John Linton
It's been six days since our first meetings in Colombo and we have now had proposals from each of the companies, professional practices and government departments we met with - in four cases multiple responses following emailed queries on their initial response. Sri Lanka Telecom have actually provided us with responses, on three complex issues while we were still in Sri Lanka and subsequently qualified them following our further questions.
That doesn't happen in Australia for us in 2008.
I doubt that our initial, or even projected, business is anything more than a 'drop in the bucket' for any of these Sri Lankan organisations particularly accounting practices like Price Waterhouse and Ernst and Young (who I doubt would bother to talk to a company of our size in Australia) and the thought of getting a 24 hour response from Telstra is beyond my ability to imagine - and I have a pretty vivid imagination.
So we now have all the commercial/financial information needed to make a sensible decision as to how we can proceed to establish an 'Exetel' in Colombo to provide an increased level of support services for the Australian 'Exetel'. There is still a lot of checking and validation to be done but there are some starkly obvious contrasts in terms of the costs we pay in Australia and the costs of an 'identical' operation in Sri Lanka. Examples are:
1) Office space (brand new building/central location/public transport) - 1/10th our current rental
2) CoLo - 1/3rd current rental
3) Ist Class office fit out - 1/8th cost we currently estimate for new offices
4) Full electrical and ethernet wiring for new office - 1/15th last cost we paid in North Sydney
5) Top 3 Programming graduate (high distinction average paid treble local top job salary) 1/5th Australian salary
6) Accounting and Legal services from 'Big 4' International practice - 1/5th costs of 'Tier 3' Australian practice
7) Access to regulatory authorities at Dep Sec level - within 3 working days of seeking appointment
8. Cost of fibre activation to business areas - 1/10th of Australian pricing
9) Monthly cost of fibre rental in business areas - 1/5th of Australian pricing
10) Recruiting/Head hunting professional services by 'Top 5' Colombo consultancy - 1/10th Australian costs
I did a first cut extrapolation of what it would mean if we went ahead with our plans and the impact in FY09 is a 30% reduction to our total operating expenses - not something to be taken lightly.
Of course, the actual set up difficulties are quite minor compared to the challenges involved in managing and maintaining such an operation over time and we will very carefully think through those very considerable difficulties before making any final decision. The major issue will, as always, be finding the right General Manager for such an operation on both an initial set up and then an ongoing basis.
The other issue that is a major consideration is the likelihood of Sri Lanka Telecom offering ADSL and other data services as a wholesale product and what the current 3G carriers will offer as a wholesale product over the coming 18 months. Should either of these things transpire, and at commercially viable pricing, then it isn't very hard to see how, even at very minor sales levels, the costs of a Colombo operation could be covered by a relatively low volume of business sales each month. However we will not base any decision on that happening.
Then of course - there is the little matter of the 25 year old civil war................