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Malaysia: Look Ahead to 2013 - Part 1

AvantiKumar | Jan. 7, 2013
Computerworld Malaysia presents a 'virtual roundtable' of opinions from Malaysia-based industry leaders on what we can expect in 2013.

 

Bobby Varanasi - Global Ambassador, IAOP

Photo - Bobby Varanasi, Global Ambassador, IAOP (International Association of Outsourcing Professionals) & CEO, Matryzel Consulting


The global sourcing sector has seen an increasing uptake, supported by an exponential shift, from transactional (and functional, volume-driven deals) to vertical/ sector-specific solutioning being provisioned by competent providers. Engineering services and high-end revenue-aligned services have changed the very nature of service provisioning in the sourcing space. Acquisition of consulting and solutioning front-end entities has boosted both revenues and margins for many global providers.

Meanwhile new markets in Latin America have opened a window of opportunities for non-LATAM (Latin America)-based providers to bring much-needed experience to this large marketplace. A healthy 10-12 percent YOY (year on year) growth in the sector is perceived, regardless of the perceived threat of obsolescence being parlayed by cloud-based solutions. In fact many providers  are re-aligning the models to the new normal of bundling cloud-based solutions with back-loading their price points in a manner that both utility value and risk are more intrinsically shared by both client and vendor.

Unfortunately this is a global trend, and has so far not been the case in Malaysia. The nation continues to struggle with being relevant in a complex and highly sophisticated industry. While the government is positioning outsourcing as a great opportunity for job creation, the reality with industry readiness negates all the opportunities. Malaysia has a long way to go unfortunately, and all the posturing both by government and industry is not based on reality, rather it is built around an aspiration.

While shared services continue to be built in cheaper locations, they are coming under increasing pressure with cost containment and outsourcing is languishing with almost nil adoption. Whatever little outsourcing is being adopted is premised on the back of business and vertical competencies that are only offered by the global service providers. Local providers have become inconsequential and quite irrelevant in this context.

The biggest low is that despite all the government emphasis on economic transformation (where outsourcing plays a significant role), industry reality - read lack of readiness to demand - is the biggest dampener. Demand-centric decision-making and industry development is not seen in the country. Posturing and marketing obsolete/ defunct services to the rest of the world doesn't get much attention.

Further, it is crucial to appreciate that services and solutions are by their very nature appreciable only in the context of their ability to "create value and benefits", both of which are intrinsically distinct for each client. Malaysia's inability to articulate business value, its heavy-handed approach toward thinking "technology makes things happen all the time", and "selling solutions/ services is not much different to selling products" has already spelt the death-knell for the sector in general, with almost zero recall value in the regional/ global marketplace.

Additionally, commoditised services are a function of costs and will always chase them. Diametrically opposite issues confront the nation here: While the nation wants to become a developed nation, current cost structures DO NOT enable provisioning of competitive commoditized services at globally offered rates (Malaysia is approximately 30-40 percent more expensive than other emerging nations for such services - call centres, ADM, SI etc. Other nations are more than able to do so and that's where the demand (for commoditised services) is going.

To transform the nation's emphasis to high-value services, just speaking about it, spending millions on the "possibility" through marketing will not convince any corporate chieftain. High-value has to be seen, perceived, and benefits received.

Malaysia's continued emphasis on posturing for the global marketplace has now become more than a minor irritant. It is eating away at the base opportunity (that no one wants to acknowledge). The old adage sticks here - you can only fool some people some of the time, not all the people all the time.

Additionally, some intrinsic issues plaguing Malaysia are around lack of management competencies, leadership stuck in operational moulds, lack of delivery capabilities and general incompetence with provisioning portfolio solutions where risk-sharing and accountability for business outcomes is a given. Technology is God in Malaysia - while everywhere else it has been relegated to its core role - that of an enabler, period. 

Some essential building blocks are still invisible

For the coming year, I don't see anything dramatic happening in Malaysia: within the regional context too, Malaysia shall continue to languish as an "afterthought" and an "and location" for many companies looking to establish Asia Pacific focused delivery centres. While the nation can forget attracting Internet majors (the nation's bandwidth and last-mile controls are a big stumbling block), even attracting traditional services' provisioning will not happen given lack of fundamentals relating to demand-realities.

The region shall continue to purchase services and these will become major deals for the large global services providers, which are shifting their attention from US/ Western Europe towards Asia Pacific and Latin America. They come with both deep pockets, and breadth of experience that is unmatched by regional (and local) companies. These global majors shall continue to grow their client portfolios in Asia Pacific including Malaysia.

While Malaysian service providers lament about the fact that even large local firms don't purchase outsourcing services from them, it's an untrue statement. Large local firms are more open to outsourcing should there be models that permit inclusive growth (and not growth and efficiencies built around job losses, or straight-forward production efficiencies driven by technology alone). Hence the provisioning of more hands-on risk-based business models (including price models manifested in risk sharing) are welcome conversations by these large end-user organisations.

Unfortunately such language is alien to Malaysian service providers, but the backyard of global service providers. I don't see anything changing for the next three years. In other words, "unless domestic companies demand value, vendors abhor investing in such value; unless vendors show they can create value, domestic companies (or even global buyers) will not engage with them". So what comes first? The answer is pretty obvious. This is a reality that eludes Malaysian industry's sensibilities, since the government seems to have taken the leadership role in sectoral transformation (a sad case of industry using government as a crutch rather than as an enabler).

The global economic environment shall continue to be driven both by austerity measures in developed nations, and bespoke domestic growth in key nations across multiple continents, as they navigate their way into the globalised marketplace, slowly yet steadily. Domestic companies and industry shall remain the biggest contributors in each of these economies. Global / multinational firms shall have to reflect an intrinsic understanding of semi-open economic environments to create any tangible impacts in such nations (India, China, Brazil, Colombia, and South Africa etc).

From a standpoint of optimising opportunities, presence in such markets is a foregone conclusion, and working with local firms a distinct advantage. Malaysia's ICT sector doesn't contribute much to any nation other than itself (and its contribution to the region is fairly insignificant anyways).

Pursuit of modernity drives Malaysia's ICT sector more than "sustainable sectoral value creation". Unless this mindset changes, nothing of significance can be expected. While I am not spelling doomsday for Malaysia, the nation's contributions haven't been of any consequence so far, and given I haven't seen any strategic thinking or alignment to demand realities, there's no compelling reason to think otherwise in the near future.

Private sector leadership is alien in Malaysia. Some essential building blocks continue to be invisible across the entire ICT sector. Envisioning a future is not about trying to replicate a Google, or training a young workforce on how to innovate, or propping up mediocre service providers whose services are dead and obsolete in the global industry context (but survive in part due to patriotism, and in part due to a misplaced sense of positivity that what is "new" to Malaysia must necessarily be of value to the rest of the world).

The nation is wasting precious monies and time in transforming the Y-generation, not realising that around the planet, knowledge obsolescence has a shelf-life of no more than 18-24 months today. The primordial question is this: are the nation's corporate sector leaders capable of strategically envisioning the future state of their organisations, and driving their entities in that direction? Or are they continually pigeon-holed in their balance sheets, since the government seems to be doing all the "strategic thinking" for them?

Unless this change happens, one can kiss the Y-generation's commitment to any sector goodbye. These are rather inconvenient conversations, but glaring and undeniable facts. The sooner Malaysian ICT industry realises it the better. Creating any number of national initiatives where the private sector is only tagging along to benefit from some government largesse is a recipe for failure. However much one may want to brush away the nation's inconsequentiality in the marketplace as "we are distinct" or that "we are victimised".

 

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