Financial Times

Sri Lanka lures Indian IT SMEs to escape rising costs

Picture shows the Sri Lankan IT/BPO sector delegation at the state-of-the-art Infosys campus at the High Tech City in Hyderabad.

A Sri Lankan IT/BPO-sector delegation led by the Board of Investment (BOI) of Sri Lanka concluded a successful mission to Chennai, Bangalore and Hyderabad last week. The delegation which included Sri Lankan IT and BPO companies held successful meetings in the southern Indian IT hubs with SMEs and government agencies. The visit was co-organised by the Information and Communication Technology Agency of Sri Lanka (ICTA), IT SME Association of India and the Software Technology Parks of India (STPI), according to a BOI statement.

The focus of the mission was the attraction to Sri Lanka of Small and Medium-sized companies in India, including companies looking for joint venture opportunities. The Indian SME sector has been hit hardest by the rising operational costs, difficulties in hiring the best talent, high attrition rates and the appreciation of the Indian rupee versus the US dollar. These factors have forced many of them to look for locations outside India.

"Sri Lanka offers advantages in both costs and quality of inputs to an Indian IT SME," said Duminda Ariyasinghe, Executive Director (Investment Promotion) of the BOI. He said operational costs were also lower in Sri Lanka, Sri Lanka also provides a solution to one of the biggest problems facing IT SMEs in India, Mr Ariyasinghe said. “In India, the best IT-related talent often migrates towards large companies due to social and cultural factors influencing the young demographic. However, in Sri Lanka, it is possible for a small IT company to make a name for itself quickly and hire top talent because of our entrepreneurial culture,” Mr Ariyasinghe said, according to the press release.

One of the companies that has been looking out for overseas investments is Blueshift, a Chennai-based IT firm with an annual turnover of US$ 2 million. Chairman of Blueshift Dr. Sankaran P. Raghunathan, who is also the President of the Indian IT SME Association, said that despite the challenges, the SME IT sector in India was growing annually at 67%, double the industry standard. "When the BOI contacted us we were delighted to host the delegation as the Indian and Sri Lankan IT sectors can complement each other," he said.

Apart from the incentives offered by the BOI, Indian IT companies enjoy a special advantage by locating in Sri Lanka, Dr. Raghunathan said. An IT company based in India is liable to a 12.36% service tax on sales to a customer in India. However, the same company would be exempt from this tax if operating and making the sale to the customer from Sri Lanka, he said.

The main investment forums in Chennai, Bangalore and Hyderebad were held in the offices of the Software Technology Parks of India (STPI), the agency tasked with developing the IT infrastructure in India, in co-ordination with state governments. The forums were well attended with a number of Indian SMEs submitting proposals to the BOI, with a visit to Colombo by a larger inward delegation planned for later this year.

"This was a successful mission that focused on developing links with the right segments," said Mano Sekaram, Chief Executive Officer of Eurocenter DDC, a Sri Lankan IT company which is co-owned by a Norwegian firm. Mr. Sekaram who is also the President of the Software Exporters Association of Sri Lanka (SEA) said the country had much to learn from the experience in India, in particular the development of the IT infrastructure.

The delegation comprised Duminda Ariyasinghe, A.W.M. Faizal and Kosala Harischandra of the BOI; Dr. R.B. Ekanayake, Fayaz Hudah and Ms. Rukshika Sinharachchi of ICTA; Nishendra Manathunga of BPO Services (Pvt) Ltd; Mano Sekaram of Eurocenter DDC Ltd; Omar Fatha Rally of Hellocorp Pvt Ltd; Jeevan Gnanam, Mario Offen and Hariharan Padmanaban of Orion Management Consortium (Pvt) Ltd; H.D. Gunewardena of Prudential Holdings (Pte) Ltd and Chandima Cooray of Sabre Technologies (Pvt) Ltd.

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