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Outsourcing is a growth industry for Malaysia

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Outsourcing Industry Need Shots In Arm

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Malaysia hits the mark in outsourcing game

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OUTSOURCING MALAYSIA’S EXPORT STRATEGY TO DRIVE INDUSTRY’S GROWTH

Outsourcing Malaysia (OM) will focus on an export promotion strategy that includes regional cross border partnerships to spur the local outsourcing industry and help it to achieve its targeted 15% growth. The Malaysian outsourcing industry generated revenue of USD1.1 billion last year.

Malaysia’s strong talent pool and other advantages have placed it among the top three Shared Services Outsourcing (SSO) destinations in the world.

Quoting this from a study by global management consulting firm AT Kearney, Prime Minister Datuk Seri Najib Tun Razak said, “Thanks to Malaysia’s multi-cultural environment, the ranking enables the country to offer multiple language skills and a high-value workforce capable of interacting as well as meeting the needs of customers across the globe.”

He said there were almost 140 foreign and 60 local companies in the country now performing various SSO activities, ranging from IT and business process outsourcing to knowledge process outsourcing.
OM’s export strategy is in line to increase the competitiveness of Malaysian outsourcing companies and to tap the industry’s enormous untapped potential.

Its Chairman David Wong told reporters at a media briefing that OM believes that cross border collaboration is a key driver to elevate local players’ competencies and to help them become global service providers. OM had recently organised a successful business mission to Australia to facilitate partnerships between Malaysian and Australian IT and business solutions providers where over US$100 million worth of collaboration opportunities were identified.

It was the first business mission to Australia for OM. Response towards the seminars, round-table discussions and B2B meetings in Sydney and Melbourne revealed the genuine willingness and openness of Australian companies to explore partnership opportunities with industry counterparts in Malaysia.

According to Mr Wong, among the factors which contributed to the success of its Australian mission were Malaysia’s strengths in specific industry verticals and the country’s proximity to the Middle East countries.“ Australian companies recognise our competitive edge in the areas of Contact Centre Operation & Services, Enterprise Resource Planning, HR and Finance & Accounting Outsourcing and our close location to the growing Middle East markets is also a strong plus point.

“Our positioning of Malaysia as a gateway to the larger ASEAN region is also another compelling reason for Australian companies to consider partnering us, while for Malaysian companies, we can leverage Australia’s respected global brand. Together, we will be able to collectively target markets beyond the two countries,” Mr Wong said, adding that collaboration is crucial to create appealing solutions in today’s commodity marketplace.

He added, “OM plans to organise follow-up visits to Sydney and Melbourne within the next year and is also targeting similar missions to other countries such as America, Singapore, Japan, Korea and Dubai over the next 24 months following the encouraging results achieved from the ‘smart partnership model’ concept initiated for Australia.”

OM also recently launched its newly revamped website (www.outsourcingmalaysia.org.my) as part of its strategy to make it easier for the global market to access the local shared services and outsourcing capabilities that are available in the country.

Outsourcing Malaysia is organising the Smart Sourcing Summit 2010 (SSS2010) in December 8 -10 under the theme “Uncertainty in a post- crisis world – doing more with less”.

Source: The Sauce

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Export Strategies to Drive Growth: OM

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Scale is the Name of the Game for OM

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Malaysia's outsourcing industry to grow between 15 and 20 per cent

KUALA LUMPUR, May 17 (NNN-Bernama) -- Malaysia's outsourcing industry is expected to grow between 15 and 20 per cent this year as more companies outsource their services to remain competitive.

However, to remain competitive in the outsourcing market in the future, Malaysia will have to focus on segments where it can have an edge such as the mid-layer segment as the low-end segment is now dominated by India.

"I foresee good growth in the outsourcing industry because it helps to drive down cost," said Interactive Intelligence Inc's regional sales director for Asean, David Toh Yue Heng.

He told Bernama recently that the outsourcing industry in Asia was led by India for years but as salaries went up, people started to look at other countries that offered better and value-added outsourcing services.

