Sri Lankan IT industry and its unchartered potential in local economic resurgence – An overview of the economic benefits of the IT industry by Namal Senaratna, Founder and Managing Director of Asia Pacific Technology Systems (Pvt) Ltd.
Asia Pacific Technology Systems (Pvt) Ltd. (APTS) is a multi-award-winning Information Technology solutions provider founded by Namal Senaratna, who is also the Managing Director of the company. Over the course of 14 years, the company has built a strong base of clientele, and implemented cutting-edge solutions. APTSs’ commitment to its client, hard work and resilience have driven the company to create client-centric solutions which rival global standards. Mr. Senaratna provides an overview of the IT industry both locally and globally and highlights the economic benefits that the industry can generate if given priority.
1. In your opinion, what are the technological advancements that are currently needed in Sri Lanka’s IT/ICT industry, and how can we go about achieving those advancements?
The IT industry as a whole includes businesses engaged in hardware support services, software, BPO services and cloud services. Hardware support services account for nearly half the global revenue of USD 3.5 trillion with future growth expected to come from cloud services segment. At present Sri Lankas IT industry stands at revenue of little over USD 1.5 billion, which accounts for nearly 2% of our GDP. In comparison, India’s IT industry contributes to nearly 8% of its GDP, demonstrating its tremendous potential. Even though we’re still very small, if you consider some of Sri Lankas IT products that have gone global, I’m convinced that we can also grow our industry so that it contributes significantly to our economy. Sri Lanka certainly has the resources, talent, capacity & the mindset to compete with global giants.
Investments in smart cities, BPO, Internet of Things (IoT), artificial intelligence (AI), Block Chain, and Applications with big data analytics are expected to drive future growth. Even though a national policy framework for establishing a technology-based society was on the agenda, Sri Lanka is not exactly there yet. While there are new technologies being developed by global giants, I believe that we must stay focused on acquiring what we need to meet our immediate requirements, so that we can pull ourselves out of the economic meltdown that we are currently facing. Nearly half our economy is driven by the service sector while industrial and agricultural sectors contribute 27% each. Due to our still under-developed internet infrastructure, some of the global developments may not be immediately useable. Instead, we must try to acquire or develop technologies that will help improve our education, health, banking & finance, tourism, export, and agriculture related industries over the next two to three years.
We have performed admirably in the past, as we have repeatedly emerged as a top global IT Business Process Outsourcing (BPO) destination in several international surveys. The proof is in the fact that many top global brands have set up BPO operations in Sri Lanka. Our software industry has also grown significantly over the past decade with contributions to exports doubling from 4% to 8%.
According to the McKinsey Digital Quotient framework report on Sri Lanka published in 2018, corporate Sri Lanka is placed slightly higher than the global average and we seem to have done better than other emerging markets in Asia. However, when compared with China, India, and more developed countries, we are lagging behind. McKinsey sees that companies don’t really integrate their digital visions and goals with their overarching corporate goals which is something that I have also encountered throughout my many years of industry experience. This is arguably due to a weak understanding of IT amongst the very top management of Sri Lankan companies. From a national point of view, while our leaders know something needs to be done, they don’t really understand what needs to be done or what can be done. The bureaucracy encountered in persuading the decision makers can at times be tiring and discouraging. So, in my personal opinion, both our corporate leaders and our national leaders need to update their IT education!
The Government is a major stakeholder in improving the foreign currency income through IT sector and it is a sitting duck if it can support us connect the dots. The Government can facilitate training and development of our common citizen as well the IT professionals through various interventions, be it using local expertise or having the international community share their best practices, technological knowledge sharing, use of local expertise to improve state functions, encourage trading to Asia region using diplomatic ties etc. The Government must consider IT sector important and essential to accelerate Sri Lankas digitalisation journey, but our current high corporate income tax rate is not helping nor encouraging industry stakeholders to be willing partners.
2. How do you feel about the IT/ITC industry in Sri Lanka? What challenges will the country face going forward and how do can the country harness the talent to tackle those challenges?
According to the Information and Communication Agency of Sri Lanka (ICTA) the ICT industry in Sri Lanka was expected to reach USD 3 billion revenue by 2024 but going by our current perilous economic and social state this goal is likely to be pushed back a year or two. We are a resilient people and I believe this is a temporary setback and that we will bounce back stronger than ever.
We are probably one of the only countries in the world to have been affected by three back-to-back socio-economic crises that dampened our growth. In 2019 we faced the horendous effects of the Easter attack, only to be held back again by the global Covid-19 pandemic in 2020/21. These together with the social and political events of 2022 have compounded our economic woes, threatening our very survival. Before the pandemic the IT industry employeed over 120,000 people and was well on its way to growing revenue and employment opportunities. However, with the international debt default this year, the IT insudtry, like most others, has arrived at a very difficult station.
In my opnion, as an industry, we have several challenges lying ahead of us. One of which is that the constraints on foreign currency is making it almost impossible to facilitate any sort of new infrastucture projects. Additionaly, several of our customers who have been imapcted by diluted business activities have had to postpone previously scheduled projects. When companies are forced to operate on older tech versions, in my opinion it is a high risk situation.
