The shared services and outsourcing (SSO) industry has been an important part of Malaysia’s ICT-led transformation into a high-income, knowledge-based economy. Through prudent entrepreneurship and ongoing government support, Malaysia has established itself among the top three SSO destinations in the world, behind global powerhouses India and China.
In 2010, the Malaysian SSO industry experienced significant growth as companies worldwide focused their post-global economic downturn investments on opportunities to drive down costs while promoting business agility and innovation. Early indications are that the Malaysian outsourcing industry generated RM3.2 billion in revenue in 2010. The continued success of the Malaysia SSO industry is one of the reasons outsourcing has been identified as a National Key Economic Area under the Economic Transformation Programme, which seeks to ensure that Malaysia achieves developed nation status by 2020.
Big Is Better
In an industry as dynamic as SSO, many trends and opportunities emerge every year. The critical skill for ongoing success is in identifying the relevant game changers. For Malaysia, two trends stand out: the first is that Malaysia is losing some of its competitive advantage over other emerging nations like Thailand and the Philippines because of the fragmented nature of our SSO industry.
Customers are eager for opportunities to reduce their costs and for SSO companies to offer the very best rates these companies must be able to exploit economies of scale. However, in Malaysia, many of our SSO companies are smaller operations that can scale to take on projects that require hundreds of seats but struggle when competing for projects that require thousands of seats.
To overcome this, Outsourcing Malaysia, an initiative of the Malaysian outsourcing industry and a chapter of PIKOM, the country's National ICT Association, has put forth a three-year plan to promote the creation of two or three large Malaysian SSO consortiums by 2012. These consortiums will be better equipped to win business in increasingly competitive global markets.
Throughout 2010, MSC Malaysia, the national ICT initiative, has been a key partner of Outsourcing Malaysia in understanding the needs of the Malaysian SSO industry through dialogues with leaders from local companies, engagements with thought-leaders from across the world and detailed market research.
Moving into 2011, MSC Malaysia can best support the creation of these large Malaysia SSO consortiums by continuing their efforts from 2010 and also assist in marshalling the necessary resources to finance the smooth execution of the mergers and acquisitions. The Multimedia Development Corporation (MDeC), the driver of MSC Malaysia, is in a unique position to reach both the public and private sector players and to forge partnerships that can smoothen the birth of Malaysia’s SSO consortiums. Outsourcing Malaysia projects that at least RM100 million will be needed over the next three years and MDeC’s collaboration will be invaluable in securing the necessary funding.
Climbing The Value Chain
The second trend that stood out in 2010 and that will be significant in the years ahead is the evolution of the Malaysian SSO industry into offering Knowledge Process Outsourcing (KPO) services.
Emerging from the global economic downturn, companies across the world are realising that outsourcing is a vital strategic component in establishing their organisation’s sustainable competitive advantage. These companies are looking at outsourcing not only on the operational level but also on the strategic aspect.
Through KPO not only are costs reduced by transforming fixed costs into variable costs via resource reallocation. SSO companies can also deliver more substantive value to their customers through services that include market research, data and statistical analysis, competitive intelligence, engineering and software R&D and design and legal research and administration processes, among many others.
To offer meaningful and competitive KPO services, Malaysian SSO companies must be able to carry out of extremely complex, and sometimes customised, processes that requires advanced analytical and technical skills and employs knowledge workers with the ability to make sound and timely judgments. The highly skilled workforce needed to deliver these services requires advanced education and specialised training.
Over the past 17 years, MSC Malaysia has been a vital influencer in Malaysia’s ongoing efforts to develop a highly skilled IT-literate workforce. In 2011, the SSO industry needs MDeC to take and even greater role in capturing the imagination and ambitions of young Malaysians in the bid to encourage them to pursue challenging educational courses. The industry also needs MDeC’s support in offering even further opportunities for knowledge workers to continue developing their skills while working through certifications, trainings and industry dialogues.
MSC Malaysia has been a stalwart partner of the Malaysian SSO industry for many years. Together they have shared many successes. Looking forward at 2011 and beyond there is every indication that with dedication and hard work there will be many more successes to be shared and celebrated.
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