Business process in-shoring in Sri Lanka

Posted on September 23, 2006  /  24 Comments

Finally, a major company has shifted its call center out of Colombo. When will the government call center follow?

Telecommunications allows for distance to be overcome. Taking back office operations to Rajagiriya is not enough; there should be call centers in Hambantota and Trincomalee.

Now that the SLTL fiber is on its way to Hambantota, the former may yet happen. Trinco, of course, is another story.

Full story


  1. Hi Prof, Harsha,

    Neat stuff. SL BPO market is quite small in terms of investments — USD 13 mn vs USD 50 mn — touted by BOI.

    Unfortunately, the issues holding back BPO growth remains the same.

    Out of curiosity: a) who was the first BPO
    b) who are the big 4 operators mentioned in the report
    c) any tidbits on accent nutralisation, as you mention training in the survey
    d) what does ICTA hope to gain by this data, are they in a position to push for reforms?

  2. Sounds interesting, Although your focus is very narrow…

    Its not only the cost and the telecommunications factor that should be considered…. whats most important is the quality of people, language skills, be it in any language….

  3. I hope Moin read the report as whole. It does not limit itself to telecom in anyway. Being a survey, it reports what the BPO operators thought were important.

  4. When President Premadasa wanted to move garment industry to rural areas the pessimists objected. However, in spite of their negative predictions, now it has been proved that apparel industry has a better base in rural areas than in urban and sub urban areas like Ratmalana and Katunayake. One reason was that it was a labour intensive industry and the HR costs were much lower in rural areas.

    However, for the call centre industry it is an entirely different story for so many reasons.

    (a) The skill set required for call centre operators is at a higher plane than that required from apparel sector employees. (After all, sewing is nothing new to any rural girl. Being a call centre operator is a different task.)

    (b) The transport issues are critical in the call centre industry. (Specially when there is a 24 hour operation.) Not to mention the security issues. As we all know both transport and security in rural areas are much below the level one expects.

    (c) While the HR costs may be lower in the rural areas, the technology costs (both ownership and maintenance) are higher. i.e. to use a PC in Hambantota costs more than using the same in Colombo.

    Yes, none of these are challenges that cannot be met, but the question is, whether it is worth taking the trouble.

    Most of the call centers (specially those work only in Sinhala and Tamil) do not provide a large number of job opportunities. Government Call centre employs only 10-12 people. (In contrast, a factory employs 100-200 youth.)

    What is the maximum number of youth can be employed in the call centers that operate in vernacular? Not large. It might create few hundreds of jobs, but that’s it.

    It would be a better idea to have something like an “IT park” in Hambantota and try to move some of the international level call centers there than trying to promote vernacular call centers in rural areas.

  5. Ignoring the “pissa” in the thread, I would like to add these observations to the above post of mine.

    1. Sri Lanka has a good potential for Business Process Outsourcing (BPO) but the possibility has never been seriously analysed – not even by LIRNE. (The LIRNE study is more a “news story” rather than a serious analysis for future potential.) ICTA is more interested in basking the glory of the business generated by others, rather than actively trying to develop this industry.

    2. Developing BPO industry in SL was one of the key objectives of e-Sri Lanka. This never happened because not even a single person at ICTA knew about the nuts and bolts of BPO industry. Prof. Samaranayake or Fayaz Hudah do not know even the basics.

    3. There are so many Sri Lankans knowledgeable in BPO, having involved in it for ages. I have worked with some of them. There was this legendary guy “Nanda”, with his famous question “Why can’t we digitise that?” for every pile of papers he sees. Why can’t ICTA recruit someone like this?)

    4. BPO is not just call centers. It is a much broader business. In addition to call centers, BPO covers digitising records, data entry services, tele marketing services, animation creation etc. Each of these lines is different from others. The latest is Media Process Outsourcing (MPO) where the studios in Bangalore or Hyderabad edit design news clips for key news channels like CNN.

