Financial Times

Outsourcing has evolved from the need to enhance competitiveness, reduce costs and maximize profits enabling companies to concentrate only on the core competence, while at the same time reducing operational risks involved in management. It provides room to increase productivity and efficiency in management. The period of 1994-1996 saw a boom in Business Process Outsourcing (BPO) activities. Some business enterprises such as GM, Xerox, Kodak and IBM have been incorporating the outsourcing ethic in their business strategies for more than a decade.
Outsourcing comprises of mainly the following functions;

a.. Human Resources
a.. Procurement
a.. Finance and Accounting
a.. Customer Care
a.. Logistics
a.. Facilities Operations and Management
a.. Training
a.. Medical billing /Transcriptions

Revolutionizing the BPO industry
Sri Lanka is a potential destination for prestigious BPO activities with only a handful of BPOs operating in the country so far. To make it a more viable option, some major reforms need to be done with infrastructure, education, peoples’ perceptions and most importantly, livelihoods. The rural sector of Sri Lanka, where over 70% of the population resides, could be the resource base that is needed for BPO operations.

This would create employment for thousands and enable the rural sector to grow in phenomenal proportions.

To do this, first Sri Lanka has the mammoth task of improving the well-being of the rural sector. In a developing country like ours, where all the facilities and infrastructure evolves around Colombo, and most of the rural population struggle to survive, let alone have access to technology, it is vital to upgrade their lifestyles first by providing them with properly equipped schools, trained teachers, transport facilities, electricity, water and proper medical facilities. This is where we have to develop infrastructure in the rural areas before we even imagine reaping fruit from any high tech venture in those areas.

Role model
Nandan Nilekani, CEO of Infosys Technologies, one of the world’s leading IT services and consulting firms, based in Bangalore, India, has this to say on how India rose as a leading source of software for the world, “One does not expect a country with a per capita GDP of $3,100 (measured in terms of purchasing power parity, which adjusts incomes upward to account for low price levels in poor nations), a literacy rate of 65 percent and 65 percent of the population in the rural sector to be an IT superpower. Yet India’s knowledge based exports are expected to surpass $50 billion by 2010.

Sri Lanka’s new president sees the need for economic reforms and new trends in keeping Sri Lanka’s economy on par with other global enterprises and economies. At a speech to local businessmen before being elected as President Mahinda Rajapaksa stated that he would be a “Business and entrepreneur friendly” leader and would foster national talent and encourage foreign direct investment. He also stated that he was conscious of globalization, the impact of information technology and other changes the world was going through, and that as a small country, we also must go along with the same trend. The other important factor he stressed upon was that he was ready to give constant support to our national entrepreneurs. He also stated that “although Colombo has experienced vast development, it is not the same with our rural areas. If so, while protecting our culture, environment, bio diversity and natural resources, we must be determined to develop our rural economy rapidly.”

Like India, we need to focus on the need for fast development in the knowledge of Information Technology throughout Sri Lanka. One of the first tasks of the government to enable such enterprise would be to encourage local entrepreneurs by funding research and training centers for the IT industry across the country, and provide concessionary loans for them. We also have to change peoples’ attitudes on the subject. One of the biggest obstacles we face is the inadequacy of the English Language among our graduates. We need to revamp our whole education system. We have to accept whether we like it or not, that English is the global language if we are to be more competent in the global economy. We need to master the global language. Microsoft chairman Bill Gates in an article, wrote “Most of us now live in an information democracy. If you have access to a PC and the Internet, you can tap into almost all the information that is publicly available worldwide. Advanced software and Web services can help trace, slice and dice the information in ways that were impossible only a decade ago.” Yet, only those with an understanding and being able to interact in English would contemplate browsing a website for information.

BPOs now in Sri Lanka
Currently only a few outsourcing agencies such as IFS, HSBC, Astron, Virtusa, Hello Corp, and Timex BPO and Finance Centers such as WNS exist in Sri Lanka. Almost all of these are owned by large foreign parent companies.

The local entrepreneurs in Sri Lanka must be encouraged to initiate Sri Lankan-owned BPO enterprises. This way, the profits would be revolving inside the country rather than going overseas. India is one of the fastest growing sourcing destinations in which almost 95% BPOs are Indian-owned. If Sri Lanka is to follow suit, there are quite a bit of major reforms that need to be done mainly to the infrastructure, standards of English literacy, advancement of broadband and Internet technology and mitigation of tariff controls, which will encourage BPO operators to start up new business and expand.

The BOI and the ICTA will have major roles to play in this factor. Thousands of jobs can be created to reduce unemployment and at the same time Sri Lanka’s rural sector can also can be information rich, have better living standards and be technologically advanced. This dream is not a very far fetched one. India did this in such a short period.

The key element is fast infrastructure development in rural areas.

