For a country to succeed as an outsourcing hub requires a number of characteristics to be in place at the same time and almost all of them relate to people. It must possess a labour force with the requisite language skills, technical ability and flexible business models to attract clients in an extremely competitive market. Most of all, this combination must be offered at the right price.
Malaysia is not, perhaps, the destination most often associated with the outsourcing phenomenon. In the UK that particular honour must go to India, and in the US, the Philippines is attracting a growing amount of attention. Both India and the Philippines boast a large labour pool within which English is the recognised language of use, and from a cost perspective they both have their charms.
Strong raw materials
However, if Malaysia has to work harder to raise its profile in the outsourcing market, at least it has strong materials to work with. In an offshore location attractiveness report in 2004, consultancy firm A T Kearney rated Malaysia as number three in its league table, describing the country as “an often overlooked, but natural choice for offshore services”. It cited low costs of infrastructure, strong business environment and government support for the country’s information and communications technology (ICT) industry (including the creation of the Multimedia Super Corridor) as driving it towards the top spot. Malaysia, it said, would be one of the countries challenging India for supremacy in the medium term, although (and as Outsourcing Malaysia acknowledges) the small size of its population restricts its activities to the “quality not quantity” segment of the market.
Bobby Varanasi, of Outsourcing Malaysia, is keen to let the world know that Malaysia also has a compelling story to tell, albeit one that differs from the recognised competition in a number of key respects. Outsourcing Malaysia was borne out of the realisation that, although the country possessed strong service provision attributes and technical skills, it was nonetheless underselling itself in the world market, says Mr Varanasi. “We had a whole new value proposition that was just not being picked up on.”
Mr Varanasi says that Malaysia is offering pivots around a “value not scale” proposition. “India offers the lowest value – handling largely back-end, transaction-oriented, typical outsourced functions,” he says. In contrast, what Malaysia lacks in volume of human resources, it makes up in the strength of its skills base, he says. As a result, his member companies will not pursue low-value work, but instead court activities related to design and development, oil and gas services and technologies, logistics, supply chain and shipping technologies, and banking and financial services.
“There is a second point of differentiation, and that is in the business models that we are able to offer clients. In India, by contrast, the model is standard: fee-based, third party providers. But [our members] are much better placed to integrate their activities with those of the client, and there is a greater degree of risk sharing and hence shared responsibility. Within Asia, Malaysia has by far the greatest appetite for joint ventures,” says Mr Varanasi.
He is keen to promote the idea of Malaysia as a hub for the greater region. For business clients, the country’s ethnically and linguistically heterogeneous population should spell more than an ability to service operations in the UK or US. “Traditionally, [Western-based multinational corporations] face a number of linguistic and cultural barriers when they are trying to entrench their operations in Asia – but doing so is something that [Malaysian service companies] can help with,” he says.
Mr Varanasi gives an example: when US business process service company Teletech was looking at a base in south-east Asia from where it could handle clients’ needs in a variety of language jurisdictions, it settled on Malaysia. “We managed to sell Malaysia both to the company and, just as importantly, to its customers,” he says. The latter task is no less important and in some respects more difficult, he adds.
Teletech plans to employ about 3000 people out of Malaysia, speaking 16 different languages, including the main Indian and Chinese languages and dialects, and Japanese, in addition to English. The company handling the work will be Kuala Lumpur-based Scicom (motto: ‘total customer delight’), which claims to be able to provide voice and application support in a total of 43 languages. But Mr Varanasi says that the company went well beyond the provision of a back-office support function, helping to develop a sales and market entry strategy for the client.
Outsourcing Malaysia is not a trade organisation, although it is intended to fight the corner of and promote the interests of the sector as a whole, says Mr Varanasi. From its inception, the organisation identified both outward and inward-facing agendas. The former meant addressing visibility concerns and the latter meant getting the message understood in the domestic market.
Just as important is the need to nurture talent and provide access to marketing, says Mr Varanasi. “We understand that [success in this industry] is all about people and about developing capability. So we know what our talent pool requirements for the future consist of, and what we need to do to develop that talent.”
As far as business development is concerned, the industry has learnt from the experiences of the IT industry in an earlier age – when companies’ marketing exertions were hampered by lack of access to the capital markets – and many faced commercial failure as a result. The ‘strength in numbers’ approach of Outsourcing Malaysia, by contrast, confers on its member companies the ability to market themselves in a way that they would not otherwise enjoy, says Mr Varnasi. “We try to help [our members] engage with customers and afterwards we step aside.”
CASE STUDY: CISCO SALES
One company that is convinced by Malaysia’s combination of charms is Cisco Systems Inc, which recently chose the country as the hub for its South-East Asian Inside Sales Customer Relationship Centre, located at the company’s office in Petaling Jaya, and established to help potential customers in the region plan their networking needs.
By establishing the centre, Cisco could enable businesses that were planning their networking systems to speak directly to the provider, bypassing resellers or systems integrators. Deciding factors in the location choice included a multilingual, multicultural labour pool and good infrastructure. The support that the government has pledged to make Malaysia a hub for outsourcing services is among the factors that helped to make the country the perfect location for the centre.
Cisco is to invest some RM15m ($4.3m) over two years to develop the centre in Petaling Jaya, which will house 26 sales and engineering support personnel serving about 7000 potential clients in Indonesia, Malaysia, the Philippines, Singapore and Vietnam. The focus of the centre is to be the development of the small and medium-sized enterprise (SME) market sector, in recognition of the huge and burgeoning number of SMEs in Malaysia and elsewhere in the region.