Tight Margins in Sri Lanka

Article excerpt

An expanding data processing sector at the beck and call of middlemen

"Ten years ago only a few companies in Sri Lanka dared to venture into the IT and data processing industry. But today we are in the midst of unprecedented growth in this field," claims Suresh Dominic, Managing Director of John Keels Computer Services (JKCS), a company based in Colombo, Sri Lanka's capital. Established in 1987 with a capital of over $85,000, JKCS expects a turnover of $3.7 million this year. In the last ten years it has captured substantial data processing and software business - mainly checking, validation and management of data from multinational companies like P & O Nedloyd, DHL and Mentor Computers.

By sending their data processing work tO countries like Sri Lanka, these multinationals are saving about 70-75 per cent of their costs. Meanwhile, Sri Lankan professionals also regard themselves as beneficiaries. In a country where a civil war is going on and foreign businesses are not exactly falling over themselves to invest, any business opportunity is welcome.

Competition from India and the Philippines

"There is no bargaining power," says Somasundaram Dharmavasan, Managing Director of Kingslake Engineering Systems Private Ltd, which caters to over 300 Sri Lankan businesses and twenty multinational companies. His firm does not get its orders directly from multinationals, but via agencies based in the West which earn high profits from acting as intermediaries. London-based Techno for example, receives orders from companies like British Gas, Shell and British Petroleum and then sends them overseas on a sub-contract basis. "We have always been dependent on intermediaries," says Dharmavasan. "But now our aim is to establish direct links with our clients so that we can increase profits. The market is extremely competitive, and if we quote higher rates our orders will automatically go to India or the Philippines. …