    5. To ICTA, BPO = call centers. That is all those fools know. So they do promotion for any of the other lines.

    6. Developing the HR necessary for the IT and ITES industries was also another objective of ICTA. Dr. Gihan Dias was recruited specially for this purpose. However, either in Manju or post-Manju periods, ICTA has hardly done anything to develop the skills of the ITES workforce, other than paying lip service. Perhaps it is too much to expect ICTA to produce the necessary workforce for a healthy BPO industry.

    7. Moving call centers to rural areas is an “ideal romantic dream” to be sold before an election. (Ranil W, art thou listening?) However, there are so many practical issues involved (pl see my previous post) and it might not worth the trouble.

    8. On the other hand, there are other lines of BPO business (like digitising) we can move to rural areas. Unlike at call centers, the digitizing operators need not have English skills.

    9. Tele marketing might be the most difficult area to develop in the Sri Lanka cultural set up. Most Sri Lankans are not good in marketing. Neither Sinhalese nor Tamils see marketing as a “respectable” job. Some of the tele marketing firms like find it extremely difficult to retain their work force. (Everyone leaves after 3-4 months) So capacity building in this area is a dire need.

    10. Given the talents of our youth, MPO and animation creation (for media and movie industries) are the lines to take. There are ample business opportunities in those areas.

    11. Finally, if Sri Lanka ever wants to develop its BPO industry we need a champion to take that cause forward. Not that senile batty Prof. V.K.Samaranayake. It will be easier for a camel to go though the eye of a needle than ICTA to promote BPO under its current frame work of Sorry, guys till Sam is there forget BPO in SL.

    Can somebody please mail this post to World Bank CMB office?

  6. “Now that the SLTL fiber is on its way to Hambantota, the former may yet happen. Trinco, of course, is another story.”

    They have already started a BPO venture in rural Mahavilachchiya too. But there is no presense of SLT in there, let alone Fibre, they don’t even provide regular land lines there.

    We can see if Mahavilachchiya can succeed in BPO. They have done tremendously well in other areas and there is no reason why they cannot.

  7. Sorry, I am not Channa D. Fernando. But I agree with the points he has raised.

  8. Obviously Channa D Fernando is quite knowledgeable about BPOs. I was impressed by the fact that he knew exactly how many people worked in the government BPO (1919).

    His criticism of the LIRNEasia report on BPOs is noted and in fact there is little disagreement about its descriptive nature. But in its defense, that’s what it set out to do: describe. That’s what a baseline survey tries to do. If the description was not good, then we’ll be apologizing.

    The whole thing started with the ICT subcommittee of the Ceylon Chamber of Commerce wanting to establish a baseline so that it could figure out whether it was doing any good or not.

    Separately from LIRNEasia, I have been promoting the move of BPOs out of Colombo, not necessarily to Girandurukotte, but at least to the secondary cities like Kurunegala, Galle, Matara and Kandy. BOP location decisions must be taken by the entrepreneurs. What government should do is create the conditions. The conditions are not there right now, because backhaul costs and reliability issues (even in Colombo).

    For example, Dialog Telekom has 500 working on customer support, compared to the 12 at 1919. If at least 200 of these can be located in Kurunegala, won’t that make a difference?

    We welcome discussion on these ideas. If Mr Fernando can propose some specific things that can be done, I am sure the Chamber Committee will be receptive.

  9. Interesting posts and I quite agree with Channa D. BPO is not only about call centers. It’s more than that and goes to various other areas as well.

    I would like to know views on one key issue attracting BPO’s to country like Sri Lanka. It’s none other than the country image, specially in the present context.

    I travel frequently and just returned from a regional ICT event and whenver I talk about Sri Lanka 1st thing someone would ask is, ARE YOU SAFE? IS EVERYTHING OK? WHICH PART ARE YOU FROM? ISNT IT A RISKLY PLACE? rather than asking about how is your ICT industry, How’s your INFRASTRUCTURE, How’s your TALENT POOL etc.

