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The Malaysian government's ambition to transform the country into a world-class datacenter hub is a promising move, but several challenges will need to be ironed out to ensure success, say industry watchers.
Prime Minister Najib Razak last year announced a national masterplan comprising public-private sector economic activities to transform Malaysia into a high-income nation. Dubbed the Economic Transformation Program (ETP) and facilitated by government arm, Pemandu, the scheme seeks to double the country's per-capita income to US$15,000 by 2020.
It encompasses 131 entry-point projects (EPP), which the government says will outline actions required to grow the local economy. One of these involves the upgrading and development of three data center providers--MyTelehaus, CSF Group and Teliti Datacenter--for approximately 400 million ringgit (US$134.6 million), aimed at turning Malaysia into a datacenter hub.
Sudev Bangah, senior research manager at IDC Asean, said the demand for data center and hosting services across Asia-Pacific, excluding Japan, has increased as many enterprises continue to focus on reducing costs and streamlining operations to increase efficiency.
Bangah told ZDNet Asia in an e-mail that a significant portion of these outsourcing contracts in the past year has been focused on datacenter services--and Malaysia is no exception, with IT outsourcing services charting a double-digit growth year-on-year.
"The awareness of technologies such as cloud computing and virtualization makes this more compelling, as consolidation and standardization of IT assets continue to drive demand," he said.
He added that enterprises today face several shortages in terms of capital, security and skillsets, and prefer not to deal with these challenges directly while managing their IT needs.
Fadhlullah Suhaimi Abdul Malek, director for business services at Pemandu, said the Malaysian government believes data centers can play a vital part in the country's economic growth. It expects this sector to contribute a gross national income (GNI) of 2.4 billion ringgit (US$807.5 million) and create some 13,290 jobs by end-2020, said Fadhlullah, who oversees the datacenter initiative.
"We believe most businesses will need data centers and Malaysia has the geographical stability to meet this need," he told ZDNet Asia in an interview. "Our target is to increase sales of Malaysia datacenter floor-space to 2.5 million square feet by 2015 and 5 million square feet by 2020."
Land, utility and bandwidth challenges
Fadhlullah, however, acknowledged that several potential issues could hinder its efforts, including land acquisition, utility and bandwidth tariffs. He said Pemandu is working with local authorities to ensure new players looking to set up data centers in the country receive speedy approvals regarding land acquisition.
"As for utility tariffs, we are working with the national utility board, Tenaga Nasional, to look at how to possibly reclassify data centers as a new economic industry to ensure they get specialized tariffs," he said.
He added that the government this week announced a newly-formed consortium comprising 24 telecommunications companies, which will look at purchasing wholesale cable capacity in a bid to reduce the cost of international broadband subscriptions.
"The consortium is a means to bring the industry together and work in concert to reduce the cost of bandwidth so that all data centers stand to benefit," Fadhlullah explained. "The impact, though, will not be immediate as we need to allow the consortium, which is a private-sector initiative, to formulate and implement its plans."
However, an industry analyst warned there were no clear indicators or conclusions that point to a direct relationship between data centers and a country's economy. John Brand, vice president of research at Springboard Research, said: "Data centers are simply a cost of doing business, rather than providing a positive value contributor to the broader economy."
Brand noted that there would be some minor spillover impact on the broader economy, but these were expected to be small compared to other labor-driven initiatives.
The analyst added that most of such datacenter projections were based on the predicted growth of online services, particularly in the transformation of data centers from being private or local data storage and processing centers, to utility-based services.
"As this part of the industry is still relatively immature, the impact on the economy is more conjecture than fact," he said.
And while growth in storage and processing requirements have driven the need for more datacenter offerings in the market, Brand cautioned that not all data centers will be successful in the long term.
He noted that consolidation will inevitably occur over the next three to five years, and this poses a risk for organizations looking to engage on a long-term basis.
"We believe the most successful datacenter providers will be those that can move beyond the basic tenets of virtualization, to create a truly revolutionary approach to the delivery of IT capacity and capabilities," he said.