According to Toh, Malaysia's advantage is its multilingual talents.

"We can speak multiple language apart from English, Malay, Chinese and Tamil, and some even speak Japanese and Korean," he said.

Based on a study by AT Kearney, Malaysia is ranked third in the Asia Pacific region for outsourcing.

Asked whether Malaysia was prepared to become a contact centre hub in the future, Toh said Malaysia has "all the ingredients to become a successful hub".

Among them were skilled workers, resources and infrastructure as well as reasonable cost, he said.

"Hence, with all the ingredients, it is possible," he added.

Toh said the government and the people in the industry should work hand-in-hand to achieve their aims and attract external markets.

Among the key areas that Malaysia could focus were the government sector, and inbound and outbound markets, he said.

Toh said the ongoing efforts by government agencies to improve the public delivery system offered opportunities for call centre operators to look into the segment.

Traditionally, he said, most government agencies used the telephone system for communication.

Of other segments, the outbound market is one of the key areas with potential for growth, Toh said.

He said outbound call is one initiated from a call centre agent to a customer on behalf of the call centre or a client.

Typical outbound calls include include telemarketing, sales or fund-raising calls, as well as calls for contact list updating, surveys or verification services.

A call centre may handle either outbound or inbound calls exclusively or deal with a combination of both.

http://www.export.by/en/?act=news&mode=view&id=19508

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Rating the Up-and-Coming Offshore Outsourcing Hotspots

Offshore/outsourcing firms in Malaysia, Indonesia, the Philippines, and Thailand might lack the resources of Indian heavyweights such as Tata or WiPro, but they aren't sitting still.

India and China continue to be the biggest (and most established) names in offshore outsourcing according to new research from market-watcher Gartner Inc. Both countries increasingly have plenty of competition, however.

A new Gartner report paints a picture of thriving outsourcing ecosystems in several Asia-Pacific locales -- such as Malaysia, Indonesia, the Philippines, Thailand, and Vietnam.

The new offshore firms currently lack the resources, infrastructure, and reach of established heavyweights such as Tata or WiPro, but the upstarts aren't sitting still. Moreover, like their Indian and Chinese rivals, many are getting boosts from their national governments. The upshot, according to Gartner, is that most Asia-Pacific outsourcers (with the exceptions of Indonesia and Vietnam) are able to offer good to excellent infrastructure services.

"Countries such as Malaysia, the Philippines, and Vietnam have continued to strengthen their position against leading alternatives, while Indonesia has entered the top 10 for the first time," said Jim Longwood, research vice president at Gartner, in a statement. "Some of these countries have invested considerably and leveraged increased demand for lower-cost services. The global financial crisis forced many organizations to place a greater emphasis on cost optimization."

The Gartner report, 10 Leading Locations for Offshore Services in Asia Pacific and Japan for 2010, lists India as the top offshore destination, with China as (a still distant) number two. Elsewhere, however, things are considerably more competitive: everyone, Gartner says, has an angle.

Australia, New Zealand, and Singapore, for example, compete (and differentiate) based both on the comparative maturity of their outsourcing services and on the relative stability or intelligibility of their outsourcing practices: all three countries earned high marks for political and economic stability, as well as for language skills. Upstart entrants, on the other hand, largely compete on cost.

Vietnam, for example, leverages rock-bottom pricing to offset its deficiencies in other areas. It fared particularly poorly on the data and intellectual property and security and privacy measures, according to Gartner.

On the other hand, the analyst firm notes, Malaysia, Thailand, the Philippines, and Indonesia have been able to achieve a kind of happy medium between low-cost and adequate service. All four countries position themselves as low-cost alternatives -- albeit with fewer bona fides (e.g., resources, experience, or reputation) -- to established (but in some cases more costly) options elsewhere in the Asia-Pacific region. All four countries turned in Top-10 finishes in Gartner's latest offshore outsourcing tally.