    As per my observation this is a great challenge. I recently asked one of regional business partners to re-look at outsourcing some of the work they do to Sri Lanka so the cost of handling such work is cheaper. And also I told them we have good infrastructure etc. However they said, even though you can convince us we can’t convice our clients as they have a negative image about the country as a whole. As per this they are not keen to outsource the work eventhough it’s cheaper.

    So this is a real challenge which I personally came through when I wanted to encourage some overseas people to move to Sri Lanka not in big scale but in a small scale to start with. However I have not given up and going to keep pushing them using various strenghts of the country. But, daily whenever CONFLICT related news goes on internationa media with greater negativity to GOSL such as what we observered recently people get really alarmed and wants to be out of it. On the other hand there are various other safe/secure destinations that people can think of.

    If things goes like this as per my observations attracting Sri Lanka as a BPO destination is going to be a mighty challenge. I am sure it’s a challenge already though there are few people operate BPO’s.

  10. Guys,

    This is an interesting debate.

    See this news item.

    Please note: “IT industry in India needed something like 350,000 engineers per annum, but no more than 150,000 of the most highly-skilled engineers were available each year.”

    Even if we have problems in starting a BPO industry here (be it due to security or infrastructure issues) we can still train our youth for the Indian IT/BPO market.

  11. What Harsha has come across is the problem discussed in

    When we were working on creating the conditions for BPOs back in 2002-03, we knew about this problem, but then we were working in the context of the positive vibes created by the CFA. Now we are talking about MPs being picked off in the middle of a checkpoint surrounded capital city. Different game.

    This particular thread is not on off-shoring, but on in-shoring. Getting the jobs created in cities such as Kandy and Kurunegala. While the government of consensus works things out, people still got to live.

  12. Interesting discussion! Since Rohan has already explained what the objective of our study was, I see no reason to clarify further.

    The discussion is on in-shoring; how can we get, say, for instance Sri Lanka Insurance to run a BPO in Kurunegala to do part of its accounting? Kurunegala I would assume might have a fairly large number of partially (or fully) qualified accountants looking for rewarding work but don’t necessarily want to relocate in Colombo. What is preventing from this hypothetical SLI from setting it up?

    A recent (October 2006) research study on competitiveness among global cities by NeoIT lists 6 generic factors affecting the choice of one city over another. Access to labour (availability of persons with the right skill set, attrition etc) and risk factors (crime, political instability, natural disasters etc) are found to be of Very High importance. Costs (wages, rents, utilities etc) and social and living environment (government support, things to do etc.) are found to be High. Infrastructure (telecom, transport, office space etc.) is found to be Medium-High. OIv4i08_1006_Global_City_Competitivenessov.pdf (169KB)

    While the NeoIT study is on global cities, I don’t see why this approach would be very much more different from selecting a local city; Kandy vs. Kurunegala vs. Kamburupitiya vs. Killinochchi. The only big difference, given Sri Lanka’s specific government failure in providing infrastructure to the provinces, I would think is changing the level of importance in the infrastructure component.

    Cities should start competing for the SLI business. They should form alliances in the cities; perhaps bringing together people from local chambers and local governments to make marketing proposals to lobby for in-shoring business. Suddenly, there will be ‘competition for the market’. One could argue that this will result in a win-win-win; win to SLI to save costs; win to the city to get more business and taxes; most of all a win for the young accountants to get a decent job!

    You may dismiss this as pipe-dream, but unless you start thinking out-of-the-box and is willing to settle for less than perfect solution (given ground realities) we will never move ahead. (Thank you Rohan!)

  13. donald, that is why i took an accounting example; so that the need for language proficiency is minimal.

    the majority of BPO work that happens in sri lanka (for overseas clients) is in fact accounting related; the reason for which is clear.

    never have i said what you are consistently promoting is not relevant; in fact is is very relevant. only, i am not a technical person and more importantly my focus is something else. in fact because of its importance, i tried to bring this issue out in the open and even tried to have a 30-minute discussion on prime time tv. i am quite disappointed that none of the big talkers had the guts to debate this issue on tv for us to get some real momentum going (well, except you).

