Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

Malaysia's outsourcing industry will double by 2017: study

AvantiKumar | Oct. 23, 2013
It takes just six days for an investor to start doing business in Malaysia compared to an average of 36 days to do the same in other APAC countries, said Outsourcing Malaysia's Chairman David Wong at the APOS event in Johor.

Outsourcing Malaysia unveils  research in APOS 2013 modified 

Photo - (From left) Woon Tai Hai, Chairman, PIKOM;  IAOP Chairman Michael Corbett. Chairman, IAOP;  and David Wong, Chairman of Outsourcing Malaysia unveil the new research findings on the outsourcing industry for 2013 at the Asia-Pacific Outsourcing Summit (APOS) in Iskandar, Johor.


According to a new study unveiled by Outsourcing Malaysia at the international Asia-Pacific Outsourcing Summit (APOS) in Iskandar, Johor, Malaysia's outsourcing industry is set to double in growth by 2017 with a compound annual growth rate of 15 percent from its current 2012 revenue of US$1.7 billion.

An initiative under the national ICT association PIKOM, Outsourcing Malaysia [OM] chairman David Wong said the second industry report  -  'Malaysia's Global Services Outlook' - was conducted by market research firm Valuenotes.

Malaysia has been ranked 12th worldwide by the World Bank for the 'Ease of Doing Business' category, said Wong. "This ranking is also the highest amongst all countries that are considered 'outsourcing countries.'"

"A simple illustration of this is that a potential investor can start doing business in Malaysia in a mere six days, while it takes an average of 36 days to do the same in other APAC countries," he said.

Wong said Malaysia has the "highest infrastructure availability worldwide ranking at 32nd spot among all outsourcing countries compared to India ranked 84 - with connectivity, electricity supply and Internet penetration per population at the highest scores."

"With the Malaysian government's continued initiatives to set up new business cities that fully equipped with infrastructure facilities such as transportation, electricity, water supplies and telecommunications such as here in Iskandar, it will further increase our appeal to investors who are looking at Asia to outsource their business processes," he said.

More than 200 industrial estates

Wong said there were now more than 200 industrial estates/ parks and 14 Free Industrial Zones (FIZs) in the country for businesses to kick-start their operations.

In addition, "the strong and diverse language capabilities, strategic geographic location, stable business and economic environment as well as strong government and industry association(s) support and initiatives were also listed as the some of the other key factors that make Malaysia a viable outsourcing destination," he said.

The new study also points a need for Malaysia to immediately move away from entry-level outsourcing, said Wong. "The largest Malaysian outsourcing company only manages to employ 5,000 people as compared to more than 100,000 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 project."

"This is why we have to focus [higher up the value chain] on providing more highly specialised end-to-end services in niche markets such as a) Business Financial Services Industry (BFSI) b) Healthcare c) Logistics and d) Oil and Gas in order to remain globally competitive," he said.

Wong said the BFSI sector now currently accounted for 30 percent of the market share and would increase especially in Islamic banking with the potential to offer offshoring services. "The fastest growth will be seen in the Healthcare (CAGR 10 percent), Government (CAGR 9 percent) and Travel and Logistics (CAGR 8 percent) sector. Infrastructure management and payment processing are some of the services that are being predominantly outsourced by business in the sector."

Some of the most popular IT outsourcing projects are generic office enrolment (GOE), electronic procurement (eP) and human resource management information system (HRMIS). "Oil & Gas is another critical sector where there is high potential for growth. Malaysia's strategic location, good port quality and road infrastructure on the other hand is contributing to the growth of the logistics sector," he said.

"On our part, we will continue to create avenues for discussion and networking through events such as APOS to continue driving the industry's overall developments with an emphasis to push for niche market growth as well as driving more interest in outsourcing as a viable career amongst the local workforce," said Wong.

Themed 'Creating Sustained Value for Regional Integration," APOS 2013 is the first of five regional summits that will be organised by Outsourcing Malaysia together with the International Association of Outsourcing Professionals (IAOP) across Asia Pacific in the next five years.


Sign up for CIO Asia eNewsletters.