The article presents our bullish case for Sri Lanka as the next breakout premier hub for the global IT industry. It highlights several factors that contribute to Sri Lanka’s position, including:

1. Strong Education System with a Cultural Affinity for STEM: With many students in STEM programs and Western education brands offering English-taught courses, Sri Lanka excels in STEM education. High English literacy rates further bolster this advantage.

2. High Ranking as an Outsourcing Destination: For several years, Sri Lanka has been recognized by a myriad of organizations and associations such as Startup Genome, A.T. Kearney, IBM and many more for its affordability, and diversity of its talent. 

3. Democratizing Tech Skills: Led by one of the wealthiest businessmen in Sri Lanka, who has launched an initiative providing free STEM education online and on national TV, to enhance the supply of engineers, scientists, and more. 

4. Rising Interest in Remote IT Jobs: There’s a growing demand for remote IT jobs. Many seek global companies offering USD-pegged salaries, with families encouraging careers in software engineering.

5. Thriving Tech Companies: Companies like WS02 and Virtusa are showcasing Sri Lanka’s potential in the global IT sector, reflecting a vibrant and dynamic tech ecosystem.

A Cultural Affinity for STEM

When you think of India, particularly South India, you immediately think of the abundance of technical talent, and rightfully so. Sundar Pichai, Satya Nadella, and Indira Nooyi all hail from South India, and the region is a renowned hub for producing top-tier tech talent. Sri Lanka and the southernmost part of India are separated by less than 100 kilometers. In many ways, Sri Lanka has cultural traits and practices similar to South India’s. Many South Indians, and in general, Indians have a strong inclination towards the fields of Science, Technology, Engineering and Mathematics (STEM). India boasts the 2nd highest number of total graduates from STEM per year and 5th for the highest percentage of STEM graduates. In Sri Lanka, there is a similar trend towards students selecting STEM fields for their secondary and higher education. Like South India, most parents in Sri Lanka encourage their children to pursue these fields. As a result, the country has many prospective students studying and pursuing STEM fields. 

Undergraduate Output by Field Studied (2022)

Note: Numbers are for Government universities only.

Undergraduate Enrollment by Field Studied (2022)

Note: Numbers are for Government universities only.

Source: Author’s own analysis of UGC data, 2022.

Our analysis of the University Grant Commission’s latest data shows precisely that. In 2022, undergraduate enrollment for STEM courses in Government/State Universities accounted for 34% of total enrollments. Similarly, STEM faculties in Sri Lanka combine to produce more than a quarter of all undergraduates coming out (i.e., completing) of state universities. Although this figure is not as high as India’s (30%), it is on par with the United Kingdom (25%) and higher than the percentage produced by Sweden and Australia. 

Access to Foreign Institutions

The numbers we’ve mentioned above include only State Universities. In Sri Lanka, your to enroll at a State University, it depends on your performance, with preference given to top-performing A/L students. As a result, many students are denied the chance to attend government universities due to a lack of available openings. So what happens to everyone else? Fortunately, Sri Lanka is also home to 27 Private Universities that offer programs affiliated with many well-known Universities in the U.K. and Australia. The students who don’t get accepted to State University, and those who completed their secondary education at private institutes can attend these universities. A majority of the private universities in Sri Lanka specialize in offering STEM programs. For example, the largest private institute – the Sri Lanka Institute of Information Technology (SLIIT), has ~10K students and is accredited by the Institution of Engineering & Technology, UK. Students also have the luxury of choosing programs from Universities such as Monash, University of London, and Deakin University among many more. 
Furthermore, early this year, to improve its competitiveness and position itself as an education hub, the Government of Sri Lanka approved a proposal by the Ministry of Education to enter MOUs with several foreign universities from the U.S., U.K., China, and Australia. In another win for the IT industry, the globally renowned Information of Information Technology (IIT) India announced that Sri Lanka would be the destination for their 3rd foreign branch. IIT has produced several Indian business leaders, notably Sundar Pichai, Narayana Murthy, and Bharat Desai. The introduction of foreign programs to state universities and the entry of well-established foreign institutions such as IIT significantly improves access to quality education, particularly around STEM fields, and will further enhance the technical capacity of Sri Lankan talent.

Source: SLIIT University.

Democratizing Tech Skills

Along with the availability of private universities that focus on technology and engineering (e.g., SLIIT. SLTC, etc.), students in Sri Lanka have also had the opportunity to participate in and attend several other I.T. programs that enhance their technical skills. These programs provide students access to world-class global material and courses from institutions such as Google, Harvard University, etc., accelerating their tech career and enhancing their competitiveness within the global talent pool. Some notable programs in the country include: 

• Google Summer of Code -Google Summer of Code is a global, online program focused on bringing new contributors into open source software development.. Participants work on a programming project lasting 12 or more weeks with an open-source organization, receiving guidance from mentors. Now in its 20th year, Sri Lanka has been one of the most famous participants, participating since its inception in 2004. The University of Moratuwa has led participation in the program for many years and accounts for one of the highest total participation by a single university in the program. 

