Sri Lanka has immense potential to build itself as a destination for tech products and services. The Sri Lankan IT Industry records the fifth highest foreign revenue for the nation. Following the end of the civil war, IT is one sector Sri Lanka placed high hopes on. In 2016, the industry aimed to generate $5 billion per year by 2022. But, alas, by 2019, it was realised the country wasn’t on track to achieve this target. The country has then revised this goal in 2020 to $3 billion by 2025, which is equally ambitious.
In this context, there was a need to develop a researched model over the past several years to help steer the industry’s growth. In this context, there was a need over the past several years to identify factors affecting the growth and develop a researched model to help steer its development and growth in the industry.
Primary Factors – Stability of the nation & Strength of its brand
The vast majority of IT companies, including startups, were impacted adversely by the turbulence in Sri Lanka in recent years, such as communal violence and Easter attacks. Such incidents have resulted in the loss of confidence by foreign investors and clients, translating to lower sales. Hence, it is critical to maintaining political stability, health stability and peace in Sri Lanka to grow the ICT/BPM industry.
The study further identified that Sri Lanka’s brand as an IT destination has great potential and should be strengthened further. National branding is another top factor that can drive the growth of its local IT companies. However, qualitative findings from the study show it has been proven that the Island of Ingenuity branding effort has been a failure.
Secondary Factors – Sales, Quality, and Skills
Upon analysing the state of the industry, the study revealed companies need to invest in their global sales and marketing. Likewise, industry bodies must facilitate entry into new markets. Here, the government can assist via foreign missions and international relations. However, it’s important to note that such efforts require funding at both the macro and micro levels.
But obtaining new clients is only one part of the equation. For an IT company to retain these clients, its service levels must be impressive. Positive referrals via word of mouth are also a valuable sales channel. Hence, ensuring high service levels is a necessity to maintain the cycle of growth. Sri Lanka has a reputation for high quality, but Sri Lanka is not branded well properly for that.
But quality isn’t limited to just the QA processes within organisations. It must extend to talented graduates from educational institutions. Yet, this requires the education system to be revamped and address several areas of concern. Namely, the lack of skilled workers as there’s a mismatch between academia and industry, a shortage of soft skills, and a strategy to train youth beyond Colombo.
Supportive Factors – Ease of Business and a Startup Ecosystem
Naturally, for the Sri Lankan IT industry to grow, the ease of doing business must improve. Based on our research findings, this will come in a multitude of ways. A few of them include well defined corporate and contract laws, a transparent process for investments, effective banking solutions, simplified approaches to register a company, etc.
Such steps will go a long way towards easing the process of starting, running, and closing down a business if necessary. At the same time, the government, alongside industry bodies, must promote initiatives to develop the Sri Lankan startup ecosystem. Such enterprises would accelerate innovation and the growth of the entire industry.
Analysing the results and the road ahead for the industry
Based on the results of this research, it’s evident that the Sri Lankan IT industry has great potential that remains untapped.
Addressing critical issues such as the guarantee of stability and strengthening the national brand makes it possible to develop a growth trajectory for the industry. Still, this is only the first step as the industry must also collectively invest in developing its global sales capabilities. Additionally, it must also work with academia to ensure local graduates have the skills required. Finally, regulators must improve the ease of doing business by removing barriers to ensure consistent growth well into the future.
Based on the findings of this research, it’s recommended that a high-level task force be formed to spearhead the implementation of the model, to achieve the industry targets set by the government. Such an administrational structure is necessary to ensure accountability towards achieving the current $3 billion annual revenue target. Otherwise, “We risk repeating the mistakes with the previous $5 billion target.”
Such a task force would address many of the issues pointed out by the model. Its mandate would cover the primary factors and the secondary factors by working with academia to address the skills shortage while facilitating entry into new markets. Ideally, it’d also be capable of revisiting all aspects of doing business in Sri Lanka to remove barriers for both large and small companies to operate in Sri Lanka. Thus, allowing the Sri Lankan IT industry to pursue high-value projects in AI, IoT, Data Science, Cyber-Security, etc.
Ultimately, the growth of the Sri Lankan IT industry requires progressive policy and a transparent legal framework. While the research indicates much work needs to be done, Tech parks in regional areas is a positive move announced by the current administration. These parks will provide not only much-needed office space but also the ecosystem necessary for a human capital centred industry like IT.
This article provides a synopsis of the research findings and proposed model, while the details have been published as academic papers and a book titled “A Growth Model for Sri Lanka’s ICT/BPM Industry ”.
The views expressed in this article are the author’s own and do not necessarily reflect Arteculate’s editorial stance.