Brand added that Malaysia is likely to face several challenges in its bid to become a datacenter hub. "The general requirements for data centers are security, privacy, cost of labor, reliability, cost of energy as well as political and cultural stability--all of which are factors that make regional hubs either desirable or a liability."
A senior telco executive noted that international bandwidth cost remains a huge challenge in Malaysia as there is insufficient competition in the local market to force prices down. "The consortium of players buying in bulk will help, but that should only be the starting point," said the executive, who spoke to ZDNet Asia on condition of anonymity.
He suggested the Malaysian government further liberalize the industry by allowing global players to land their cables in the country without having to terminate their links through the incumbent player. "This is the only way prices of international bandwidth can go down and benefit both consumers at large and businesses running data centers," he added.
Edwin Yapp is a freelance IT writer based in Malaysia.
Source: ZDNet Asia
When the British were finally expelled from India in 1947, driven out of a country scarred by decades of imperialist rule, they left at least one parting gift: a linguistic legacy that has formed a crucial ingredient in the country’s economic miracle.
English proficiency is hailed as an invaluable foundation in India’s rise to the top of the world’s information technology and knowledge outsourcing industries, fuelling the country’s rapid growth with billions of dollars of business every year and streams of overseas investments into global IT centres such as Bangalore.
Nine-year-old Chinese pupil, Sun Minyi, listens to his teacher during a special English class at Chongming county, north of Shanghai July 12, 2002. REUTERS/Claro Cortes IV
But, as Asian rival China surpasses India’s English proficiency rates for the first time, that advantage over other developing economies looks to have been squandered.
China was ranked one place above India in Education First’s 2011 English Proficiency Index, released last month, the first time India has been beaten by its neighbour and fellow BRIC economy in the international rankings of foreign countries English-speaking abilities.
“It appears that China is poised to surpass India in the number of English speakers in the coming years, if it has not already done so,” the report said.
The implications for India’s future IT and outsourcing prospects aren’t difficult to calculate.
“For the past six decades, India has been coasting on its colonial legacy when it comes to English. But without the systemic changes needed to ensure greater penetration of the language, the advantage has been shrinking,” the Times of India, India’s biggest-selling English newspaper, wrote in an editorial on Tuesday.
As Chinese authorities ramp up English teaching in schools across the country, looking to tap into a growing international outsourcing and IT market, India’s public education sector has been criticised for poor facilities, falling standards and a lack of government support.
“More than ever, English holds aspirational value for the average Indian who views it as a ticket to economic betterment. But on the supply side, both the central and state governments have been sadly lacking,” the editorial added.
“It is time they woke up to this particular side effect of the Indian public education system’s moribund state. There are economic consequences in the offing. India’s far behind China in manufacturing, it could be bested as a services provider as well.”
Malaysia, which has mimicked India’s use of English as a language used by no-one and used by all, tops the Asian region for proficiency, and was placed ninth globally in the rankings, assessed using hundreds of thousands of tests conducted across participating countries.
Writes Education First: “To the extent that China is increasingly driving much of the regional economy, its ability to communicate in English will pressure all of its neighbors to keep pace.”
Having blown its headstart, and in failing to meet the Chinese challenge, India now appears to be playing catch up.
ASSOCHAM study reveals talent crunch, soaring attrition rate might push India behind other BPO giantsBy Administrator | Label: INDIA, BPO
New Delhi: India's Business Process Outsourcing (BPO) sector is facing stiff competition from the likes of Mexico, Philippines, Malaysia, China, Canada and Ireland that are posing a grave threat to the growth of India's BPO sector.
The BPO industry is facing serious challenges vis-à-vis shortage of skilled and educated workers as the attrition rate in India's BPO sector has risen phenomenally at the rate of 55 per cent with a significant visible movement in mid and senior management levels, according to an industry specific analysis of the Associated Chamber of Commerce and Industry of India (ASSOCHAM).
"Although, the BPO sector in India has been very popular since the beginning, as it has opened up plenty of job opportunities and has totted up huge revenue, but the awfully high attrition rate coupled with talent crisis has plagued the sector since the very beginning", said ASSOCHAM Secretary General, D.S. Rawat.