• D.P. Education – Founded by one of the wealthiest men in Sri Lanka, DP Education, founded by Dhammika Perera, is an initiative focusing on increasing quality and access to digital education and learning. The platform has partnerships with Microsoft, The University of Moratuwa, UNICEF, Age of Learning, and more, and it provides a variety of courses across programming, coding, robotics, and general technology skills. D.P. Education received ‘The Disruptor Award‘ by Bett Asia in 2023 for its innovation in reshaping the education landscape. According to a recent article, the program has helped boost the I.T. sector by empowering 30K students through 142 campuses.

• Springboard – Founded by Calcey in 2023, Springboard is a no-strings-attached scholarship to students who participated in MOOCs (Massive Open Online Courses) from the world’s best universities, curated by Calcey’s engineering leaders. The curriculum, which consists of courses from universities and organizations such as Harvard, Georgia Tech, IBM, University of Michigan, and TUDelft, was delivered via its exclusive partner – EdX.com. The program concluded in mid-2024 and provided more than 20 students with a blended learning approach, equipping them with adequate skills for the demands of the global tech environment. 

Advanced English Proficiency

Sri Lanka has a higher literacy rate than its neighbors in Asia boasting a rate of 92%. The government has two official languages, Sinhala and Tamil. However, English is considered a link language between many people in the country. In practice, English in Sri Lanka plays a significant role. It is used in the Supreme Court, is prevalent in media and advertising, is resurging in education, and is the preferred language in private business and commerce. Among many people, especially in the capital of Colombo, English is considered a native language. This should be no surprise, as the island was a British colony for over 100 years. 

Though most of the population use Sinhala as their primary language medium during their education, they begin to learn English at the start or during pre-school, as shown in the figure below. The data from British Council also show that students are also spending considerable time learning English in school, with ~50% of students spending between 3-6 hours per week on English. The report also found that ~75% of students chose to study English outside school.

The grade participating students from Sri Lanka started learning English

Time spent learning English per week at school

Source: British Council.

Furthermore, according to the latest IELTS data,  the standardized English language proficiency test for non-native English speakers globally, Sri Lanka ranks higher compared to other countries in the Asian region. As shown in the figure below, the average performance by Sri Lankans in the Academic exam ranks 7th highest in Asia. It significantly outperforms the average score of 6.1 among Asian students. The government of Sri Lanka is placing further emphasis on English proficiency and hopes to roll out the’ English for All’ by 2030. These initiatives, combined with many young Sri Lankans consuming digital content primarily in English, show that the country is well on its way to further increasing the number of people ready to contribute to the global economy. 

IELTS, Academic Mean Performance by Nationality, 2022

Source: Authors own analysis of IELTS data, 2022.

The Allure of USD Salaries

Traditionally, for companies employing Sri Lankan workers, remuneration was paid out in the country’s local currency, the Sri Lankan Rupee (LKR). In 2022, when Sri Lanka went through an unprecedented economic crisis, the Rupee reached an all-time low relative to the U.S. Dollar. While many companies were struggling to stay afloat, the tech sector was mostly facing a brain drain. Many of the highly skilled personnel in the country were seeking opportunities abroad. As a result, these companies, primarily those offering software outsourcing services, decided to provide salaries pegged to the USD. Calcey Technologies was one of the first companies to start paying salaries adjusted to U.S. dollars in 2022; here is what CEO & Co-Founder Mangala Karunaratne had to say:

“We started moving towards USD-pegged compensation in the early part of this year. As with all our other great ideas, this too was actually suggested by our own people. The fact that 70+ other IT/BPO firms have since done the same suggests that we were right”

The currency has stabilized, but the trend of employees seeking USD or Euro payouts is prevalent. According to an independent analysis, more than 192 companies out of 300 currently offer remuneration pegged to a foreign currency. As the employees of foreign contractors are exempt from local income taxes, it makes them even more attractive to prospective employees.Consequently, many young and aspiring individuals look to work in the tech sector, specifically for companies offering these benefits. 

As a result, there is a significant opportunity for companies to enter and operate in the Sri Lankan market, specifically companies that can offer Sri Lankan I.T. talent the ability to work with a global clientele, compensate them in foreign currency, and enjoy economic benefits. 

Where do the Top Minds Land?

I’ve made the case for why Sri Lankan I.T. talent ranks among the best in the world for companies looking to augment their operations or begin an evergreen venture. But where does all the top-tier talent work? Throughout the article, we’ve drawn several similarities between Sri Lanka and South India. However, one instance where the difference is evident is the presence of large multinational I.T. companies. Several cities in South India are home to offices from Google, IBM, Amazon, and Microsoft, among others. The presence of large MNC’s results in many I.T. workers in India preferring to work for these global giants, as well as unicorn local startups that offer employees equity. However, in Sri Lanka, there are no FAANG offices or delivery centers. As a result, the top-tier talent tends to go to companies that can offer them competitive forex-pegged salaries and the ability to work closely with foreign clients, and they are most often the I.T./software outsourcing companies.