One of the biggest issues plaguing the IT industry is the brain drain we are witnessing at the moment. Talent in an ICT and Knowledge economy is what can create digital assets for the country and they themselves are assets of a country that need to be retained and protected. Even if the foreign exchange crisis is resolved quickly, recovering lost IT talent would be virtually impossible. Industry leaders have to put their collective heads together to stop the exodus as soon as possible. In the future, thousands of new jobs will be created that requires knowledge and IT skills but the gap in skill requirement and skill availability will be another challenge.
Another critical area is the legal and regulatory framework that pertains to Data Privacy, Cyber Security and Iinterlectual Property, especially as we deal with clients and service partners from different parts of the world. This is a high priority area that needs urgent government intervention to help make Sri Lanka conducive for international business. The rapid growth of e-commerce and remote working becoming the new normal, and Cloud servicing expected to be the engine of future growth, the importance of this matter cannot be repeated enough.
3. What opportunities are there for the IT industry growth both locally and globally?
Even though we are faced with many challenges, I also see vast opportunities in Sri Lanka. In many ways the Covid-19 pandemic tought us hard lessons. It showed the world that digitisation is the way forward. This created great demand for IT industry both globally and locally. What we need to do is grasp the shift quickly by mobilising our talented human capital with knowledge in technologies such as analytics, AI, ML, IoT, Block Chain.
In my opinion, Sri Lanka should focus on putting to rest our immediate requirements in education, health, banking & finance, tourism, export and agriculture related industries, in order to assimilate IT into our daily lives. If you take examples from other countries, you can see that IT plays a major role in all these fields and continues to evolve and grow making the common citizens life better. For example, in the medical industry, technology is widely used to improve early diagnosis, fault reductions, patient assistance and more. In trading, technology can assist to minimize routing times by providing best route-finding facilities, improving e-commerce platforms to make buyer-seller convergence more convenient.
IT is a globally competitive industry, but for countries like ours, it is more an opportunity than a hindrance. Unlike more tangible products IT products and services have the ability to breakthrough geographical limitations with relative ease, so distribution can potentially cross borders. What is important is to find like-minded partners for collaborative work. We need to put ourselves out there confidently, and actively seek fellowship opportunities in developed markets with the aim of acquiring knowledge and to persuade foreign funded project initiations over here in Sri Lanka.
In terms of people, I see much demand and opportunities for IT professionals going forward. While some entry and mid skill IT jobs maybe lost to automation in the future, our outreach to international markets, acceleration in e-commerce and the growth of manufacturing industries will see growing demand for high-skill technology jobs, especially in data analytics and cyber security.
There’s also great potential to transform Sri Lankas public sector through technology. Our public sector is large, and digitalisation of key administrative functions can help eradicate corruption, improve transparency, and bring about much needed efficiency. However, with the current political, social, and economic instability, we are unlikely to see fruition in this area in the short to midterm.
4. What does the future hold for APTS and the IT industry in Sri Lanka?
Even though at present we as a country and industry are on survival mode, we’re always looking for the silver lining in the dark cloud. I have always believed that with crises come opportunities. During the pandemic times we did exceptionally well as the world realised the importance of digitisation. As we speak, there are many projects waiting to take wings when our foreign currency constrains are resolved to an operatable level.
The Sri Lanka IT industry is advanced and one of the fastest growing areas in the economy. This has also partly been driven by our clients, who foresee the importance of digitalisation and are willing invest in the latest technology. We as a team are using this time wisely to focus on research & development, and forging closer ties with our clients and supply chain partners so that we get to understand their challenges in greater depth so we can design solutions that are future ready, friendly on the budget yet not compromise on standards. We understand that sometimes technology can be addictive and perceived as the solution to all problems, so it is our responsibility to make sure their IT investments are aligned with business objectives with demonstrable results. At APTS my moto has always been to do the right thing for the right reasons. We will not do anything to just only make money.
5. As an IT solutions provider, what has APTS accomplished over the years towards the growth of the industry, and as a SME owner, how do you see APTS growing in the future?
We are a young company of only 14 years of age. We started right at the bottom, but we are driven by the vision of ultimate customer satisfaction and follow 100% ethical practices. Perhaps that’s a reason why our clients have stayed true and loyal to us, what better achievement can any business boast about? During this relatively short period we have been able to build partnerships with some of the biggest brands in the world and I’m happy that we have been able to introduce world class product and service offerings to our loyal and growing clientele across multiple industries.
Even though at present, our focus is on SME sector, we want to grow and expand our product and service portfolio to discerning large corporate enterprises as well. I’m sure our impeccable credentials and reputation will support us with this shift. Although we also face the same issues brought about by the prevailing economic crisis, as our other industry peers, we do have a clear path to navigate APTS on this journey. I’m also so humbled and proud that I have an outstanding young team and an experienced management team that are fully committed and supportive. I fully endorse that whatever up and downs we are faced with; it is ultimately the team who makes the difference!
