capital while there are huge opportunities for us, he said.

Innovative plan

Ali said that a software project is an innovative plan in the mind of the entrepreneur and to secure capital the entrepreneur has to convince the bank or the investor on the viability of the project, but it is difficult today in Sri Lanka.

The ideal example is the WSO2, the well-known open sources software company in Sri Lanka. It still does not have a revenue flow, but Intel Capital; a US venture capital funds it.

The investor has the confidence on the investment and in the future it would generate profits. Similarly, as we know the Skype also does not yet generate revenue but in the future a big IT company will buy it as Skype has revolutionised communication.

Ali expects this scenario to change with time. In India too it took time to change the attitudes of the banks and other financial institutions.

It is a matter of time as the Sri Lankan software industry becomes popular in the global market even if the local banks are not ready, foreign capital will flow in. Sri Lanka is still not known as a quality software developing destination and I experienced this in my promotional tours in Europe. However, the situation is changing and last year Sri Lanka was ranked 29th in the AT Kearney global index for outsourcing locations.

Mindspring is a software service company and most of the projects the company engages in are in the SME sector. With a highly skilled talent pool of 24 people, Mindspring has built a reputation as a reliable technology partner among its local and overseas clients.

The services encompasses the traditional client-server architecture to today's distributed Internet based applications, on Microsoft, Java, and Open Source platforms.

Computer has been a hobby and passion for Ali since he was in grade 8 at D.S. Senanayake College Colombo. After his Advanced Level examination he qualified in BCS and in 1989, at the age of 19 he launched Mindspring. Initially the company did system integration and provided hardware solutions. In 2002 the business strategically divided into two and software development started.

Rapid progress

In 2005, Mindspring entered the export market engaging partners and end customers in Western Europe and South East Asia, and made rapid progress in acquiring overseas outsourcing projects.

As an executive committee member of the Software Exporters Association (SEA) Ali has a broader view on the industry's future. He said that the HR issue also affects the industry's growth. As the number of professionals passing out is lower than the demand the higher wage rate in the industry affects the small companies.

Thanks to the advantage in the exchange rate (high Indian rupee and low Sri Lankan rupee exchange rate against the US$ ) we have some advantage here and if this did not happen we will be uncompetitive as a result of high salaries.

Today the starting salary of a software engineer is Rs. 40,000-50,000. With two years experience it goes up to Rs. 60,000. This is a difficult task for small companies because small companies have to offer high salaries to retain the staff. They prefer to join big companies not only because of high salaries, but also due to exposure to large projects and the larger number of professionals.

Ali said that if the country can address these two issues the industry can attract more projects to Sri Lanka.

Key sectors

The industry has focused on centres of excellence, the objective being to specialise in some key sectors. One sector is mobile technology and we have a number of companies that are highly successful in this segment.

Another sector is the financial sector and the large number of accounting professionals, high CIMA pass rates and availability of CIMA qualified people in the country are major plus points in this field.

Ali also believes that software testing or quality control is another thrust area that can be exploited. One-third of a software project is software testing and a third party testing gives more credibility to the product.

On the other hand in developed countries software testing is considered a low level job and it is difficult to find people. But it needs a good domain knowledge and experience. Sri Lanka can attract software-testing projects by developing skills in this sector.

Today professionals can get CSTE qualifications, the US qualification in software testing in Sri Lanka. The UK qualification in the field, BCSISEB will also be launched in Sri Lanka shortly.

Ali said that there is no proper estimate on the size of the Sri Lankan software industry today due to lack of data. As there is no tangible products we export there is no way to measure the value of exports.

There is no HS code for software. The industry enjoys a tax holiday and total export revenue does not come through the banking system. To address this issue the industry has agreed to volunteer true revenue figures. This will help to obtain credible figures on the size of the industry.

IT workforce

The size of the IT workforce is measured by the IT workforce survey which was started with USAID funds and this year we will get the figures for the third consecutive year.

The survey gives all data such as labour market demand, supply and number of employees in the industry. These are very important to plan the future of the industry. The development of the software industry helps to boost the whole economy of a country or a city.

The ideal example is Banglore. With the boom in the IT industry infrastructure, housing and all other business sectors developed rapidly. It is estimated that six other jobs are linked to one IT job.

The software industry in Sri Lanka has great potential and we are very optimistic because the government listens to the industry, state universities are becoming more dynamic and with the passage of time financial institutions will also change. Unity in the industry is a great advantage and we don't have competition among companies.

However, our foreign missions and trade agencies are less supportive. Today the industry needs one voice. The BOI, ICTA and the industry carries out different promotional activities and this is less productive.

According to my experience, we are quite conversant in this industry but soft skills have to be developed. To work with partners' overseas communication skills have to be developed.

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PC House honoured by Samsung

PC House (Pvt.) Ltd., a subsidiary of PCH Holdings, recently received an award from Samsung Electronics as their "Most Proactive Business Partner in Sri Lanka."

The award ceremony was held recently in Colombo. Prof. Tissa Witharana, Minister of Science and Technology was the Chief Guest.

The award was conferred on PC House following a recent partnership agreement between PC House and Samsung Electronics, which empowered PC House to market and distribute Samsung branded ICT products such as CRT and LCD Monitors, Laser Printers and Laser based Multi Functional Printers (MFPs), Optical Device Drives (ODD) products such as CD ROM Drives, DVD ROM, Combo Drives, CD Writers and DVD Writers in the local market.

PC House was reckoned for its natural leadership for acting in advance, dealing with anticipation and preventing any market failure, in support of the Samsung ICT product range.

By winning this prestigious award PC House has shown that it is doing the best by taking corrective measures to position a world-class brand such as Samsung in the Sri Lankan market.

Sunshine Holdings ventures into telecommunication industry

Diversified conglomerate Sunshine Holdings Limited further expanded its business portfolio by entering into the telecommunication industry, with its recent acquisition of a 10% stake in VSNL Lanka Ltd (VLL), a fully owned subsidiary of Videsh Sanchar Nigam Limited (VSNL) India, the fourth largest long distance telecommunication provider.

The investment in the telecommunications industry is yet another pioneering initiative for Sunshine Holdings Limited, with plans under way to acquire a further 5% of VLL. This will help to add value to its shareholders as well as to balance and further strengthen the growing investment portfolio.

VSNL Lanka Ltd (VLL) was a fully owned subsidiary of Videsh Sanchar Nigam Limited (VSNL) India. VSNL is one of the oldest and leading global telecom players in the world.

In February 2002, the Government of India in keeping with their disinvestments plan, released 25% of VSNL equity to a strategic partner. Consequently, VSNL was taken over under the administrative control of the TATA Group.

The visit of Ratan Tata, the Chairman of the TATA Group to Sri Lanka in 2002, seeking further opportunities with regard to business, identified Sri Lanka as a market with great potential in terms of the telecommunication industry. As a result of this VLL was incorporated in June 12, 2003, as a public limited company incorporated under the Companies Act (No 17 of 1982) of Sri Lanka.

V. Govindasamy, Group Managing Director of Sunshine Holdings Limited said, "Due to our relationship with the TATA Group, I was appointed to the board of VLL and we started to work together.

There was an understanding that the Sunshine Holdings Group will have a stake in the VSNL company. It is in that spirit that VSNL has now offered us this opportunity to enter into the telecommunication business.

We are in the business of creating value addition to our shareholders.

Telecommunications, namely the long distance telecommunication business by far is one of the best investment opportunities in Sri Lanka.