ICT for Service-Based Economy in Sri Lanka

A service-based economy, also known as a service economy is a system where the mainstream of economic activities and value formation are centredon providing services rather than producing physical goods.

In a service-based economy, services such as healthcare, education, finance, entertainment, consulting, tourism and various professional services perform a more significant role in generating wealth and economic growth than producing goods.

The service sector, broadly defined, accounts for a large proportion of value-added and employment in the majority of countries, while goods-producing industries account for less than 20 to 30 per cent both in GDP and in employment in advanced economies, depending on the definition of services.

There has been considerable growth in the service economy compared to other economic activities such as agriculture and industry in the past few decades of rapid technological development. This was mainly because the activities related to the service economy became less expensive and more convenient to the consumers with the help of new Information and Communication Technology (ICT).

The information revolution is a key driver of the service economy or service system. Manufacturers of computer hardware and software, as well as software application developers, now consider service to be an integral part of their product offering. These companies commonly promote their ‘solutions,’ which consist of both products and services that cannot be separated.

Digital Literacy in Sri Lanka

Digital literacy refers to the ability to use digital technologies, such as by using computers, smartphones and the internet to access, understand, evaluate and create information. In Sri Lanka, digital literacy has been a growing concern due to the increasing role of technology in various aspects of life, including education, business and governance. The Department of Census and Statistics (DCS) has been measuring computer literacy for more than a decade and has recently started measuring digital literacy as well. However, they use a narrow definition.

Sri Lanka’s total population was 21.86 million in January 2023. DCS measured a computer literacy rate of 28.3% (during the first six months). In comparison, the digital literacy rate for the whole population was 40.3%. There were 14.58 million internet users in Sri Lanka in January 2023. At the beginning of the year 2023, Sri Lanka’s internet penetration rate stood at 66.7 percent out of the total population. Also, data from GSMA Intelligence shows that there were 36.18 million cellular mobile connections in Sri Lanka. The number of mobile connections in Sri Lanka increased by 2.7 million (+8.0 per cent) from the year 2022 to the year 2023.

Digital literacy is higher than computer literacy for all disaggregated levels, showing the drift from Personal Computers to Smartphones and Tablets. Over 44.5 % of the population aged 5-69 years uses the internet facility at least once during twelve months. Digital literacy involves mastering the skills to use digital tools and the web effectively, but it is also much more: it calls for knowing how to use these services in a safe, respectful and ethical manner.

ICT to Service-Based Economy

The ICT sector in Sri Lanka has an average growth rate of over 17% per year. Due to a highly skilled workforce, a cost-competitive business environment and emerging IT and BPO/KPO sectors, nearly 50% who have completed their higher education are trained in IT, technical and business disciplines. Sri Lanka is the first country in South Asia to trial 5G technology and was also the first to commercially launch the 4G-LTE network. The IT and BPM industry in Colombo and the workforce are growing at over 20% year-on-year. ICT exports are estimated to increase by 34.95 % to US$ 529 million in April 2023 compared to April 2022.

ICT plays a crucial role in enhancing and supporting a service-based economy in numerous ways. Here are some ways in which ICT can help a service-based economy:

Efficient Communication and Collaboration: ICT tools such as email, instant messaging, video conferencing and collaborative platforms enable seamless communication and collaboration among service providers, clients and partners, regardless of geographical locations. This leads to faster decision-making and improved customer service.

Automation and Efficiency: ICT can automate repetitive tasks and streamline processes, increasing the efficiency of service delivery. This leads to reduced operational costs, faster service turnaround times, and improved customer satisfaction.

Data Analytics and Insights: ICT allows businesses to collect and analyze vast amounts of data related to customer preferences, behaviours, and market trends. This data can be used to tailor services to specific customer needs, identify new opportunities, and make informed business decisions.

Online Marketplaces and Platforms: ICT facilitates the creation of online marketplaces and platforms where service providers can offer their services and customers can find and compare various service options. This leads to increased competition and improved service quality.

E-commerce and Digital Payments: ICT enables businesses to offer their services through online platforms and customers can easily make payments electronically. This convenience encourages more transactions and expands the customer base.

Remote Work and Outsourcing: ICT enables remote work, allowing service providers to collaborate from different locations. It also supports outsourcing specific tasks to specialized service providers worldwide, optimizing costs and expertise utilization.

Automation and AI: ICT technologies like automation and artificial intelligence can be integrated into service processes to enhance efficiency. Chatbots, for instance, can provide instant customer support, freeing up human resources for more complex tasks.

ICTs connect people to jobs: Online job marketplaces are supporting an estimated 12 million people worldwide to find employment by connecting them with employers globally. Babajob in India, Duma and M-Kazi in Kenya, and Souktel in the Middle East and North Africa are examples of job search services using internet-based and mobile tools. Such services authorise employees by making labour markets more transparent and inclusive; for instance, Souktel targets low-income and marginalized communities.

Sri Lanka’s knowledge services industry is the fifth largest export earner for Sri Lanka over 80,000 employees engaged in the industry. There are about 250 ICT companies in the country and approximately 60% are small-scale, 30% are medium scale and 20% are large-scale companies. Among the ICT companies operating in Sri Lanka, Virtusa, IFS Research and Development Private Limited, MilleniumIT and 99X Technology Limited were nominated as the most secure places to work.

The ICT industry is the emerging sector of the economy. In the global market, strategic technological capabilities need to be capitalized to survive in the market. Essentially, ICT the sector is an integral part of every industry.There is also an increasing likelihood that geopolitical tensions will result in new sanctions and platform bans, which may radically reshape user behaviours and the broader digital landscape.

ICT plays a pivotal role in the success and growth of a service-based economy. It enables businesses to deliver services more efficiently, enhances customer experiences, supports innovation and expands market reach. Embracing and leveraging ICT effectively can lead to increased competitiveness, improved economic performance, and a more dynamic service sector.

About the writer

Senior Lecturer, Information and Communication Technology Department, Faculty of Technology,

University of Sri Jayewardenepura

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