The Malaysian outsourcing Industry - scaling new heights

The industry is expected to grow at a CAGR of 15% to reach $1.9 billion by 2013. Currently, IT outsourcing services in Malaysia has a greater share of the overall outsourcing market, followed by BPO services; while knowledge services outsourcing, still in its nascent stage, has a smaller share. Government support, domain knowledge and industry expertise in BFSI, oil & gas and logistics has benefited the growth of the Malaysian outsourcing industry. Moreover, Malaysia’s multi-cultural and multi-lingual cability is attracting business from Asian markets like China, Japan, South East Asia and the Middle East. According to Arun Jethmalani, CEO,  “Companies in the BFSI, oil & gas and logistics sectors, which had set up operations in Malaysia decades ago, are leveraging the country’s multi-lingual ability and domain expertise in these verticals to set up IT and BPO centers in Malaysia.” ( http://www.bharatbook.com/Market-Research-Reports/Outsourcing-in-Malaysia-Scaling-New-Heights.html )

Malaysia has been recognized as one of the preferred destinations for outsourcing, however it faces some challenges. One of the major challenges for the Malaysian outsourcing industry is to overcome constraints with regards to scalability. The total number of employees in the industry is roughly comparable to the number of new hires by a leading Indian IT outsourcing service provider. Employee costs, too, are 15% to 20% higher when compared to other popular destinations like India.
One of the key concerns for the outsourcing industry in Malaysia is the need to move up the value chain to offer high value services as opposed to highly commoditized services in IT or BPO. Says Bobby Varanasi, an outsourcing consultant, “Strand Aerospace Sdn Bhd is a prime example of a Malaysian company moving up the value chain in outsourcing. The company specializes in computer-aided stress testing for engines of Boeing and Airbus.”

Finding its own niche will be critical for the Malaysian outsourcing industry to sustain its growth. For example, a majority of the local Malaysian service providers serve the Asian and the Middle East markets. They are well poised to address the outsourcing opportunity in Islamic banking services from these markets.
With consolidation and collaboration at the service provider’s end and strong initiatives from the government for the outsourcing industry, Malaysian service providers will receive greater recognition in the global markets. However, given the challenges, providers will find it difficult to make a significant dent in the outsourcing market. Considering the scale, a focused approach backed by the government and industry initiatives will drive the success of the Malaysian outsourcing industry in the long term.

This report provides an in-depth analysis of the service provider landscape in Malaysia. The report brings out the key strengths and challenges faced by the country's service providers. The report also highlights the growth drivers and provides the key trends and insights for opportunities in the Malaysian outsourcing industry. Outsourcing Malaysia (OM) is an initiative of the Malaysian outsourcing industry and a chapter of PIKOM. With support from its institutional partners, the Multimedia Development Corporation (MDeC), and senior leaders from the global services industry, this outsourcing consortium aims to promote the capabilities and competencies of the Malaysian outsourcing industry.

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