As the Malaysian Prime Minister’s motorcade pulls up in front of Round Rock 1, the nexus of Dell Inc, a beaming Michael Dell greets the statesman, and they and their teams were swiftly ushered into a meeting room. Later that day, 5th May 2006, Dell announced their latest major investment in Asia – right into the heart of MSC Malaysia.
Dell’s announcement reflects the reinvigorated interest by American firms in Malaysia, especially within the ambit of MSC Malaysia’s Shared Services and Outsourcing (“SSO”) program. Dell already has significant investments in Malaysia and this latest news takes the company’s interest to the next level. Dallas-based ACS launched its Cyberjaya global delivery center earlier this year. TRW, one of the biggest names in auto-parts, is centralizing IT in MSC Malaysia. And this is a just a sampling of the many new American initiatives in Malaysia happening right now and in the pipeline.
All these activities reflect a truth that American firms are starting to learn: MSC Malaysia SSO is very competitive, and conducive for long-term growth.
MSC Malaysia’s SSO
Since the launch of MSC Malaysia 10 years ago, over 1,400 technology investments have been made there, with a total of 3,000 for the country as a whole. MSC Malaysia has achieved recognition from analysts such as AT Kearney, McKinsey and Frost & Sullivan. They have ranked Malaysia top three overall as an offshore destination for SSO. This is largely due to Malaysia’s unique value proposition – “Best of All Worlds” – world-class labor force and attractive business environment and very cost competitive.
The high-quality Malaysian workforce is also among the world’s most consistent. Rob Cayzer, MDeC Program Director for SSO underlines this: “According to figures from consulting group Mercer, the attrition and salary increase rate is significantly lower in Malaysia at only 5% and 5.5% respectively, compared to India (9.4% and 11.3%) and China (8.9% and 7.7%).”
MSC Malaysia’s labor force offering is unique. It boasts the lowest cost high value work-force among all major SSO locations. At any given time, 50,000 Malaysians are in tertiary schools overseas – almost all in English-speaking countries like the United States, Australia and Great Britain. What is remarkable is that over 90% of these students come home to Malaysia upon graduation, bringing with them a high-quality educational background that American firms look for. Overall, around 120,000 Malaysian students graduate every year, the bulk of them with high-quality education in finance, accounting, engineering and IT.
The English language itself is second nature to Malaysians. English has been integral to Malaysian education since 1824. A recent survey done by independent consultants found that 90% of the people in the Kuala Lumpur metro area (“KL”), population 5.5 million, speak English. More importantly, the survey found that 70% of the population speak English at a level suited for American customers.
Another unique feature of the Malaysian workforce is its multi-lingual capacity. The average Malaysian speaks at least two to three languages, not counting the different dialects within some languages. One of the world’s largest companies in the telecommunications space centralizes most of its CRM operations in Malaysia. That center delivers in 24 different languages to the globe. IBM’s
Malaysian operations in finance, accounting, IT and customer support serves clients in 19 countries in the Asia Pacific.
Equally important is the sophistication of the Malaysian workforce. The average KL worker probably has at least one credit card, lives in the suburbs, owns a car, and is entertained by Hollywood and listens to Fergie and Christina Aguilera. If that sounds familiar, it’s because the massive and stable socio-economic growth of the past 20-plus years have resulted in a progressive and dynamic society. And all this at a fraction of the cost of a similar person in Shanghai, Bangalore, Hong Kong or Singapore.
Part of MSC Malaysia’s “Best of All Worlds” attractiveness is that it is conducive to growth. The companies already mentioned bove are all growing aggressively. |
Growth Engines
Sectors such as finance, logistics, oil & gas, manufacturing and technology are well-established in Malaysia, and are in themselves engines of growth. Companies such as Shell and HSBC have significant operations in Malaysia since the late-19th century – and their Malaysian operations are still growing. Motorola and Intel have long-standing relationships with Malaysia and a large amount of design and engineering work is done here for global consumption, with their numbers are increasing. |
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In fact, the Multimedia Development Corporation (MDeC), the government agency driving MSC Malaysia, is most interested to work with companies committed to long-term growth. MDeC and its programs themselves are designed for this very purpose.
And all this is on top of Malaysia’s inherent structural strengths in people, cost and environment. Excellent cost structures, including low cost of living, and a business-friendly environment are further reinforced with the good risk profile that Malaysia enjoys. F-Secure, a leading European anti-virus firm, will be launching their latest virus-definition center in Malaysia in September, a center that requires not only the right skills and infrastructure, but also a low-risk environment.
