Indian consulting and IT giant Satyam Computer Services announced this month that it will create a 2000-seat software engineering centre in Cyberjaya, south of Kuala Lumpur, to provide technological development and software support services to customers in the US, the Middle East and Asia. The facility will be its largest outside India.
Satyam chairman Ramalinga Raju said that the company chose Malaysia because of its advanced infrastructure, IT expertise and competitive costs.
In Malaysia, outsourcing has been identified as a growth area, as the willingness to pay for external services is strong, especially among players in the banking, insurance, manufacturing, healthcare and government sectors.
In an interview with OBG, Badlisham Ghazali, the chief executive officer of the Multimedia Development Corporation (MDeC), an agency of the ministry of science, technology and innovations, confirmed the trend, saying that outsourcing is an area that is undergoing tremendous development in Malaysia. The growth of this particular niche is expected to allow Malaysia to capture business from China and India.
Management consulting firm AT Kearney has ranked Malaysia as the world’s third most attractive outsourcing destination for two years in a row, behind India and China. McKinsey & Company has also ranked Malaysia in the top three most attractive locations, and the UK-based National Outsourcing Association selected it as offshore destination of the year for 2006.
According to Ghazali, there are currently around 90 companies performing shared services and outsourcing activities in Malaysia’s Multimedia Super Corridor, employing more than 20,000 employees. The industry generated more than RM2.6bn ($727m) in revenue last year, including RM1.2 bn ($336m) from the export market.
Large multinational companies such as HSBC, Standard Chartered and Shell have established operations in Malaysia ranging from business process outsourcing and call centres to IT centres. There could be more in the pipeline, as India's rising salaries and tightening labour market might lead some companies to look offshore..
Besides, Malaysia’s political stability and multilingualism – high levels of spoken English and common use of Chinese and Tamil among some communities – remain strong assets.
However, as Malaysia continues to develop, cost-competitiveness could be difficult to maintain as competing levels of IT development and infrastructure are increasing quickly in neighbouring countries.
Nevertheless, Malaysia’s huge investment in human capital has encouraged many large multinationals such as Intel, AMD and Bosch to stay in Malaysia for higher value-added operations.
Beyond investment in IT capacity, the government has recently created Outsourcing Malaysia, an organisation which provides a platform for cooperation between the government and industry to promote the growth of service providers and to develop the industry further. Corporate membership has almost doubled since its launch in May. Outsourcing Malaysia is presently focusing on developing new businesses in overseas markets and ensuring an adequatesupply of highly skilled labour.