MSC Malaysia to move SSO cluster up value chain: MDeC

• SSO cluster recorded RM10.4 billion in revenue for 2012
• Plans to move up value chain to increase KPO services segment

PLANS are underway to move MSC Malaysia’s Shared Services and Outsourcing (SSO) Cluster up the value chain by concentrating on high value Knowledge Process Outsourcing (KPO) services.
 
Malaysia has been consecutively ranked the world’s third SSO destination by the global management consulting firm AT Kearney since 2004, after India and China, the Multimedia Development Corporation (MDeC) said in a statement.

The SSO cluster recorded RM10.4 billion (US$3.22 billion) in revenue in 2012, a 14% jump from 2011, said the agency in charge of MSC Malaysia.
 
The cluster contributed RM5.8 billion (US$1.8 billion) to the nation’s GDP (gross domestic product) in 2012, up 32% from 2011. It also saw a whopping 57% increase in job creation with over 7,300 jobs created in 2012, bringing the cumulative number of jobs to 65,800 since MSC Malaysia’s inception in 1996.
 
MDeC chief executive officer Badlisham Ghazali (pic) said that the SSO cluster’s performance is a mark of the great strides that Malaysia continues to make in the SSO industry.
 
He said that Malaysia offers a unique value proposition, especially to foreign investors as the nation churns out over 190,000 multilingual graduates annually, while providing current and potential investors with world-class infrastructure, competitive costs of business operations and a safe haven with low occurrence of natural disasters.

"Additionally, Malaysia is also one of the few countries in the world to provide extensive government support to drive this industry," he added.
 
The key contributors to the cluster’s revenue were the following top three industries: Banking, Financial Services and Insurance (BFSI), Oil & Gas and ICT (Information, Communications & Technology).
 
The BFSI industry recorded RM2.26 billion in revenue in 2012, while the Oil & Gas and ICT industries contributed RM2.45 billion and RM3.66 billion in revenue respectively within the same period. The remaining industries that contributed to the SSO industry also include the Logistics & Transportation as well as Pharmaceuticals & Healthcare.
 
Gartner reported that the worldwide Business Process Outsourcing (BPO) services are expected to grow from US$126 billion (RM402.8 billion) in 2010 to US$162 billion (RM517.9 billion) in 2015; while the worldwide Information Technology Outsourcing (ITO) services are expected to grow from US$225 billion (RM719.3 billion) in 2010 to US$281 billion (RM898.4 billion) in 2015.
 
Evalueserve, on the other hand, forecast that global KPO services would grow from US$8.9 billion (RM28.6 billion) in 2010 to US$ 17 billion (RM54.7 billion) in 2014.
 
“There is a huge potential for the global SSO industry in the future. These projections bode well for Malaysia and set the right tone for our short term goals for 2013 while also offering great insights into, and ultimately achieving, our 2020 aspirations,” said Badlisham, referring to the Government's aim to make Malaysia a developed nation by that year.

MDeC said it is set to drive the industry’s next phase of development and subsequently move Malaysia up the value chain with a focus on the high yield KPO sector.

According to the custodian of the MSC Malaysia initiative, this will be done by encouraging existing investments to take up KPO-type of activities, attracting new investments in KPO-type of services as well as growing and further developing niche areas – such as expanding Engineering & Design services to the Oil & Gas industry and beyond.

The cluster also aims to facilitate the growth of local outsourcers under the Entry Point Projects 2 (EPP2) programme. This will be done by benchmarking local EPP2 companies against the International Association of Outsourcing Professionals (IAOP) global standards, providing incentives and initiatives to allow smaller local players to flourish.

These include the InnoSource programme which facilitates market expansion in terms of funding needs such as private equity and venture capitals, and the SCORE+ Acceleration programme to nurture local companies with respect to growth, market expansion, market access and promoting industry dialogue.

“As we continue to  move away from the generic call center business, we are looking to upskill or reskill our professionals, particularly in the finance and IT industries, to reach the higher level of experience and knowledge required in carrying out KPO services,” said Michael Warren (pic), SSO vice president at MDeC.

“The current talent development programmes in the pipeline such as the MSC Malaysia MyProCert-Strategic Reform Initiatives (SRI) programme and BFSI Training Programme are key training initiatives that will help us achieve this aim,” he added.

In addition to training and benchmarking programmes, the SSO cluster will also establish partnerships for knowledge development centres, leveraging on MDeC’s networks in the United States, Europe, Japan and Singapore and working with Outsourcing Malaysia and partners such as Gartner to increase Malaysia’s presence abroad.

In 2012, the MSC Malaysia SSO cluster received more than 30 new investments, including foreign direct investments from companies such as Amway Business Services Asia Pacific Sdn Bhd, BT Global Technology (M) Sdn Bhd, and Xchanging Malaysia Sdn Bhd. Additionally; MSC Malaysia also received key domestic investments from Brandt International Sdn Bhd, Pulse Group Sdn Bhd, and MyTelehaus Sdn Bhd.

However, the amount of new SSO investments is a 59% drop from 2011 to RM500 million.  

“This is down because we’ve been targeting higher-value, higher-income investments in areas like Knowledge Process Outsourcing (KPO), rather than creating thousands of call-centre type jobs,” Badlisham told a May 21 media briefing on MSC Malaysia’s financial performance for the year 2012.  

“We need to do this because Malaysia does not have the (population) numbers to compete on high-volume low-wage jobs,” he added.

Moving forward, deepening focus on newer avenues and embracing emerging technologies are some of the growth strategies adopted to enable MSC Malaysia’s SSO companies to thrive in key markets.

MDeC remains confident of continued growth and believes that there will be even more opportunities for the Malaysian SSO industry in the future.

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