Vertical future for Malaysia’s SSO

(from Outsourcing Magazine Issue #2: Oct/Nov 2007)

I’m writing this piece whilst in a plane in China. The opportunities here, as it is for the rest of the world is significant. China is a country, which consumes US$140 billion (RM490b) worth of ICT solutions each year. They are projected to add another US$60 billion (RM210b) within only a few years.

This is a difficult market to ignore. It is also not an easy market to walk into especially for budding Malaysian companies. Anyway, that's a different story.

The tremendous changes in this country are one of many significant shifts in the global economy today. Analysts have observed that the outsourcing industry has slowed its pace of growth. Will it be the end of SSO? No, I think it just means that the big-budget large-scale operations are starting to slow down. This is not Malaysia's space. Therefore, I reckon it will be a long time before Malaysia feels the pinch. In fact, I think the reverse may be true - Malaysia should start to accelerate. There are few reasons for this.

Firstly when servicing MNCs, Malaysia is the best place as twinning location for India, China and Philippines. So this model is fairly sustainable especially as the cost of labour in other countries starts to balance with Malaysia, even more work should move here. Secondly, Malaysia has the natural fit to support the new emerging markets. As the slogan goes: "Malaysia truly Asia".

Thirdly, the wave of knowledge-based work is on the rise, though still relatively small. Malaysia's experienced knowledge workers are highly competitive, especially in price performance. Malaysian graduates are still more expensive when compared to other rival countries though the gap is narrowing. As they get more experience, Malaysians tend to become very price competitive. No, Malaysians' are not cheap. I think it's an indicator that people here tend to stay in the country with their families than work abroad. Same as other great countries.

Finally, there is a growing demand by enterprises in Asia to help turn around and upgrade their practices. This is the potential goldmine for Malaysian service companies. Businessmen, administrators and government officials have recognised the country's developmental capability, but Malaysian companies have not taken advantage of this.

There are also an increasing number of firms who need partners to build, operate then transfer the business back. This is a growing trend in Asia, including West Asia – and USA too. This opportunity exists in all service areas, including finance, logistics, healthcare and telecoms. I guess these firms are tired of consultants who cannot operate and operators who cannot transform.

Malaysian industry should take the lead. The only way for the industry to strive is to be industry-led and to become a first mover. Though it may be slow at first, there is a growing number of companies that need these types of services.In any case, I reckon the future of SSO for MNCs and locals in Malaysia lies in investing in deeply focused sectors. The margins are better, the customers are nicer and the prospects are brighter.