BPO industry:

Sri Lanka should focus on SME

by Gamini Warushamana

National ICT week kicked off last week by the Information and Communication Technology Agency (ICTA), focusing Business Process Outsourcing BPO.

To understand the BPO business we visited one of the largest Sri Lankan business process outsourcing company, Virtusa, which is employing over thousand young graduates. Virtusa produces high end software products to the world renowned companies in the US and UK.

The client list of the virtusa is like a rainbow with coloured trade marks of large global companies. Some of them are among Fortune 500 or 1,000 companies. ARASYS Technologies, ENDECA, Initiate, Paga, eCollege, ORACLE, Aprimo and many more.

If Virtusa is a factory, you cannot see any material inputs coming in or products that are going out in TEUS. It is also not a company with executives struthing around with ties dangling from their necks.

There are no busy production lines like in a garment factory. Serious looking Virtusans, software engineers and various other professionals are working on projects peeping into PC monitors in this huge office complex at the Trans Asia hotel in downtown Colombo. This is the general shape of a company engaged in this knowledge business. This production process is a team effort and in some large projects 100-150 people work over two three years to complete the project.

But Virtusa is not an average BPO company or the most famous call centre. Though it cannot be seen, as a software developing company, Virtusa feeds most valuable knowledge inputs to its machines, thousands of PCs in small cubicles. It needs real knowledge inputs in IT, maths, accountancy, finance and not just fluent English with American or Canadian accents that call centres need.

"Virtusa is an Industrial Software Vendor (ISV) like Microsoft, Madu Ratnayake, General Manager of the company, defined the generic name of the company. We provide our services to large enterprise in US and UK where they use the software in their business.

Virtusa specialises in two areas, bank, finance and insurance (BFI) and Communication Content Technology (CCT). Virtusa is a globally integrated company or as Ratnayake says a "truly flat" company with its operation in Asia (In India and Sri Lanka) and front end in US and UK.

Total knowledge pool of Virtusa is 3,600 where the majority is in India. BPO is not a new business and it was started many years ago and our neighbour India is the home for world's largest outsourcing businesses from call centres to high end software developers, medical services, e-tuition, accountancy, media and so many other services.

But the BPO business is still in a growing stage and only few big US companies have outsourced their businesses, Ratnayake said pointing out the potential Sri Lanka has in the business. SME sector has not yet moved to outsourcing and this is the segment where Sri Lanka can exploit.

In India large scale BPO companies employ 30-50 thousand people and Sri Lankan is not in a position to enter into business on that scale. Outsourcing for SME companies with about 100 employees is ideal for Sri Lanka. Sri Lanka has a great chance to start with SMEs, Ratnayake said.

Prime objective of business outsourcing is low cost. For instance, starting salary of call centre operator or accounting graduate in India is $100. To attract BPO businesses we have to provide service at a lower cost. The cost of this business is directly related to the salary they pay the professionals.

If the supply of IT professionals would not increase to match with increasing demand, with new players entering into business, the cost will increase. Therefore if we do not invest to develop our human capital Sri Lanka will not be an attractive place for BPO, Ratnayake said. "Our present position is not satisfactory and we have to invest more to increase IT literacy and develop the human resource for the industry, Ratnayake said.

Apart from that Sri Lanka is in a disadvantageous position in other cost factors too. Office facilities and telecommunication services in Sri Lanka are expensive compared to India. The cost of Power in Sri Lanka is the highest in the region. Most of the outsourcing business, in India or China or even Virtusa in Sri Lanka have been started by expatriate professionals. Investment of this nature has more economic benefits than big captive outsourcing businesses.

Captive outsourcing are the investments of the world's large companies such as IBM in developing countries.

They offer only job opportunities to the local economies. Though some pockets such as Virtusa can be seen there is no trend of expatriate Sri Lankan professionals returning to invest in the field.

Ratnayake was of the view that to develop this as a trend there should be a stable political and business climate in the country.