  14. samarajiva,

    I will respond in detail, but a quick point.

    You say: This particular thread is not on off-shoring, but on in-shoring. Getting the jobs created in cities such as Kandy and Kurunegala. While the government of consensus works things out, people still got to live.

    Why you worry so much about “in-shoring”? I am sure you do not fall into the category of people who want to eat even before the rice is cooked. Let us first cook the rice and then eat it. It takes time, but that is the proper way to do it.

    Let us focus on “off-shoring” for the moment. If we can bring enough off-shoring BPO business to Sri Lanka the spillover will automatically move to outstations.

    The first 5-star tourist hotels were built in late 1960s in Colombo. I do not think those days anyone would have imagined we would have a similar hotel in “hadda pitisara” Kandalama. It happened automatically without any special effort. Same will happen in the BPO industry.

    I would also like to remind you that a large proportion of operators in Colombo BPO business are originally from outstations. In fact, I know some boys even from Kurunegala.

    So as far as the jobs are concerned, the “in-shoring” has already taken place.

  15. samarajiva,

    You ask whether I have to present anything to the Ceylon Chamber of Commerce. Yes, I may, but it will take some time, because I have to do my home work.

    For the moment, let me tell my previous experience with “authorities”.

    There are two government agencies responsible for bringing in BPO business here, BOI and ICTA. Just like the Tourist Board markets Sri Lanka to attract tourists these two bodies should bring BPO business. Unlike you and me, these guys at BOI and ICTA are paid from the tax payers’ money exactly for that.

    We, as individual citizens, can only dedicate a limited amount of our time and the maximum we can do is to offer them our ideas, which I have done repeatedly.

    No, I do not think the government should do everything, but there are reasons we need strong support from government for this task. Let me give you two examples.

    1. The local labor laws and not favorable to a healthy BPO business. It is a volatile business so one cannot think of any “permanent employment” in BPO. Further, some of the regulations in shop and office act are discouraging. (I know, recently they have changed the regulation that females cannot work after a stipulated time.)

    2. We all know about people like PBJ. This man looks for any thriving business and the moment he sees one he puts a tax on it. So it will be quite possible that PBJ puts a tax on BPOs in near future. (Say pay an amount of Rs. x on each seat of a call centre!!)

    Question is who takes these issues with government, on behalf of the BPO industry.

    Do you think that senile, ailing, selfish, corrupted, half-nut, half-dead Prof. V. K. Samaranayake will ever take these issues with government?

    Will he ever assure the investors that government will not interfere with the BPO business?


    That is why we need a champion within the government. We need someone powerful. Not a chota bhai. Should be at least a minister or somebody who can say to PBJ to go and fly a kite.

    Do you think Ceylon Chamber of Commerce is capable of creating such a champion? I am not sure.

    I am already tried my luck with BOI and ICTA. So I do not want to waste my time with those fools any more.

    Fayaz Hudah, the guy who is in charge of the private sector development at ICTA is gross incompetent. I have tried to explain the BPO business to him, but that fool cannot even understand the basics of business. (Not to mention his boss.)

    What can we do if government employs such hopeless people?

  16. dear mr channa d fernando

    could we please keep this blog decent without attacking people and calling names? at the end of the day we need everyone to work together if we are to make it work, so lets not burn any bridges.

    i hope you take this in the right spirit.

    thank you.

    harsha de silva
    lead economist, lirneasia

  17. Harsha,

    If you think you can work with the present lot of ICTA and develop the BPO industry, all the best to you.

    To me, it is only wishful thinking.

    I do not say Manju was perfect, but when Manju was there at least there was a possibility to voice our views in the private sector forum. Not that all the issues raised by us were addressed, but at least it was good have a forum to record our otherwise unheard voices.

    Now private sector form has become only a one way communication. We gather once in a while to hear what old man and the clan have done or what they present as they have done. No opportunity for us to talk.

