By: Staff Writer
December 18, Colombo (LNW): Sri Lanka’s IT and BPM industry is undergoing a structural adjustment as global inflation, fiscal instability, and shifting labour economics reshape its growth trajectory. The SLASSCOM Compensation and Benefits Survey Report 2025 reveals that companies are moving away from crisis-era salary expansion toward more disciplined, performance-linked compensation frameworks, reflecting broader changes in global cost structures.
During the height of Sri Lanka’s economic crisis, technology firms were forced to raise salaries aggressively to offset inflation and prevent talent erosion. However, as macroeconomic conditions stabilize albeit at a higher cost base companies are now recalibrating pay strategies to align with revenue growth and productivity gains rather than inflation-driven benchmarks?
These changes are unfolding within an inflationary global environment that continues to influence outsourcing decisions. The US CPI-U rose by about 27 percent between mid-2019 and late 2025, driven largely by post-pandemic monetary easing and sustained fiscal deficits. Inflationary pressures have complicated corporate planning worldwide, prompting multinational firms to reassess outsourcing costs, location strategies, and return-on-investment metrics.
In the past, low-inflation environments allowed governments and corporations to plan long-term expenditure with relative certainty. Today, inflation has transformed budgets into moving targets, particularly for developing economies reliant on imported inputs and foreign currency revenues. Sri Lanka’s experience since the early 1980s illustrates how persistent currency depreciation can magnify these challenges, eroding fiscal discipline and distorting cost structures across sectors.
For the IT-BPO industry, this environment has created a paradox. While Sri Lanka remains cost-competitive relative to developed markets, the margin for error has narrowed. Clients are increasingly demanding higher value, stronger compliance standards, and measurable productivity gains rather than purely low-cost service delivery.
Export data reflects this transition. IT and BPO service exports declined to US$671.6 million in the first ten months of 2025, down 3.8 percent year-on-year, signalling near-term pressures from global demand moderation. However, 2024 recorded export earnings of US$848 million, up 6.7 percent, underscoring the sector’s longer-term growth potential.
Industry leaders argue that the current phase represents a strategic reset rather than stagnation. Investment is shifting toward advanced analytics, cybersecurity, AI-driven services, and specialised BPM functions. Companies are also placing greater emphasis on reskilling existing employees instead of expanding headcount rapidly.
As Sri Lanka seeks to position itself as a stable, high-value digital services hub, the sector’s success may increasingly depend on productivity, innovation, and policy consistency rather than wage competitiveness alone. The pay normalisation now under way may prove a necessary adjustment in building a more resilient and sustainable IT-BPO ecosystem.
