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Malaysia well-positioned to tap US$670 billion global market: Outsourcing Malaysia report

AvantiKumar | Sept. 21, 2015
PIKOM, OM release Global Business Services Outlook Report 2015.

PIKOM and OM launch the GBS Report 

Photo - PIKOM and OM Council members launch GBS report with David Wong, Chairman of OM (2nd from Left) and with Cheah Kok Hoong, Chairman of PIKOM (3rd from Left).


Previously known as the Shared Services & Outsourcing industry, Malaysia's Global Business Services (GBS) industry is in a stronger position to tap the US$670 billion global market.

This is according to national IT industry association (PIKOM) chapter Outsourcing Malaysia's first industry report - 'Global Business Services Outlook Report 2015' - to provide a detailed analysis of the buyer's perspective.

Launched during Smart Sourcing summit, David Wong, chairman of Outsourcing Malaysia (OM), said, "This year, the report  was created from a Buyer's perspective; to give a different point of view after having previously shed light on Malaysia's position as a Seller or Provider of SSO offerings, and the strategic roadmap for the industry."

"We wanted to know what buyers (both from internal country industries and overseas markets) wanted; in order to know how Malaysia - as an GBS/ SSO provider, can best position itself to meet those requirements to maintain its attractiveness as a top destination for GBS / SSO," said Wong.

The report uses findings from respondents from 15 key countries / economies; and revealed that the global GBS industry stood at US$670 billion in 2014, with APAC accounting for the largest share of 36 percent at US$240 billion.

"Of this, Malaysia's share of the pie is comparatively small at US$4 billion, which indicates much room for growth," he said.

From Years 2014-2019, GBS is expected to grow steadily with APAC recording an average CAGR of 5 percent per annum. However, four selected markets - India, South Korea, Malaysia and Singapore, in particular, will record higher CAGR of 10-15 percent over the next five years.

Demands for services

Wong said from a wider perspective demand that fuelled GBS growth was expected to come from the banking and financial services ('BFSI'), government, retail and hospitality/ tourism industries.

Demand from the BFSI segment was expected to come from banks as they face pressure to reduce operational cost, offer seamless customer service and replace legacy systems, he said.

Meanwhile, the government sector was expected grow faster due to increase in IT penetration and adoption across government-based services in different countries. The retail and hospitality industry will also see growth fuelling from the rise of e-commerce and increasing adoption of ICT, said Wong.

He said the report showed that the outsourcing demand from the global telecommunication sector was expected to slow down; however, in APAC it was expected to register a higher growth due to rise in demand for application service delivery, service provisioning, activation services and billing services.

For 'specific' growth segments in ICT - the OM report highlighted Infrastructure Maintenance, Information Technology Management (ITM), Business Process Management (BPM), Software Services and Infrastructure Management Services - as those likely to see a significant take-up, as compared to other ICT segments.

He added that the current report findings augured well for Malaysia, but local players need to be aware of the specific industry demands and new technologies such as Big Data Analytics, Cloud Computing and new disruptive business models that are driving demand for GBS / SSO.

Current advantages include weakened ringgit

Wong said that despite current economic challenges, Malaysia continued to hold its attractiveness as a leading GBS location, given the country's continued ability to provide cost savings for buyers and its capacity to serve global markets.

"Given Malaysia's strong positioning as a leading GBS location, the weaker ringgit could also work in favour as overseas Buyers look to invest capital, purchase assets or hire talent for GBS operations here. Major GBS customers will continue to be from the developed economies i.e. the US, UK and Japan. But demand will also come from within APAC," he said.

The report also recommended that GBS players "aggressively build awareness of services capabilities with the Malaysian government and GLCs, develop or acquire Infrastructure Management and Information Technology Management capabilities and forge partnerships to move up the value chain and expand market reach, especially given the imminent implementation of the AEC (Asean Economic Community)".

The launch event also saw OM Malaysia signing two Memorandum of Understanding (MoU) agreements with University Kebangsaan Malaysia (UKM) and Call Centre Association of Malaysia (CCAM) respectively.


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