Malaysia Outsourcing Challenge

At the briefing, Bobby Varanasi, Outsourcing Malaysia's head of marketing and branding, also presented findings from an IDC report, commissioned by Outsourcing Malaysia and the Multimedia Development Corporation (MDeC), on Malaysia's outsourcing landscape.

The study revealed that the local SSO sector faced serious challenges that must be addressed for the industry to compete against global rivals.

Varanasi said the IDC report highlighted that the health of the country's outsourcing business "could be better".

According to the study, for on-shore service opportunities, business deals from local companies was "almost nil" and there were few business wins involving Western companies. For near‐shore business opportunities, despite Malaysia's proximity to growing economies, the country was not as attractive as India or the Philippines, the report said.

"Offshore business opportunities, despite possessing the requisite infrastructure and catalysts, we have not seen any growth in demand for Malaysia as an offshore destination," the report noted. "Further non‐availability of key management capabilities to create and engage with global clients is fully lacking in a competitive context."

IDC also highlighted the need for local players to offer scale and volume and bottom‐line savings by creating "portfolio" services, and not simply offer discrete services such as call centers or custom development.

"Provide value and top‐line impact by focusing on 'vertical' solutions--Malaysia's price points cannot afford low rates for non‐core discrete services, given higher cost structures in the country," it added.

The report also called for "aggressive adoption of outsourcing in the domestic marketplace" to support local providers going global. It recommended local providers work with foreign players as prime sub-contractors to acquire capabilities, scale and knowledge of global service delivery, rather than try to obtain end-users as key clients.

Other key findings of the IDC report:

Malaysia's total technology and technology-enabled services market, including shared services, outsourcing, joint ventures and partially-owned subsidiaries, is estimated to be US$3 billion with a projected compounded annual growth rate of 17 percent.
Government, financial services and insurance, and manufacturing, design and integration sectors present the largest market opportunities. About two-third of local market is dominated by foreign vendors that have inked large deals in these sectors.
Key vendor criteria include scalability, capability and skillsets, and reliability.
Niche market opportunities exist for local players in hosting, remote management and engineering services for computer aided modeling (CAD), prototyping and testing, in oil and gas and automotive sectors.
Lee Min Keong is a freelance IT writer based in Malaysia.