Malaysia is already one of the leading outsourcing destinations but it is unable to compete with countries like India and Philippines when it comes to the cost factor. The only option now available for Malaysia to compete in this sector is to increase its value-added services.
The Oxford Business Group has released the Malaysia 2012 report with a number of interesting findings.
Malaysia as an outsourcing destination
Malaysia is now placed third, behind India and China when it comes to outsourcing in the AT Kearney’s Global Services Location index. Although, Malaysia is unable to present a steadfast challenge to cheaper competitors, it remains as one of the favored outsourcing destinations.
Malaysia now sees outsourcing as an industry of immense growth potential under the Government’s Economic Transformation Policy (ETP). Malaysia stands behind when it comes to offering low-cost services but the report released by Oxford Business Group states that Malaysia can bank on its value-added services to grow further in the outsourcing sector. It also noted that areas such as knowledge process outsourcing and sharing services are key areas to be focused on which stand to the advantage of Malaysia.
The report also states that Malaysia portrays huge potential when it comes to ICT-enabled growth in the services sector. Many countries which have a high reputation in outsourcing industry fear the challenges posed by countries like India and Philippines. These countries with their low-cost tie-ups are aggressive enough to capitalize on business opportunities by grabbing more away from comparatively higher paid outsourcing countries.
Outsourcing Industry Growth in Malaysia
While the outsourcing industry in the developed nations is growing at a rate of 25 to 30 per cent currently, Malaysia has reported a growth of only 15-20 per cent. Smaller economies like Malaysia are expected to grow at a higher pace and the outsourcing industry is mostly driven by multi-nationals. Malaysia now has 216 outsourcing companies which makes a mere 10 per cent of Multimedia Super Corridor companies. These companies also account for about 30 per cent of the revenue.
An increase in market size is the best way to allow big businesses to integrate services like IT and accounting which can be further moved to overseas locations. This is a good alternative to attract more services and Malaysia through these measures had drawn over 200 companies to start services in the country. Frost and Sullivan is one of the companies to start its services in the country recently.
The revenue of Malaysia from outsourcing units have reached US$273.6 million in 2011, which is 139 per cent of the target set initially by Economic Transformation Programme. The report also addresses a number of basic factors like infrastructure, labor skills and the ICT environment. Malaysia is now competing aggressively to gain a significant place as favorite outsourcing destination employing innovative methods in its value-added services.