Market OverviewSri Lanka's IT market is estimated to be worth US$327mn in 2010, just 2% the size of India's, but isexpected to grow to around US$632mn within BMI's five-year forecast period. The computer market hascomfortably been growing at a double-digit CAGR for the past several years, yet the penetration rateremains below 1%. Computerisation has only just got started in the government service.Sri Lanka's IT market has considerable latent potential, but has been handicapped over the years by thecountry's economic instability, due largely to the long-running civil war. This has impacted the market inmultiple ways, from disruption of regional and distribution channels to the negative effect on theeconomic and incomes growth and the underdevelopment of the country's telecoms infrastructure.In 2010, the consumer PC segment will benefit from lower interest rates and more credit availability,while the Computers for Education programme will continue to receive government investment in 2010.The projected 2010-2014 CAGR of 18% would make Sri Lanka one of the fastest-growing markets in theregion, albeit from a low base.Industry DevelopmentsIn August 2010, Sri Lankan Deputy Finance and Planning Minister Dr Sarath Amunugama said that ITwould play an important role in helping the government to achieve its targets for growth. The Ministercalled on foreign IT companies to invest in Sri Lanka and partner with the government to apply IT toassist development. The Sri Lankan government's e-Sri Lanka strategy outlines the country's vision forinformation society development and forms the basis for initiatives related to ICT development.The decision by the Sri Lankan government announced in H110 to reduce import duties on electronicgoods by around 3.5% should result in a further reduction of local market PC prices. The move will leadto a reduction in tax on imported CPUs, thus leading to lower prices for locally assembled computers.In 2010, the government plans to roll out another 1,500 computer labs for Sri Lankan schools. This is inaddition to the 3,500 that have already been constructed in both rural and urban areas, with around 6,000planned in total. The government designated 2009 as the year of IT (and English) in Sri Lanka. At the endof the year, the country continued to roll out new IT and education-related initiatives.Competitive LandscapeGreater economic stability in Sri Lanka will enable an expansion of domestic computer production. InMay 2010, Sri Lankan manufacturer Singer launched its new Singer X series of affordable notebooks andnetbooks onto its domestic market, targeted at rural users. A number of other Sri Lankan PC brands,including Panora, Maya and Kobian, have established a niche in their domestic market.In 2010 Microsoft Sri Lanka is promoting its cloud-computing solutions, which it believes could be atransformative software delivery model for Sri Lankan enterprises. Hidramani Group, one of SriLanka's largest apparel manufacturing companies, recently announced that it was running a cloudcomputing pilot on Windows Live Initiative.The nascent IT services market is dominated by local IT distributors that have built IT services offeringsaround portfolios of brands such as HP, SAP and IBM. International vendors such as HP and IBMoperate mainly through partners rather than having a direct presence. IBM appointed a new countrymanager for Sri Lanka in 2009 and described Sri Lanka as a significant growth market within its SouthAsia unit.Computer SalesSri Lanka's addressable computer hardware market is estimated at US$227mn in 2010 and is projected toreach around US$421mn in 2014. At least 350,000 computers were sold in Sri Lanka in 2009, despite theeconomic slowdown. This annual total could increase to more than 650,000 by the end of BMI's forecastperiod with growing demand for affordable notebooks.Sri Lanka's IT market will stay hardware dominated, with spending on hardware accounting for anestimated 71% of Sri Lanka's IT spending i

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Sri Lanka Information Technology Report Q4 2010
Published on October 2010
Report Summary
Market Overview
Sri Lanka's IT market is estimated to be worth US$327mn in 2010, just 2% the size of India's, but is
expected to grow to around US$632mn within BMI's five-year forecast period. The computer market has
comfortably been growing at a double-digit CAGR for the past several years, yet the penetration rate
remains below 1%. Computerisation has only just got started in the government service.
Sri Lanka's IT market has considerable latent potential, but has been handicapped over the years by the
country's economic instability, due largely to the long-running civil war. This has impacted the market in
multiple ways, from disruption of regional and distribution channels to the negative effect on the
economic and incomes growth and the underdevelopment of the country's telecoms infrastructure.
In 2010, the consumer PC segment will benefit from lower interest rates and more credit availability,
while the Computers for Education programme will continue to receive government investment in 2010.
The projected 2010-2014 CAGR of 18% would make Sri Lanka one of the fastest-growing markets in the
region, albeit from a low base.
Industry Developments
In August 2010, Sri Lankan Deputy Finance and Planning Minister Dr Sarath Amunugama said that IT
would play an important role in helping the government to achieve its targets for growth. The Minister
called on foreign IT companies to invest in Sri Lanka and partner with the government to apply IT to
assist development. The Sri Lankan government's e-Sri Lanka strategy outlines the country's vision for
information society development and forms the basis for initiatives related to ICT development.
The decision by the Sri Lankan government announced in H110 to reduce import duties on electronic
goods by around 3.5% should result in a further reduction of local market PC prices. The move will lead
to a reduction in tax on imported CPUs, thus leading to lower prices for locally assembled computers.
In 2010, the government plans to roll out another 1,500 computer labs for Sri Lankan schools. This is in
addition to the 3,500 that have already been constructed in both rural and urban areas, with around 6,000
planned in total. The government designated 2009 as the year of IT (and English) in Sri Lanka. At the end
of the year, the country continued to roll out new IT and education-related initiatives.
Competitive Landscape
Greater economic stability in Sri Lanka will enable an expansion of domestic computer production. In
May 2010, Sri Lankan manufacturer Singer launched its new Singer X series of affordable notebooks and
netbooks onto its domestic market, targeted at rural users. A number of other Sri Lankan PC brands,
including Panora, Maya and Kobian, have established a niche in their domestic market.
In 2010 Microsoft Sri Lanka is promoting its cloud-computing solutions, which it believes could be a
transformative software delivery model for Sri Lankan enterprises. Hidramani Group, one of Sri
Lanka's largest apparel manufacturing companies, recently announced that it was running a cloud
computing pilot on Windows Live Initiative.
The nascent IT services market is dominated by local IT distributors that have built IT services offerings
around portfolios of brands such as HP, SAP and IBM. International vendors such as HP and IBM
operate mainly through partners rather than having a direct presence. IBM appointed a new country
manager for Sri Lanka in 2009 and described Sri Lanka as a significant growth market within its South
Sri Lanka Information Technology Report Q4 2010 Page 1/5