As per the ASSOCHAM analysis BPO-ITes sector has emerged at the top with highest attrition rate of 65 per cent during the course of last two years, giving a serious jolt to India's prospects which was till recently the most sought after BPO destination.
Services offered by the IT/ITes and BPO in the domains of pharma and BFSI (Banking, Financial Services and Insurance) have registered an attrition rate of around 60 per cent. In the domains of retail and IT sector an attrition rate of around 55 per cent has been recorded.
Auto, FMCG, Manufacturing and infrastructure sectors have registered an attrition rate ranging between 45 to 50 per cent. Amongst all the relevant sectors the services offered by the IT/ITes and BPO in the domain of energy sector has recorded an attrition rate of 45 per cent.
"The growing trend of job-switching in the BPO industry might prove to be fatal for the survival and growth of India's BPO sector. Companies these days do not put much focus on enhancing individuals' performance, this might hamper India's rapid ascension on the world economic stage in the long run", said Mr. Rawat.
"Rapid job hops prove to be a disadvantage both for the companies who pay higher wages and those individuals who benefit from higher wages in the short-run, as the rise in package is not keeping up with the rise in knowledge/skill levels of the individuals", added Mr. Rawat.
To establish a substantial lead over competing countries acquiring a larger market share in the BPO sector and to remain globally competitive, India's rising wages must reflect in rising skill levels.
"Rapid job switches amongst professionals have certainly raised the wages but there's hardly any development of expertise amongst knowledge workers which is significant to justify their fat pay cheques globally", further added Mr. Rawat.
If the companies continue to promote job hopping, they would be doing a disservice to themselves and their employees as it translates into huge losses for the company which invests huge amount of money in training new employees.
Rapid increase in job-switching has compelled people to question India's competitiveness in the BPO sector and thus, it is imperative that BPO companies must provide adequate training and work experience to employees, said ASSOCHAM.
THE linkages between multinationals companies (MNCs) or large enterprises and small and medium enterprises (SMEs) are always important in marketing SMEs' services and products. Needless to say, it's a sound platform to help small firms expand abroad.
To be able to best utilitise the available network and linkages with MNCs, nothing beats homework and indepth knowledge as SMEs are generally required to fulfil the requirement or standards imposed by MNCs to become the latter's suppliers.
Managing director of management and technology consultancy Innosol (M) Sdn Bhd Dr Umasuthan Kaloo says the linkages contribute towards both the production of marketable goods and services and marketing communications.
Chua Tiam Wee ... ‘MNCs are outsourcing many non-core businesses to SMEs.’
“SME is usually the supplier to the larger enterprise although it is also possible for the roles to be reversed as in the case of large volume manufacturers of cars supplying to boutique car builders who make changes to the base product to appeal to wealthier or more discerning segment of the market,” he says.
Generally, SMEs supply goods or services to an MNC which trades in global markets and the advantages include reduced costs and the opportunity to concentrate more effectively on their own core competencies.
“Through such collaboration, SMEs are forced to upgrade process and products to match the international standards of the MNCs, thereby upgrading the entire enterprise to global supplier status,” Kaloo adds.
In most MNC-SME linkages, the MNC partners supply considerable assistance to small businesses in the early stages of their relationship to upgrade their processes and products. This process will also typically involve transfer of technology in the critical technical and commercial aspects of doing business in international markets.
“SMEs could gain direct or indirect access to key export markets which typically include the more challenging and demanding markets of North America, Europe and North-East Asia,” he says.
However, Kaloo points out that this symbiotic relationship is not without risks to both parties.
“The MNCs run the risks of the SMEs integrating vertically to provide goods or services in direct competition with the MNCs. MNCs also run the risks of being saddled with non-competetitive SMEs thrust upon them as part of licensing agreements with local authorities,” according to Kaloo.
Meanwhile, SMEs run the risks of anti-competitive practices and of unequal bargaining positions when they form only one link in an established supply chain which is owned and managed by MNCs.
“MNCs have also been likened to global gypsies shifting their operations to lower-cost locations, when the economics of change favour such a move, leaving the local SME partners high and dry,” he says.
Notwithstanding these inherent risks, such relationships provide an important launching pad for SMEs with aspirations to export their goods or services.
