Future of outsourcing in Malaysia

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US hospitals have been sending X-ray’s to India to be read by radiologists there due to the cost differences. This service falls under Knowledge Process Outsourcing, a niche Malaysia is targeting.

Where do we see the future of the outsourcing industry in Malaysia? A simple short answer is, outsourcing will continue to grow as businesses seek to innovate and to stay competitive by focusing on its core competency and to be cost effective and efficient.

As at 2012, Malaysia’s outsourcing revenue was RM5 billion with a total of 54,000 jobs created. By the year 2015, OM have forecasted total revenue of RM7.1 billion and 88,000 jobs. It is the Malaysian government  and industry’s aspiration to generate RM13 billion revenue and with  a total of 200,000 jobs by 2020. This represents a CAGR of 12.6% and 18% per annum respectively.

Malaysia has experienced significant growth in recent years despite the global economic downturn. This is due to increasing demand from companies globally, seeking lower cost destinations as well as expertise and resources to expand and grow their businesses. India, Philippines, China and Malaysia have certainly benefited from the growing demand.  The implementation of Outsourcing and Data Center EPPs (Entry Point Projects) in 2010 by Pemandu has also given the necessary boost to the outsourcing industry to grow at a faster pace.

But this doesn’t mean that we should lay back and relax. It calls for further proactive action from Malaysian companies to grow together with the rest of the industry. With continued growth of our neighbouring countries such as Indonesia, Sri Lanka, Thailand, Vietnam and even Myanmar, the bulk of outsourcing business from Europe and North America will go to these locations. However, on the bright side, the growth of outsourcing in the Asian market in the coming three years will provide ample opportunities for all.

Whilst there are many opportunities that await us, there are some dangers that are lingering surrounding the industry in Malaysia.

 

Moving up the Value Chain

There are many opportunities for growth and differentiation. This includes moving up the value chain by providing specialised and knowledge-based services. Outsourcing industry trends have been evolving over the years with Business Process Outsourcing (BPO) companies evolving to become Business Process Management (BPM) companies which provide a much wider portfolio of services to customers such as  helping them reinvent business processes. Outsourcing providers are also encouraged to offer Knowledge Process Outsourcing (KPO) services to deliver value in areas such as   market research, data and statistical analysis, R&D and legal research, etc.

 

Embracing Change

We must embrace change and transformation. With the advent of new technologies and trends such as Cloud Computing, Big Data and social media, the playing field can be levelled for companies of all sizes. Transformation demands innovation and collaboration to find the best solutions.

 

Finding the niche

In reality many outsourcing companies provide a “one-stop centre” solution to their clients. Commonly these companies provide a series of services to their clients but in reality they need to identify their niche and provide it as a solution to clients.

 

Talent 

To be sure, the talent issue is global but this is small comfort for Malaysia. We need to address this or it will hamper the quality of services provided by our outsourcing companies.

Here, Outsourcing Malaysia (OM) has committed itself to a three year plan with five key thrusts to address the issues at hand:

  1. Enable demand generation, penetration and access to target markets; i.e. Promotions, missions, branding (positioning, posturing and packaging) for members.
  2. Strategic Supply-Demand management (assessment, verticals, markets amd client types).
  3. Talent: Strategic Supply-Demand Framework/Programme, and Industry-Academia Collaboration.
  4. Industry access to capital.
  5. Establish Institutional Strategic Partnerships for collaboration in areas of people, process and technology.

OM aspires to identify and facilitate growth in vertical services which Malaysian providers can be benchmarked against the best in the world. It is our aim to achieve global recognition by being in the top 10 in two to three verticals by year 2015. We are already a world market leader in the providing Islamic banking services and the same can be replicated in other market segments.

David WOng

 

 

David Wong is Chairman of Outsourcing Malaysia, an industry initiative by Pikom, the National ICT Association.

 

 

Photo Flickr: User T. Aberle

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