In addition to language skills, the Philippines has better utility infrastructure than India — so companies spend little on generators and diesel fuel. Also, cities here are safer and have better public transportation, so employers do not have to bus employees to and from work as they do in India.

Full report.

I started with the government’s target of USD 2 billion in export earnings in 2016 from the IT and BPO sector. That’s roughly five times the level of export earnings in 2010, according to figures given to me by ICTA: close to USD 100 million from BPOs (13,000 employees) and USD 300 million from software (27,000 employees). To simplify I will maintain the 1:3 ratio.

That means that the BPO sector must grow fivefold from now to 2016. At current levels, this means 65,000 employees producing USD 500 million by 2016.

Before going into the question of whether Sri Lanka can produce 65,000 people to work in BPOs, given our constraints in people and skills according to AT Kearney, I raised a question I have raised before: the low revenue per employee in the sector. Using ICTA’s numbers I get an average monthly revenue per BOP employee of LKR 70k. Very low, I have argued. Too low to support quality operations.

So my suggestion was that we do not get hung up on the 65k employees issue. Instead we should focus on upping the revenue/employee so that we can still earn USD 500 million in export earnings with fewer than 65k employees. That way we can pay the employees better too.

Other related writing is in LBO:
4 July 2011
5 July 2010
1 March 2010

The total software earnings of USD 294 million are produced by 27,000 people. That is LKR 99,825 per employee per month. Lower than I expected.

On the BPO side, 13,000 people produce USD 98 million. That boils down to LKR 69,103 per employee per month.

Now that does not look too pretty, does it? Taking overheads and marketing into account, the firms in the BPO industry would be lucky to be able to spend LKR 40,000 on compensation per employee per month. That’s an average.

The full column is here. The preceding related column, which pointed out that Sri Lanka seems to short of people with skills is here. The two issues are related. Why we do not have enough people is because we do not pay them enough. Why we do not pay them enough is that the revenue per employee is too low.

One reason we cannot increase revenue per employee is because no one can get 5 nines (99.999) reliability in Sri Lanka. Good KPOs can work around this, but not the standard BPOs. And increasingly people are beginning to assume that video conferencing is possible. But how reliable is that in Sri Lanka?

Sri Lanka’s information and communications technology workforce has doubled in the past four years as the island ramps up training and investment to make the sector a key export industry.

A new survey said the number of ICT sector jobs increased by 100 percent to over 62,000 this year from 30,120 in 2006. Over 50,000 people are estimated to have been employed in the IT sector in 2010.

The national ITC workforce survey by the state-run Information and Communication Technology Agency covered 80 state institutions, 325 private sector firms, 30 BPO (business processing outsourcing) firms, and 75 IT training institutes.

Cannot find the report on the Dept of Census and Statistics website nor at ICTA website. Hope it will be posted soon. Until then, a news report is all there is.

India is still number 1 and China is number 2. No change.

Thailand has slipped to 7 from 4, overtaken by Indonesia.

Sri Lanka is at 21, slipping from 16 in 2009. Pakistan has slipped to 28 from 20th place in 2009.

And Bangladesh? Not in the list, again. That’s what comes from restrictive BPO policies and refusing to admit captive BPOs. I hope the Digital Bangladesh folk are paying attention.

Present broadband charges which are higher than competitor countries are deterring foreign ICT and business process outsourcing (BPO) firms from setting up in the island and are partly responsible for poor internet penetration, a report said.
“The cost of commercial broadband and internet links such as IPLC ((international private leased circuit) and leased lines is higher in Sri Lanka when compared to the region,” said the ICT draft plan by the ministry of telecommunications and information technology.

“This makes Sri Lanka less attractive for companies setting up, especially in the early days when heavy cash outflows exist.”

The availability of such quality services need to be expanded so that companies can locate regionally where pockets of talent exist, said the paper which was discussed at a meeting of government and industry officials Tuesday.

We are made happy by this announcement because it reflects the success of our efforts to initiate action through the collection and publication of benchmark data for several years. We did not stop at mere publication, but made specific criticisms about our prices being higher than those in Bangladesh and Bhutan.

High leased line prices, both domestic and foreign, must be brought down. There is much room for improvement by Sri Lanka as can be seen from the table below. A few years ago, Sri Lanka had low prices relative to its peers, but now even Bangladesh is cheaper because the regulator there has been paying attention. It is shocking that mountainous, landlocked Bhutan offers lower prices than Sri Lanka.

High-quality, low-cost leased lines with a choice among suppliers is a necessary condition for the effective application of knowledge to services, manufacturing and agriculture and their better integration to global value chains.

No matter our efforts are not acknowledged. Just get the job done and we will sing the praises.

Sri Lanka retained its position at 12 while China moved to 5, from 13 a year earlier.

“China is continuing its ascent as a services destination, and confirms it should not be considered anymore “merely” the world’s factory,” the report said.

“Sri Lanka is another Asian country that has succeeded in positioning itself as an alternative to India.”

Several Sri Lankan firms are engaging in the high-end of the market in the so-called ‘knowledge processing outsourcing’ of KPO sector.

Sri Lanka has been competing for outsourcing business for several years under the shadow of a 30-year war which increased risk. In 2009 a war ended and the country is looking forward to increasing services investments in particular.

But that aside, this is very good news. I hope SLT will offer decent leased line prices to Jaffna and that some entrepreneur will quickly move to set up BPO operations in the peninsula. Our friend Muttukrishna Sarvananthan is talking up building a knowledge economy in the North. One precondition has been satisfied.

Sri Lanka Telecom (SLT) has commissioned a fibre optic cable linking the former war zone in the northern Jaffna peninsula with the rest of the country, offering high-speed communications, a statement said.
The “information superhighway” to the north has been built alongside the A9 main route to Jaffna, where information technology and business process outsourcing ventures are being promoted to provide jobs for youth after the war.

SLT said its expanded fibre optic information system will improve customer access to high performance broadband, helping business expand and enabling all telecommunications operators to expand their operations bringing new facilities to the north.

The new cable has the capacity to meet all future requirements of the Northern Peninsula, it said.

Sri Lanka Telecom began the project after the end of the island’s 30-year ethnic war, fought largely in the north and east, in May 2009.

The good news for South Asia is that Sri Lanka has moved up from 29 to 16 and Pakistan from 30 to 20. India, of course, sits at the top, no change from 2007. The advances of Sri Lanka and Pakistan have been at the expense of the Northern European countries (e.g., Lithuania and Latvia), Singapore and the UAE. Other than Singapore, the rest of SE Asia, including Vietnam are ahead of Sri Lanka and Pakistan. Ghana, Jordan, Egypt are still ahead.

And where is Bangladesh?

I think the talk provides the "big picture" of the necessity of telecom reforms of the type that we at LIRNEasia are involved in. If we are to go beyond simply giving people phones, to giving them "money in the pocket and hope in the heart" this big picture is essential.

_note_: For those reluctant to read Word Documents online (ie me) I’ve added the talk as HTML on the following page.