“Forming linkages with MNCs is one of the more popular methods of bringing small enterprises in selected industry sectors more quickly up the leaning curve of innovation and marketing skills,” he says.
Dr Umasuthan Kaloo ... ‘SME is usually the supplier ...’
In this respect, he points out that agencies in Malaysia have facilitated the formation of linkages between multinational retail chain in recent years, like Tesco and Carrefour, with small agro-based enterprises for the supply of fresh food items.
In Thailand, the linkages with a number of the world's leading manufacturers of automobiles have persuaded a large number of small engineering enterprises to adapt and develop world-class skills in the manufacture of cast metal items and parts and moulded plastic parts.
“Several hundred innovative procedures had to be learnt and practised to meet the global standards for the finished products set by the MNCs. Again, qualified Thai agencies and the MNCs provided the small enterprises with the training and development needed to develop these advanced skills,” he says.
Meanwhile, SMI Association of Malaysia national president Chua Tiam Wee says there are a lot of SMEs that have strong linkages with MNCs or larger companies in Malaysia and SMEs do realise that it is important to have such linkages to grow their business.
“The trend is that MNCs are outsourcing many of their non-core businesses to the SMEs, especially logistics, distribution, information technology and marketing works, so that they can concentrate on their core operation,” he says.
“Banks also outsource their marketing works of credit cards and loans to third-party marketers. Consumers can also pay their phone bills through third parties (SMEs) assigned by telecommunications companies.”
Countless Malaysian SMEs supply large electronic companies with parts while these MNCs provide training for SMEs with information about their products.
But getting in on the game is not easy. SMEs need to comply with some stringent requirements set by MNCs in terms of quality, delivery time and good service to gain the trust of MNCs and build their business rapport.
To help small businesses grow, Chua suggests that government-linked companies also outsource more of their non-core business to SMEs.
PUTRAJAYA, Dec 6 (Bernama) — Datuk Seri Najib Tun Razak announced new policy initiatives to address the need for world-class talents for Malaysia’s economic transformation.
He said the initiatives included allowing selected Public Services Department scholarship holders to serve their bond outside the civil service.
Another move was the introduction of a resident pass, which accords the holder the long-term right to live and work in Malaysia, he added.
“To achieve the aim of Malaysia to become a world class economy, we have to implement initiatives to attract, develop and retain skilled human capital,” Najib said, when launching Talent Corporation at his office. Also present was Deputy Prime Minister Tan Sri Muhyiddin Yassin.
Najib said the selected PSD scholarship holders could serve their bond of service with a broader range of organisations, including government-linked companies and private sector corporations, especially in NKEAs, the National Key Economic Areas.
The mechanism for this would be developed next year, he said, adding:” We recognise there are many ways to contribute and we are creating opportunities for scholars to do so.”
On the resident pass, Najib said that it would be available to highly skilled expatriates seeking to continue living and working in Malaysia.
Unlike an employment pass, it would not tie the holder to an employer, he said. It could be issued for a longer period and would cover the spouse as well.
“The resident pass will also be offered to the Malaysian diaspora and their offspring who no longer hold Malaysian citizenship. The resident pass is one way to offer them linkage to Malaysia and give them the flexibility to return whether to work or to be with family members,” Najib said.
He said the Immigration Department would be ready to receive applications for resident passes by April 1 next year.
Malaysia, the prime minister said, was open for business and welcomed highly skilled foreign talents who could help to drive its economic transformation.
“For that reason, there will no longer be a requirement to advertise for key expatriate positions,” he added.
Najib said the cabinet had also approved the relaxation of employment pass conditions, involving the lifting of the 10-year limit and mandatory understudy requirement for executive positions.
Najib said that Talent Corporation would collaborate closely with the relevant agencies to coordinate implementation of the policies announced today.
The corporation, which starts operating on Jan 1 next year, will have a board of trustees and be chaired by Najib himself.
The board members will include Ministers in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop and Datuk Seri Idris Jala and Chief Secretary to the Government Tan Sri Mohd Sidek Hassan. Johan Mahmood Merican will be the Chief Executive Officer of Talent Corporation Malaysia Berhad, Najib said.