The efforts of both outsourcing upstarts and established contenders (a grouping that includes China, Australia, New Zealand, and Singapore) appear to be bearing fruit, according to Gartner. For example, even though India's outsourcing industry continues to grow, the sub-continent's share of the overall outsourcing pie is steadily shrinking. What's more, Indian outsourcers are now grappling with many of the same issues -- including wage inflation, turnover, or financial inconsistencies -- that bedevil established services firms in first-world locales.

Outsourcing upstarts are also thinking tactically, Gartner notes. "In view of India's dominance, many countries trying to tap into this market are reassessing their strategy and looking at niche markets [such as call centers], logistics, and other back-office functions where they might have a physical proximity advantage over mature countries like Australia, Hong Kong, and Singapore," Longwood said.

Indonesia, which this year displaced Pakistan in Gartner's Asia-Pacific Top 10, improved its standing by concentrating on what it does best -- in its case, mining and manufacturing. Its internal stability didn't hurt it, either.

"This was largely due to Indonesia's noticeable progress in addressing offshore opportunities rather than Pakistan's drop in performance, but political instability was also an issue here," Longwood explained.

Gartner said outsources are especially wary of political or economic instability. In this respect, offshore destinations such as Thailand, Vietnam, and the Philippines are viewed as less stable than other locales.

"While low cost is an important factor, the political and economic environment remains a concern for many companies when moving business to offshore locations," a Gartner statement pointed out.

About the Author

Stephen Swoyer is a New York-based freelance journalist who writes about technology

http://esj.com/Articles/2010/03/30/Offshore-Outsourcing.aspx?p=1

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Gartner Identifies Top 10 Locations for Offshore Services in Asia Pacific in 2010

India and China Remain Undisputed Leaders But Considerable Investments in Offshore Services Has Other Countries Strengthening Their Positions

Sydney, Australia, March 25, 2010 —  India and China remain the undisputed leaders for offshore IT and business process outsourcing services in the Asia Pacific region, however, a number of countries are making considerable investments in this area and positioning themselves as credible alternatives, according to Gartner’s latest research.

For the report ‘10 Leading Locations for Offshore Services in Asia Pacific and Japan for 2010’, Gartner analysed the capabilities and potential of various countries as offshore services locations in the region. A separate report identifies the top 30 globally.

“Countries such as Malaysia, the Philippines and Vietnam have continued to strengthen their position against leading alternatives, while Indonesia has entered the top 10 for the first time,” said Jim Longwood, research vice president at Gartner. “Some of these countries have invested considerably and leveraged increased demand for lower-cost services. The global financial crisis forced many organisations to place a greater emphasis on cost optimisation.”

The 10 leading countries in Asia Pacific included the undisputed leader in offshore services India, with China remaining the greatest challenger in terms of potential scale. The other countries include a mix of mature environments that offer limited cost benefits (Australia, New Zealand and Singapore) and emerging countries with a variety of challenges, but attractive costs (Malaysia, Indonesia, the Philippines, Thailand and Vietnam).

During the last 12 months there has been significant activity in many countries to consolidate or grow their positions as leading locations for offshore services, according to Gartner. Although India continues to grow in terms of IT services being exported, its relative share of the overall worldwide total has declined as a result. India is also starting to face some challenges including wage inflation, local attrition rates, geopolitical issues and financial irregularities, which are opening opportunities for other countries that are also improving their capabilities to target local service demands of more-mature regional Asian clients.

“In view of India’s dominance, many countries trying to tap into this market are reassessing their strategy and looking at niche markets like call centres, logistics and other back-office functions where they might have a physical proximity advantage over mature countries like Australia, Hong Kong and Singapore,” said Mr Longwood.

Indonesia was a new entrant into the top 10 list this year due to its expanding business environment targeting both offshore IT and business services, its large labour pool and its well-established industry base in mining and manufacturing involving prominent multinational companies. Pakistan dropped off the top 10 list.

“This was largely due to Indonesia’s noticeable progress in addressing offshore opportunities rather than Pakistan’s drop in performance, but political instability was also an issue here,” said Mr Longwood.

