Media Room: The Star
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.
Tuesday, 25 September 2009 21:48
MALAYSIA's outsourcing market will continue its high growth but outsourcing players should carve out their own niche, according to results of the organisation Outsourcing Malaysia's report, Outsourcing in Malaysia: Scaling New Heights, released in Petaling Jaya on 25 August, 2009.
Outsourcing Malaysia, a chapter of the national ICT association, PIKOM (Association of the Computer and Multimedia Industry Malaysia) and is the first of its kind in Malaysia to provide a detailed analysis of the vendor landscape, along with future trends, insights and challenges for the Malaysian outsourcing industry. The research was jointly undertaken with ValueNotes Database, a leading provider of business intelligence and research organisation.
According to the report, the Malaysian outsourcing industry is estimated to be worth US$1.1 billion for the year 2009, with a compound annual growth rate (CAGR) of 15% over the next five years to reach US$1.9 billion in terms of revenue in 2013. These include revenues from IT services, business process outsourcing services and knowledge services.
Currently, IT outsourcing services in Malaysia comprise 50% of the market, followed by business process outsourcing (BPO) services at 32% while knowledge services outsourcing (KPO) services remain in its infancy at a mere 2%. Although Malaysia has been acknowledged as one of the preferred destinations for outsourcing, the report identified key challenges and hurdles which must be overcome before it can become the preferred first choice destination.
“One of the key concerns for the outsourcing industry in Malaysia is to be able to offer high value services as opposed to highly commoditised services in IT or BPO,” said Arun Jethmalani, chief executive officer ValueNotes.
The repost states that Malaysia lacks the scalability required for high volume services due to its relatively high employee costs and small talent pool which present challenges in the availability of suitable human resources. This is compunded by the lack of alignment between the outsourcing industry and the present education curriculum, as well as the shortage in government funding which also hampers the industry's advancement.
“Despite the challenges, our research has identified a multi-pronged and focused strategy for Malaysia to capture the burgeoning global outsourcing opportunities,” said David Wong, chairmand of PIKOM and of Outsourcing Malaysia. “To sustain growth, Malaysia needs to carve its own niche that fits its strengths. For instance, Malaysia has become one of the preferred destinations to offshore services for companies in the Middle East, especially in key sectors such as oil and gas and Islamic finance, and we need to build further upon this.. More importantly, we should also focus on the strengths of our culture and language to cater to Asian markets in selected areas,” Wong explained.
The report also recommends Malaysian outsourcing companies to take advantage of the strong domestic market with capabilities in legal, engineering, manufacturing design and animation services to provide services globally and to tap into an abundant pool of accounting and finance professionals to cater to the growing demand for finance and accounting services.
The Outsourcing Malaysia and ValueNotes joint-report can be purchased from PIKOM's secretariat. Either call PIKOM at 03- 7955-2922 or e-mail Victor Low or Lisa Lee at email@example.com.
KUALA LUMPUR: Malaysia wants to be the No 2 location worldwide for outsourcing activities, edging out China, in five year’s time, said the Multimedia Development Corporation (MDeC).
Datuk Badlisham Ghazali, MDeC chief executive officer, said the country will attain this goal by ramping up its production of knowledge workers.
Malaysia, in third place after leader India and China, has held that position for the fourth time in six years, according to global management consulting firm A.T. Kearney’s Global Services Location Index (GSLI).
According to MDeC, the total number of knowledge workers contributed by MSC Malaysia — MDeC oversees that national initiative — is 79,000. By 2010, MSC Malaysia alone will need 100,000 workers.
It is estimated that the demand for knowledge workers nationwide will far exceed that. MDeC, however, could not provide an exact figure.
To meet the goal, MDeC is collaborating with industry experts and professional outsourcing bodies to train and re-train fresh IT graduates, displaced workers and working professionals for the growing outsourcing sector.
Among its partners are Outsourcing Malaysia; Customer Relationship Management and Contact Centre Association of Malaysia; International Association of Outsourcing Professionals; and Chartered Institute of Management Accountants and Customer Operations Performance Centre.
For those seeking professional qualifications, MSC Malaysia offers training and advancement programmes under its K-Workers Development Initiatives.
These are the MSC Malaysia Undergraduate Skills Programme, MSC Malaysia Undergraduate Apprenticeship and Development Programme (an on-the job training scheme), and MSC Malaysia Graduate Trainee Programme.
Increasing its pool of knowledge workers is a big challenge for Malaysia because China and India have a huge human-capital pool, said Joon Ooi, A.T. Kearney South-East Asia managing director.
But he believes Malaysia is headed in the right direction. “The process of increasing the talent pool has already begun and will create a virtuous cycle,” he said.
“As more companies outsource their services to Malaysia, more relevant resources will be trained and developed, and thus increase the human capital pool. This will in turn attract more companies and so on.”
Delesh Kumar, ICT (information and communications technology) director at Frost & Sullivan, said that besides being taught technical skills, knowledge workers should also be taught soft skills, such as communication, which are currently lacking.
“We are competing with countries like India and the Philippines and their people’s command of English and communication skills are better than ours. We need to beef up our skills in these areas,” he said.
“Presentation skills, public speaking and people management skills need to be inculcated from a young age at primary and secondary school levels.”
Delesh said the development of a more industry-relevant workforce can also be done via the existing vocational school system, whereby they can help create a pool of technology-specific talents.
“Vocational schools are more focused on manufacturing-related jobs and this should change,” he added.
Badlisham said the availability of skilled workers, competitive costs and an ideal business environment are the reasons why companies choose Malaysia for shared services, outsourcing and offshoring activities.
He believes that Malaysia’s multicultural traits are a strong selling point. “Many multinationals continuously praise our workforce’s versatility and adaptability.
“These companies are already one step ahead thanks to our readily available pool of skilled workers who are also multilingual,” he said.
The outsourcing industry is the biggest contributor to MSC Malaysia’s revenue, accounting for RM5.3bil (31.2%) in 2007.
According to MDeC, Malaysia continues to attract outsourcing jobs from high-profile companies, such as US-based hard disk manufacturer Seagate Technology Ltd, which began outsourcing its IT services in May and Australian mining giant BHP Billiton that began outsourcing its financing operations late last year.
A.T. Kearney’s GSLI, released bi-annually, ranks the top 50 countries for outsourcing activities, including IT services and support, contact centres and backoffice support. The ranking is based on financial cost, people skills and business environments.