While Sri Lanka lacks the presence of the FAANGS of the world, Sri Lanka is home to some notable success stories. For example, early this year, Colombo founded, open-source software company WS02 was fully acquired by one of the largest Private Equity companies in the world, EQT for 600M. In 2021, global engineering services giant Virtusa, founded in 1997 in Sri Lanka, was acquired by Baring Private Equity Asia for $2B in 2021, marking one of the largest tech deals in Asia. Sri Lankans also developed ‘The Millenium Exchange’, the Electronic Trading Platform responsible for powering the London Stock Exchange, and many other exchanges across the globe. In 2009, Millennium I.T., the company that developed the product, was acquired by the London Stock Exchange Group for a deal estimated to be worth ~$30M. Despite these companies’ global successes, they are still deeply rooted in Sri Lanka. WS02 and Virtusa are headquartered in the U.S., andLSEG in the U.K, but all of these companies still maintain their primary delivery centers in Colombo.  This is a testament to the overall technical capacity of Sri Lankan talent, and its ecosystem. 

The Pearl of the Delivery World?

These success stories and the abundance of highly skilled technical talent have helped accelerate Sri Lanka’s overall I.T. capabilities. Sri Lanka is typically an outsourcing destination for back-office services (BPO). However, many foreign companies are realizing the untapped potential that Sri Lanka has to offer vis a vis their strong English proficiency, focus on STEM, and the inclination for employees to showcase their talents on the global front. In the recent past, we’ve seen several well-known brands set up in Sri Lanka, looking to capitalize on the talent pool. Notable examples include: 

• OceansXYZ—Oceans hires operational talent in Sri Lanka and matches them with world-class startups around the globe. Founded in 2022, the company employs more than 250 people from Sri Lanka. In a recent interview, this is what OceansXYZ Founder Ian Myers had to say about Sri Lankan talent.

“I realized there is nowhere on the planet with a better price-to-talent ratio than Sri Lanka.There are a few reasons for this. One is their strong university system with close ties to the U.K. university system. You have a very Western-educated population. The difference between Sri Lanka and for instance, The Philippines, is that remote workers typically handle customer service roles. In Sri Lanka, the workers are experienced in accounting, growth marketing, sales, admin operations, and finance. This island probably has the most CFAs per capita out of any country worldwide.”

• Ernst and Young Global Delivery Services (GDS)—In 2021, EY established a GDS delivery center in Sri Lanka, employing over 250 personnel in roles across finance, accounting, analytics, human resources, consulting, and more. The company aims to double its workforce by 2025. 

• HCL Technologies – In 2020, HCL established a global delivery center in Colombo. In 2021, HCL expanded its presence in Sri Lanka by opening a new facility that can house around 4000 employees. 

“Sri Lanka is one of HCL’s key global delivery hubs and we are very excited to continue expanding our operations in the country with the opening of our new office here,” – Prateek Aggarwal, Chief Financial Officer, HCL Technologies.”

Although the total number of companies present is still less than in other major outsourcing hubs such as India, Vietnam, and the Philippines, global companies entering Sri Lanka to establish delivery centers and capitalize on talent is not a recent phenomenon. The image below highlights some international companies that have established delivery centers in Sri Lanka across several verticals.

Many of these companies use Sri Lanka as their primary delivery hub or use the abundance of talent available to augment their overall delivery capabilities. Regardless of the model deployed, almost all of them have doubled down on their Sri Lankan operations and continue to enjoy the benefits of both cost arbitrage and engineering arbitrage (i.e., the benefits of software engineering and cost reduction as a part of it).

Conclusion

If you’ve made it through to this section, congrats! I bet we’ve laid down a fact-based and objective analysis of why Sri Lanka is the next breakthrough destination for servicing the global IT industry. This little island and its picturesque scenery offer some of the best talent you can find in the world, along with robust infrastructure to support it. The cultural attitudes that drive students to pursue STEM fields and occupations, the quality of its private education system, the emergence of impactful tech focused micro education programs, and strong English proficiency are all positive factors that contribute to Sri Lanka’s position as a premier hub for the global IT industry.  In addition, the growing demand among the prospective and current working population to work for global companies and earn in foreign currency provides international companies looking to enter the Sri Lankan market with a highly competitive advantage. 

Calcey is proud to be a part of this thriving ecosystem, and remains deeply rooted in Sri Lanka. We specialize in transforming legacy systems, building scalable products, and guiding companies through the complexities of software development. We specialize in creating successful outsourcing partnerships based on:

• Skilled, Remote-Ready Developers: Access a global talent pool of passionate developers who thrive in remote environments.
• Independent, Self-Managing Teams: Our model empowers teams to work autonomously, fostering ownership and accountability.
• Focus on Tools & Communication: We ensure your team has the tools and clear communication channels to collaborate seamlessly.

Want to learn more? Our free eBook, “The Remote Team Blueprint“ explores our proven strategies in depth.