When we talk about significantly expanding Sri Lanka’s BPO capabilities by encouraging more investment in setting up Sri Lankan owned, outstation based enterprises, one of the first stumbling blocks that come to mind is our communication infrastructure and hardware support network. The communication infrastructure of a potential site for setting up a BPO would have to be improved to suit the needs of typical offshore consulting organizations. For instance;

• High bandwidth data lines,

• IDD, high speed Internet links,

• VOIP conference facilities,

• E-mail facilities,

are absolute musts. The capability of service providers to setup and service this type of infrastructure at short notice is mandatory (e.g. most providers would be able to provide hardware support at short notice only in and around Colombo). Note that “uptime” is critical for offshore services, especially software houses that need continuous links with principles in the EU or USA. Besides, can a budding CEO of an Infosys type firm get a reliable 100 MBPSDSL line to his office in Hambanthota? The government needs to step in, and do the needful to build the necessary infrastructure starting immediately.

Government initiatives in bridging the gap
In accordance with the Mahinda Chinthana, the current focus of the government is on strengthening the rural sector of Sri Lanka in being more knowledgeable in information technology and upgrading their living standards by influencing their daily activities through knowledge building. This means bridging the knowledge gap between the city folk and the rural folk and, gradually overcoming poverty.

This is a good thing that can happen to our rural people and the whole country. The government and the ICTA has come up with various programs such as initiating Nenasala centres in rural sectors ranging from Trincomalee to Anuradhapura and Pollonnaruwa and also the upcountry.

Their target is to open up 1000 Nenasala centres across the island by 2007. If Sri Lanka can develop this kind of knowledge and gradually have an information technology rich rural society as well as the qualified urban sector, we can then without doubt go into mass scale outsourcing which will generate foreign exchange into the country in millions of dollars.

Although previously outsourcing mainly consisted of low-skilled jobs such as manufacturing, call center and computer coding, new high-skilled functions like Accounting and Engineering and even processing of legal work are now being sent abroad. Now vacancies exist in BPOs for graduates.

Students should be enlightened about this fact. Gone are the days of the impractical theory where everyone craved to become a Doctor, an Engineer or a Lawyer to live a quality lifestyle.

Appreciating the fact that a Doctor’s profession is a very noble one, you can join a BPO as a graduate and go so far as to enjoy a quality lifestyle which might even offer better benefits.

Setbacks
We must not forget that the small BPO operators in Sri Lanka also contribute to the economy in a substantial way. Most of these small scale operations are run by entrepreneurs but they’re;

a. Not properly recognized as contributing to the economy.

b. There is no proper authority to take on the woes of these companies and or advice them and help them expand, which would help reduce unemployment considerably.

c. One of the other major issues that they face is the high rent that has to be paid for operating from Colombo. This makes them pass on the added expenses to the client and therefore put their next job at risk.

If there were substantial infrastructure facilities in rural areas where space would not be an issue compared to Colombo, they could easily expand and also employ people from the same areas thus, providing a solution to the unemployment problem. This is also one of the main reasons why the government has to provide the necessary services infrastructure to the rural areas as fast as possible. The Economic Times of Mumbai recently carried an article on small IT companies in India where it was said that, “Big gainers in the stock market this year have been some of the smaller and less talked about software companies which have more than doubled their market cap since January. Small companies were able to do this because the communication infrastructure in India is very strong.”

Scope of US/EU markets

The US or the EU consulting market is a mature one, without question. No large company such as GE or BP would even seriously consider outsourcing work to an offshore contractor unless he has a proven business background in same. The entrepreneurs who initiate BPO organizations in Sri Lanka therefore should have a thorough knowledge and understanding of what these markets want and many years work experience in the US or EU markets.

This experience can only come from experts who have moved with these markets. Therefore, the experts will have to have been domiciled in the said countries and running a business and dealing with them and also know the client market culture. To encourage these kinds of experienced expatriates to come and open up BPOs in Sri Lanka, there certainly has to be better deals that would attract them apart from the fact that they can make more profits by outsourcing.

* There should be special tax benefits for investors

* They should be able to travel frequently without hassle to secure new business

The average Sri Lankan graduate is now becoming more and more aware of the globalization trends. As a developing country, our higher education system must encourage people to literally pay penance by working for global companies and gaining varied interntional exposure, yet abandoning those comforts to return to Sri Lanka and propagate the best practices learned from their experiences, while they are still young and energetic.

This will come at a minor cost to personal living standards. One must understand that if we are to boost Sri Lanka’s profile, we must ourselves forcibly try and live up to those higher standards and ideals we seek to achieve. How else did Singapore, Hong Kong and India develop? Now the Apparel Boom is over and the BPOs are emerging with the IT Boom. We need to be equipped to take it on and prosper.