Industry Report: Malaysian Outsourcing Industry to Double Growth in 2017

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Michael F Corbett, IAOP Chairman, Debi Hamill, IAOP CEO, David Wong, OM Chairman
2013 Asia-Pacific Outsourcing Summit @ Iskandar, Johor.

Outsourcing Malaysia (“OM”), an initiative under PIKOM, announced its second industry report entitled ‘Malaysia’s Global Services Outlook’, in conjunction with the four-day 2013 Asia-Pacific Outsourcing Summit (APOS) in Iskandar, Johor. The report revealed that the outsourcing industry in Malaysia is set to double in growth in 2017 with a Compound Annual Growth Rate (CAGR) of 15% from its current 2012 revenue of US$1.7 billion.

The extensive industry report was done by B2B market researcher Valuenotes, commissioned by OM to provide insights of the industry in Malaysia.

Malaysia: The ideal outsourcing destination
One of the major insights is the key advantage that Malaysia has as an outsourcing hub – it ranks 12th worldwide by the World Bank for the ‘Ease of Doing Business’ category. This ranking makes Malaysia the highest ranked country amongst all countries that are considered ‘outsourcing countries.’ As an example, a potential investor can start doing business in Malaysia in a mere six days, as opposed to an average of 36 days to do the same in other APAC countries.

Another key advantage Malaysia has is its superior infrastructure. Malaysia has a worldwide ranking of 32, the highest ‘infrastructure availability’ ranking amongst all outsourcing countries. Malaysia scored highest in connectivity, electricity supply and internet penetration per population. In comparison, the well-known IT-outsourcing hub – India, is ranked only 84.

The Malaysian government’s continued initiatives in setting up fully-equipped business cities is expected to further increase Malaysia’s appeal to investors who seek outsource business opportunities in Asia. There are currently over 200 purpose-built industrial estates or parks and 14 Free Industrial Zones (FIZ) developed throughout the country to help businesses kickstart their operations quicker and more efficiently.

Malaysia’s other advantages include strong and diverse language capabilities, especially with English widely spoken in urban and suburban environments; strategic geographic location, stable business and economic environment; as well as strong government and industry associations support.

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David Wong, Chairman of Outsourcing Malaysia
2013 Asia-Pacific Outsourcing Summit @ Iskandar, Johor.

Malaysia’s challenge: Lack of talent volume
Malaysia’s inherent lack of talent is not a new problem, which is precisely why there is urgency to move the country away from participating in volume-based outsourcing and entry-level outsourcing sectors. To remain competitive, Malaysia needs to move up the value chain by harnessing technology to counter its lack of talent, and by focusing on more highly specialised end-to-end services in niche markets.

David Wong, Chairman of Outsourcing Malaysia said in his keynote, “The largest Malaysian outsourcing company only manages to employ 5,000 people as compared to over 1000,000 employees in some of the larger firms in India and China. This illustrates the average size of outsourcing centres in Malaysia – which limits our capability in taking on volume-driven type of outsourcing projects.”

The research findings have identified four key industries where Malaysia can compete and thrive in – Business Financial Services Industry (BFSI), Healthcare, Logistics and Oil & Gas.

BFSI accounts for 30% of market share and is expected to grow further, specifically in Islamic banking with the potential to offer off-shoring services. The fastest growth sectors are Healthcare (CAGR 10%), Government (CAGR 9%) and Travel and Logistics (CAGR 8%). Drilling down further, infrastructure management and payment processing are services that are predominantly outsourced by businesses in the sector.

Oil & Gas is another critical sector where there is a high potential of growth for Malaysia thanks to its strategic location, good port quality and road infrastructure.

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2013 Asia-Pacific Outsourcing Summit @ Iskandar, Johor.

For more photos of APOS 2013, visit Flickr.

OM-IAOP partnership: Developing the Malaysian outsourcing industry
Themed ‘Creating Sustained Value for Regional Integration’, APOS 2013 is the first of five regional summits that will be organised by Outsourcing Malaysia in partnership with International Association of Outsourcing Professionals (IAOP) across Asia Pacific in the next five years.

OM’s partnership with IAOP is an important milestone for OM, where it will be used as a platform to capitalise on the industry’s potential and ride on the industry’s hottest trends. OM and IAOP have also been strategically working together to upskill talents in the country via its COS and COP certification programs.

The partnership also brings the setting up of a Research Centre in the Asia Pacific to enable concerted research on information pertinent to the Asia Pacific-Oceania region, collation, analysis and representation of all thought leadership generated by regional chapters and outreach programs.

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