The Prime Minister said:”The talent corporation is not just about bringing back Malaysians from abroad, but also about retaining talents in Malaysia.”
Najib said that an estimated 700,000 Malaysians were working abroad, most of them in Singapore and Hong Kong.
He said the company would be acting as intermediary, engaging with the private sector and government-linked companies, to attract Malaysians to come back to work.
“They (the Malaysians) cannot be compelled to register, but Talent Corp will try to locate them and engage them,” he said.
Commenting on the salary that may be the main issue, Najib said:”We have to be globally competitive, otherwise people will not want to come back to Malaysia.”
KUALA LUMPUR: SUPERCEED (M) Sdn Bhd, a company jointly funded by the Malaysian Government via the Malaysian Technology Development Corporation, Kumpulan Modal Perdana and Cradle Fund Sdn Bhd today launched a novel information technology-based service concept – the Unified Virtual Contact Centre, at the Gardens Hotel & Residences.
The event was officiated by Deputy Finance Minister I, Senator Datuk Donald Lim Siang Chai. Also in attendance were Kumpulan Modal Perdana chief executive officer Shahril Anwar Mohd Yunus; Cradle Fund Sdn Bhd CEO Nazrin Hassan; Malaysian Technology Development Corporation investment director Jamaludin Bujang, and senior management executives from multi-national corporations.
MSC Malaysia’s Shared Services and Outsourcing (SSO) founder, who is also Outsourcing Malaysia founding co-chairman and MDeC Malaysia business and market development director, Rob Cayzer, was present as guest speaker.
“Technology is revolutionising contact centre solutions,” said Jeffrey Tan, CEO of SUPERCEED. “The virtual contact centre model eliminates the need for premise-based contact centre hardware and software, replacing them with on demand internet-based contact centre facilities,” he said.
“This means that companies no longer have to be saddled with high set-up and maintenance costs should they require contact centre services. They can simply sign up for online facilities and pay as they go.”
According to Tan, companies pay monthly subscription fees for the required number of agents or the capacity the business needs and have the flexibility to increase or decrease capacity of interaction volume, which is cost effective for businesses.
“This concept of ‘elasticity’ is attractive for multinational corporations and small to medium enterprises alike,” he said.
He added: “We can deduce the cost savings of VCC easily. The CAPEX for VCC is virtually zero. The typical CAPEX for premise-based contact center hardware and software of RM15,000 per agent. The OPEX for VCC over a 12-month campaign is about 25% of CAPEX for premise-based contact center solutions (based on VCC
entry level pricing). Considering additional OPEX for premise-based contact center solutions, VCC wins hands down.”
The Virtual Contact Centre model is also capable of harnessing the power of a virtual workforce for direct response, sales and marketing, customer service and IT, and operations projects.
“Campaigns are managed using logical groupings of agents,” said Tan.
“We are able to unify and mobilise pools of agents from different geographical regions to serve a campaign which requires deep and diverse skill sets or language requirements.”
“Interaction handling, monitoring and quality assurance is managed via various forecasting and campaign management tools and technologies,” he added.
The unified virtual contact centre also has the potential to grow business models within its current concept.
Every business is an interaction centre. Telcos’ value propositions propogate downwards across existing subscriber base, from corporate, outsourcing companies to SMEs and individual subcribers. The virtual contact centre allows telcos to give birth to secondary business models and utilise them as profit centres, Tan explained.
“An example is telcos offering SMEs and individual subcribers new products or services via creative bundling of internet contact centre solutions, bandwidth and mobility offerings ( 3G, 4G, WIMAX ),” he added.
SUPERCEED’s business partner, Golden Thrive Sdn Bhd, an outsourced BPO company and end customers, Salamfone Sdn Bhd and Baraka Telecom Sdn Bhd were presented with a crystal plaque to signify the completion and handover of their customised virtual contact centre package at the launch.
To date, SUPERCEED has established points of presence in 4 MSC Cybercentres namely SunTech, Cyberjaya, Mid Valley and Menara MSC Cyberport. The company is in the midst of expanding its points-of –presence to Singapore, the Philippines, India, China, South Korea, Japan, Australia and New Zealand.