The global financial crisis and US currency fluctuations still remain a challenge for offshore vendors and clients. While the Asia Pacific region is experiencing a lesser impact from the global financial crisis, varying currency exchange rates against the US dollar have affected the attractiveness of some countries in the region. Countries like Australia, whose currency rebounded strongly, should see an increase in domestic demand for offshore services and a marginal decrease in its attractiveness for niche services.

“As organisations increasingly look at global delivery as a means to reduce cost, they will need to focus on important areas such as security, data and IP protection and compliance,” said Mr Longwood. “However, the link between lower risk and higher cost holds true.”

The mature markets of Australia, Singapore and New Zealand offered limited cost savings, but led the ratings for language, political and economic environment, cultural compatibility, globalisation and legal maturity, data and intellectual property, security and privacy.

Whereas Vietnam was the only country to receive an excellent rating for cost; it received ratings of fair or poor on every other criterion, with data and intellectual property, security and privacy where it performed worst.

Countries such as Thailand, Vietnam, the Philippines and Indonesia all rated less favourably for political and economic environment. While low cost is an important factor, the political and economic environment remains a concern for many companies when moving business to offshore locations.

Infrastructure is the only area where most countries ranged from good to excellent, with Vietnam and Indonesia the only exceptions. Most locations were considered good to very good for language and cultural compatibility whilst China, Indonesia, Thailand and Vietnam weren’t rated as strongly.

In addition to the top 10, four other countries were also strongly considered: Pakistan, Sri Lanka, Bangladesh and North Korea. All of these countries have started to establish attractive environments for companies looking for low-cost countries or that have external service providers located in these countries that are beginning to sell services beyond the domestic market.

Additional information is available in the Gartner report "Gartner's 10 Leading Locations for Offshore Services in the Asia Pacific and Japan Region for 2010” at http://www.gartner.com/resId=1300113

Note to editors:

*The top 10 countries for offshore services were rated according to 10 criteria that will help determine which locations are right for individual organisations. The 10 criteria were: language, government support, labour pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, globalalisation and legal maturity, and data and intellectual property security and privacy.

http://www.gartner.com/it/page.jsp?id=1329213

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Outsourcing Joins Billion Dollar Club

By STEVEN PATRICK

PETALING JAYA: Outsourcing in Malaysia has just become a billion-dollar business as revenue for the sector has jumped 18% to hit the US$1.1bil (RM3.6bil) mark this year, according to a report by Indian research firm, ValueNotes Database.The figure includes revenue from IT services, Business Process Outsourcing (BPO) and knowledge services, and is expected to grow 15% annually for the next five years. This is due to Malaysia’s multilingual capability and infrastructure, said the report.

Still, the Malaysian outsourcing sector cannot afford to rest on its laurels as outsourcing remains at less than 1% of the nation’s Gross Domestic Product.

Rather than relying on plain-vanilla call-centres, the report said that there are niches that local outsourcing companies could strive to fill. Some of the these niches include legal, engineering, manufacturing design and animation services.

Arun Jethmalani, chief executive officer of ValueNotes said that the key concern for the outsourcing industry in Malaysia is to move up the value chain to offer high value services, as opposed to highly commoditised services in IT or BPO.

“There is a huge market for specialised engineering design talents. With Malaysia’s experience in manufacturing and oil and gas services, it could look at moving into this area, instead of just callcentres,” he said.

“The billing rates for specialist jobs like this are two to three times that of a callcentre,” he added.

Bobby Varanasi, an outsourcing consultant, said that an example of a Malaysian company moving up the value chain in outsourcing is Strand Aerospace Sdn Bhd. The company does computer-aided stress testing on the aeroplane engines of Boeing and Airbus.

Outsourcing Malaysia chairman David Wong said that the country could also find an outsourcing niche in Islamic banking.

“Islamic banking is complex and we have 30 years of experience in it. We could cooperate with a Middle Eastern player to advance Islamic banking,” he said.

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