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Asia unit.
Computer Sales
Sri Lanka's addressable computer hardware market is estimated at US$227mn in 2010 and is projected to
reach around US$421mn in 2014. At least 350,000 computers were sold in Sri Lanka in 2009, despite the
economic slowdown. This annual total could increase to more than 650,000 by the end of BMI's forecast
period with growing demand for affordable notebooks.
Sri Lanka's IT market will stay hardware dominated, with spending on hardware accounting for an
estimated 71% of Sri Lanka's IT spending in 2009. There is considerable growth potential as the current
level of computerisation is low, with PC penetration estimated at below 5%. The average price of a PC
has already dropped over the past few years to less than US$300, bringing computers within the reach of
lower income demographics.
Software
Sri Lankan spending on software remains rather low, with BMI estimating the addressable market at
US$39mn in 2010. The estimated 11% share of the total IT spend, accounted for by software, reflects the
relative immaturity of Sri Lanka's IT market. However, the domestic software market is expected to grow
at a CAGR of around 20% over the forecast period until 2014.
One significant market restraint is the high level of software piracy, with nine out of 10 software
packages in use thought to be unlicensed. The core business software demand is for applications such as
enterprise resource planning (ERP), as well as basics like email. Local channels have estimated around
400 ERP installations in the country currently.
Services
IT services are estimated at around US$61mn in 2010, accounting for about 17% of Sri Lanka's total
spending on IT. The market is dominated by demand from government, finance and telecoms sectors,
which account for at least half of total spending.
The provision of IT services is still typically built around hardware sales, with the growing base of
installed hardware and software systems the foundation for an expansion of services provision. The
consulting element should become more significant over the forecast period. The economic situation, and
credit tightening, is likely to have an impact on projects in some key verticals.
E-Readiness
Sri Lanka suffers from a very low level of internet penetration, at just 6.4% at the end of 2008. Broadband
penetration was 0.5%. This low penetration level reflects the parlous state of Sri Lanka's telecoms
infrastructure as a result of years of civil war. This situation has been identified by the government as a
major barrier to future social and economic development.
Progress is expected over BMI's five-year forecast period, with internet penetration reaching 26%, and
broadband penetration 13%. In recent years, the government has announced broadband infrastructure rollout
plans and also encouraged the deployment of technologies such as WiMAX and Wi-Fi. However,
adoption remains limited.
Table of Content
SWOT Analysis .... 8
Sri Lanka IT Sector SWOT 8
Sri Lanka Political SWOT . 9
Sri Lanka Economic SWOT.. 10
Sri Lanka Business Environment SWOT .. 11
IT Business Environment Ratings .. 12
Asia IT Business Environment Ratings .... 12
Sri Lanka Information Technology Report Q4 2010 Page 2/5

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Table: Asia Pacific IT Business Environment Ratings . 12
Asia Regional IT Markets Overview 15
Sri Lanka Market Overview ... 22
Government Authority 22
Background . 22
Hardware .... 23
Software . 24
Services .. 25
End-User Analysis 27
Industry Developments ... 28
Industry Forecast Scenario ... 31
Sri Lanka, IT Sector ... 33
Internet .. 34
Table: Sri Lanka Telecoms Sector - Internet - Historical Data And Forecasts 34
Macroeconomic Forecast .... 36
Sri Lanka ' Economic Activity .. 37
Competitive Landscape ... 38
Hardware .... 38
Software . 40
IT Services .. 42
Internet/Broadband .... 44
WiMAX .. 46
Company Profiles ... 47
Panora ... 47
BMI Methodology ... 48
How We Generate Our Industry Forecasts ... 48
IT Industry .. 48
IT Ratings ' Methodology .... 49
Table: IT Business Environment Indicators .. 50
Weighting .... 51
Table: Weighting Of Components .. 51
Sources .. 51
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