What is the purpose of outsourcing?
Companies use outsourcing to cut labor costs, including salaries for its personnel, overhead, equipment, and technology. Outsourcing is also used by companies to dial down and focus on the core aspects of the business, spinning off the less critical operations to outside organizations.
Malaysia shares land and marine borders with Brunei, Indonesia, Thailand, the Philippines, Singapore and Vietnam. The total multi-ethnic populace exceeds 28 million and includes a competent outsourced labor pool. IT outsourcing services are available in Malaysia at competitive rates. However, the focus seems to be on BPO and smaller projects, such as website design, graphics and animation.
TALENT POOL & EDUCATION
Malaysia offers a highly-proficient labor pool for software outsourcing. Malaysia’s landmark technology park, TPM, is home to more than 150 technology companies and employs over 10,000 workers. This campus is the leading choice for IT companies, scientists and researchers.
LANGUAGE
English is taught as a primary language in schools, and Malaysian citizens are extremely fluent in the language. Approximately 80% of urban businesses in Malaysia conduct their transactions in English.
ECONOMIC OUTLOOK
Malaysia’s economy in 2017 was a happy surprise to many forecasters. The country has one of the most vibrant economies in all of South Asia and is experiencing growth in manufacturing as well as ecotourism. The economic outlook is promising with an anticipated GDP of 5.1% in 2018, and 4.9% in 2019. The Malaysian program, “Malaysia Bill of Guarantee,” assures a business-friendly climate to attract and cultivate an IT economy, as part of its recovery following the 2008-2009 recession. With one of the top economic records in Asia, Malaysia has been enjoying a steady increase in its annual GDP for more than 50 years. If this growth remains constant, the country may achieve “developed country” status in the future.
Late But Catching Up
Until recently, Malaysia’s notable outsourcing engine has been mainly dedicated to low-cost manufacturing and service-focused IT efforts, such as help desk support. The country’s late entrance into IT outsourcing put it slightly behind other South Asian upstarts such as Vietnam and Singapore in developing a tech-fluent workforce capable of supporting more complex and digitally focused technology needs, such as data analytics, RPO and AI.
But now the digital tides are shifting. The Malaysian government has committed to numerous business and educational programs designed to grow its digital potential and proficiency. It’s an effort that seems to be paying off. The country’s Department of Statistics reported that 18.3% of the nation’s 2017 GDP could be attributed to the digital economy.
Is Malaysia Ready?
The concentrated investments and focus have many businesses considering whether Malaysia is a viable IT outsourcing destination for its more sophisticated technology projects and programs. Is Malaysia ready for big league, big tech outsourcing? To answer that question, a business must consider its outsourcing expectations and goals around talent, language, business climate and scalability.
The Scalability Challenge
Size does come into play when considering an outsourcing destination. Does the country and its businesses have the ability to rapidly scale to support changes to growing business needs? For Malaysia, which has a strong and young talent pool, that answer is yes but with limits.
While a country such as China can rapidly and cost-effectively scale to meet demand, Malaysia’s smaller and still emerging talent pool might take longer to scale and cost slightly more. Outsourcing scalability will increase with time and talent, but it’s a key factor to assess. If drastic swings in outsourced project scope or timing are likely, Malaysia may be limited in its ability to respond.
Malaysia Rising
As other Asia-Pacific regions experience bumps on the outsourcing road (such as trade wars for China and higher talent costs in India) Malaysia’s star is on the rise. While bigger, more populous neighbours offer plenty of outsourcing competition, it’s a nimble player expanding into high-value tech outsourcing, and the world is taking note.
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