Sri Lanka’s newly created outsourcing trade association, Slasscom, believes that the country has the necessary attributes to become a leading center for business process outsourcing (BPO) services.

According to independent market analysis firm Datamonitor, although the country has learnt much from India's success, it must develop its own strengths and focus on attracting high-profile vendors over the next few years.

Sri Lanka shares many of the attributes that make India such an attractive location for outsourcing work Datamonitor said in a statement. These include a low-cost of labor, a plentiful pool of educated and English-speaking workers, high literacy levels, and a legal system that is based on a Western model.

While a broad range of both IT and BPO services can be delivered from facilities in India, Sri Lanka has opted to focus on just a few domain areas, including finance and accounting BPO, and knowledge process outsourcing.

The decision to adopt a narrow focus on areas such as finance and accounting is a sensible one according to Datamonitor. Sri Lanka, with a population of around 20 million people, cannot hope to match the all-round capabilities of India (which has a population of well over one billion) but it does have a significant labor pool of qualified accountants waiting to be tapped.

According to figures from the Information and Communication Technology Agency (ICTA) of Sri Lanka, approximately 50,000 Sri Lankans qualify as accountants each year.
Despite these positive qualities, there is much work to be done before Sri Lanka can be considered a major outsourcing location. Competition among nations has never been stronger, with locations in China, Mexico, the Philippines and the Czech Republic, to name but a few, proving themselves capable of delivering high-quality low-cost services.

Sri Lanka must contend with a number of other challenges that could retard growth. The key being infrastructure; telecom costs in the country are high when compared with the rest of South-East Asia, which can reduce the country's cost advantage over its local rivals. Secondly, its IT and BPO industry is currently heavily centered on the Colombo metropolitan region and there are question marks over the ability of second tier cities to support this kind of work. There are also serious concerns about the security situation in Sri Lanka.