By Dr Kapila Fonseka, General Manager – ZinCaT Technology

Sri Lanka's Information Technology sector is facing a significant challenge with a surge in labor migration among its middle management. This trend primarily affects middle management, starting from senior developers, who are the most experienced individuals within IT companies.

Consequently, firms struggle to find suitable replacements, as some new hires also end up leaving. Even junior-level employees have begun seeking opportunities outside Sri Lanka.

Federation of Information Technology Industry Sri Lanka (FITIS) highlighted the sector's demand for 250,000 professionals, whereas only 170,000 are available, with 50,000 allocated to local businesses and the rest for exports. Although approximately 11,000-12,000 graduates are recruited annually to meet the industry's needs, the current situation exacerbates the overall shortage. (Ranasinghe, Imesh. “Local IT industry battles mass mid-level migration.” The Morning, 26 Oct 2022)

Over the past years, relaxed COVID-19 travel restrictions have facilitated the workers from Sri Lanka seeking employment opportunities abroad.

According to an analysis of migration trends by the Foreign Employment Bureau (FEB) in 2021, the proportion of low-skilled workers has gradually declined from 36.89% in 2017 to 30.77% in 2021, while migration in professional categories has witnessed a substantial increase from 4.26% in 2017 to 9.54% in 2021. Official data on job placements in 2022 has not been released by the FEB, but media reports reveal that a staggering 311,269 people left the country during that year, surpassing the previous record set in 2014 with 300,703 departures. (Weerathunga, Manori and Eranda Fernando, “Recent trends of labor migration in Sri Lanka.” Daily FT, 29 March 2023)

The demand for skilled IT professionals is putting pressure on human resources departments as companies grapple with a shortage of tech talent. Recent data from CompTIA reveals a staggering 302,400 technology job postings in September, overshadowing the addition of 84,000 net new workers to technology teams. This trend indicates that employers could face ongoing challenges in hiring for the foreseeable future. According to the organization, year-to-date tech industry employment is already 22 percent higher compared to last year. (Lewis, Nicole. “HR Pressed by IT Skills Shortages, Growing Demand.” 31 October 2022)

Given the huge outflow of qualified staff looking to improve their livelihoods by migrating overseas, what will happen to the Tech Industry in Sri Lanka?

As experienced professionals continue to seek opportunities abroad, there is a genuine concern that a substantial talent vacuum will emerge, leaving companies scrambling to fill critical positions. This migration trend not only depletes the industry of valuable expertise but also disrupts the stability and continuity of tech teams, leading to potential setbacks in ongoing projects and innovation. As the more seasoned employees depart, companies are left with a predominantly young workforce consisting of fresh graduates and entry-level professionals. While these individuals bring enthusiasm and a hunger to prove themselves, they often lack the experience and expertise required for complex projects and leadership roles. Consequently, the burden falls on the remaining employees to bridge the skills gap, adapt quickly, and take on greater responsibilities.

CompTIA's analysis shows that software development and engineering, IT support, IT project management, systems engineering, and network engineering are among the high demand areas.

However, reports of layoffs within the tech industry suggest that companies are reassessing their IT workforce and implementing new strategies and technologies in response to evolving economic conditions. In addition to the shortage of skilled workers, a survey conducted by Gartner reveals another concern. Among the 18,000 employees surveyed in the fourth quarter of 2021, only 29 percent of IT workers expressed a strong commitment to remain with their current employers. The intent to stay is even lower in regions such as Asia, Australia, New Zealand, and Latin America. (Lewis, Nicole. “HR Pressed by IT Skills Shortages, Growing Demand.” 31 October 2022)

However, the labor market is struggling with declining workforce participation rates, reduced immigration rates, and lower birth rates, exacerbating the scarcity of skilled IT workers. In response to the prevailing talent shortage, the remaining employees, aware of their increased leverage, start demanding higher salary expectations. They witness their peers switching jobs with ease and securing significant salary increments at each move. This creates a ripple effect within the industry as companies are forced to match or exceed these salary expectations to retain their top talent. Salary negotiations become more challenging, and companies find themselves in bidding wars to secure the necessary skills, even for relatively junior positions. However, there is a limit to how much companies can accommodate these rising salary demands.

As budgets strain and profitability becomes a concern, there comes a point where companies must draw a line. At this juncture, tough decisions have to be made, leading to a potential wave of layoffs or downsizing initiatives. The consequence is an industry landscape filled with talented but job-hopping professionals, constantly chasing higher salaries rather than building long-term commitments with organizations.

Once a threshold is reached wherein companies find themselves unable to accommodate the mounting salary expectations, they are compelled to release employees whose remuneration surpasses their corresponding contributions. When this happens, organizations may contemplate alternative strategies to address the vacancies created by the departure of technology professionals. Such measures might entail outsourcing specific operational functions to nations harboring a proficient workforce or recruiting foreign personnel to fulfill their talent requisites.

While the migration of tech employees can bring benefits such as knowledge transfer and global collaboration, the excessive outflow of talent poses significant challenges for companies and the industry as a whole.

Ensuring a proficient and consistent workforce is crucial, demanding a delicate balance between competitive compensation, talent development programs, and a steadfast commitment to retaining employees. Ultimately, the industry must adapt to the changing dynamics to overcome the talent vacuum and ensure sustainable growth in the face of ongoing globalization.

The need to attract investors who are keen to use local talent and develop businesses in Sri Lanka should become our top priority. Similarly, according to employers they see a reluctance of youth to take up regular employment and have a preference for casual work; therefore we need to address the need for proper education and emphasis on skills that would attract youth to take up regular employment because of the possibility of a stable and decent life.

This then requires proposals for labor market reform, also considering the revamping of secondary and tertiary education/vocational training which will attract better quality employees with the right trainability. The link between education and quality employment is also tied up with the dignity of the jobs available.