    I rest my case. This is my last post.

    It is better to spend time to plant manioc than talking about Sri Lankan BPO industry.

  18. India actively promotes BPO industry within its Special Economic Zones. (SEZs)

    There are some of the benefits given to investors / developers within SEZs. (Source:

    » Developer of SEZ may import/procure goods without payment of duty for the development, operation and maintenance of SEZ.

    » Income tax exemption for a block of 10 year in 15 years at the option of developer as per section 80-IA of the Income Tax Act

    » Full freedom in allocation of developed plots to approved SEZ units on purely commercial basis.

    » Full authority to provide services like water, electricity, security, restaurants, recreation centers etc. on commercial lines.

    » Foreign investment permitted to develop township within the SEZ with residential areas, markets, play grounds, clubs, recreation centers etc.

    » Develop Standard Design Factory (SDF) building in exiting Special Economic Zones.

    » Income Tax exemption to Investor’s in SEZ’s under section 10 (23) G of Income Tax Act.

    » Exemption from Service Tax

    » Investment made by individuals etc. in SEZ company also eligible for exemption u/s 88 of IT Act.

    » Development promoted to transfer infrastructure facility for operations and maintenance u/s 80-I-A of IT Act

    » Generation, Transmission and Distribution of Power in SEZs allowed.

    Are any such incentives provided to BPO operators in Sri Lanka? Or are they treated as another set of businessmen?

    What are the incentives / facilities ICTA guarantees for a prospective BPO operator?

    Can someone from ICTA please educate me?

  19. In-Shoring to Nenasalas

    I am surprised why nobody still raised a question about the possibility of converting the already existing Nenasalas (with their reliable VSAT broadband links) to local “in-shore” BPO centers.

    Is it impossible to do this?

    Anyway, the following are the observations of Mr. Niranjan Meegammana of fame, who visited many Nenasalas recently to implement their “Shilpa Sayura” project. (I reproduce the list below without editing or commenting)

    What have we learned ?

    1. Nenasala are not what we think they are

    2. Nenasala and a tele center are totally different models

    3. Most successfull Nenasals are the poorest

    4. Each Nenasals is unique in their geography, sub culture
    and operations

    5. Financial success of Nenasala depend on geographical location

    6. Nenasala in isolated villages do a great service to the community

    7. None of the nenasala have been able to attract Farmers, Fisherman or Workers (Shilpi), Women and Elders

    8. Electricity bill is their major concern

    9. Nenasala 2nd Layer actually runs Nenasala, The some operators dont even come to Nenasala, One location Operator had appointed a Manager, who knew nothing about computers.

    10. Many Nenasala in rural villages does not pay more than Rs. 2000 to their staff. (No income) . Some work 6-7 days a week.

    11. In some locations Nenasala is the shelter for unemplyed educated youth.

    12. Other than ICT education and Phone calls Nenasals rarely provide other services

    13. Nenasala has benefited greatly to students and youth.

    Niranjan also suggests that it would be best if we re-look at Nenasala model, re-work concepts, align current Nenasals towards sustainability.

    So what is wrong with “in-shoring” some of the local BPO operations to Nenasalas? The infrastructure is already there, so why not use it?

  20. Dear Admin,

    Thank you very much for moving the posts to the correct thread.

    Please give an opportunity for the users other than Donald to express their views too.

    This is the only site where we can freely express our views. You are doing a great job by providing us this space. Please keep up your good work.

  21. we are a US based company which deals in VOIP (voice over internet protocol) Can some one in this forum tell me that what kind of technology the BPO’s are using in Sri Lanka.

  22. well it really was nice to read all the comments about bpo industry in sri lanka….well its a booming industry,no qustion about it!..its also true that we do have some obstacles to expand this sector..but we all should work to gether in cluding the government it self to over come this situation… sure in time to come everything will be in place for us.

  23. I want to find a low registration fee deta entry job in srilanka to do as a part time job by using computer

  24. I want to find a deta entry job in srilanka