MSC Malaysia SSO investments have doubled in the past 12 months. While the bulk of these investments are in ITO and BPO, the trend is towards higher-value space such as R&D, process improvement, engineering, logistics and finance management, and some KPO. This high-value is MSC Malaysia’s niche.
Outsourcing Malaysia
On 4th May, 2006, the Prime Minister of Malaysia Datuk Seri Abdullah Ahmad Haji Badawi launched Outsourcing Malaysia (OM) at the World Congress on IT ( WCIT) in Austin, Texas.
OM represents the coming-of-age of indigenous Malaysian outsourcing service providers, coming together to form a platform not unlike India’s NASSCOM. While not as large or famous as their Indian or American counterparts, member companies of OM embody the people, cost and environment advantages of MSC SSO’s Best of All Worlds proposition.
“The value proposition for Malaysia lies in our capability to deliver high-value outsourcing services with strong expertise in vertical industries such as energy, technology, logistics, finance and manufacturing,” said David Wong, co-chairman of OM.
Even a cursory review of OM member companies will reveal their unique strength – Domain Expertise. iPerintis specializes in the oil and gas industry, while Scicom and SRG Asia Pacific have deep spikes in the telecommunications sector. SNT Global is known for their expertise in logistics. Companies like Kompakar Inc and Vsource Asia are major players in the finance sector (as well as strong experience in other areas such as energy, manufacturing and government). EA Consulting Asia Pacific and Innovation Associates are strong with government and utilities, while ITOX Systems specializes in security.
To ensure the continued development of OM, the organization has the commitment of three leading Malaysian institutions: the Association of the Computer and Multimedia Industry of Malaysia (PIKOM) brings hundreds of IT companies into the fold, MDeC is the major driver in developing MSC Malaysia SSO, and Malaysia Debt Ventures (MDV) provides tremendous advantages in funding and corporate structuring.
Dell Investment in MSC Malaysia
The day after the Prime Minister’s launch of OM, Dell Inc announced its decision to establish its first Global Business Center in Cyberjaya.
While Dell is already a significant presence in Penang for over 10 years, with over 4,000 staff employed in manufacturing, regional sales, regional customer support and logistics management, the new Global Business Center takes Dell’s commitment in Malaysia to the next level.
According to Kevin Rollins, CEO of Dell, "Dell's global growth and need for additional development activity, coupled with the success of our Malaysian facilities since 1995, gives us confidence that this new facility will enhance our ability to deliver the industry's best value and customer experience."
MSC Malaysia – Quick Facts
- MDeC – the agency to work with to take advantage of MSC Malaysia programs
- 1,500 companies are taking advantage of MSC Malaysia
- 82 companies are already within the MSC Malaysia’s SSO, including 17 large US companies
- Nearly all the US companies above already have significant operations in Malaysia before becoming part of MSC Malaysia
- MSC Malaysia’s SSO doubled in the past year
- The SSO sector grew 17% above Malaysian GDP
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This new center will see in excess of 1,000 Malaysians delivering business solutions and services to destinations worldwide, including software development, process design, finance and accounting and global customer support. For Dell, this represents the first such center anywhere in the world outside the US. For Malaysia, it affirms both Dell and the country’s commitment towards each other in their long-term partnership. Dell’s move to establish a high-value shared services center in Cyberjaya is yet another testimony of MSC Malaysia’s value proposition.
Continued Government Support
Under the Ninth Malaysia Plan, the government has almost doubled its allocation for information and communications technology (ICT) to US$3.6 billion from US$2.2 billion previously to boost the ICT and related sectors such as SSO. This translates into several tangible benefits for investors, including a Knowledge-Worker Development Institute, Dedicated Transportation System for Cyberjaya (the national IT hub), accelerated roll-out of MSC programs and more flexible benefits and incentive programs. |
The heightened focus on ICT and SSO shows the Malaysian government’s commitment towards growth in the sector, which grew 17% higher than national GDP growth. Malaysian Prime Minister Datuk Seri Abdullah Ahmad Haji Badawi recognizes this growth area when he said that “I believe that Malaysia can truly shine in the SSO industry because Malaysia offers cutting-edge sophistication at a fraction of the cost – comparable with the lowest overall cost in the Asian region.”
And the Future …
Moving forward, US firms are expected to outsource between US$600 billion to US$1 trillion worth of work in the next 6 years, of which only 5% is currently off-shored.
MDeC invites dialogue with American companies to explore the higher-end portion of SSO, where the economics dovetail well with MSC Malaysia’s Best of All Worlds proposition. The right quality people, at the right cost, in the right environment. MDeC looks forward to working with the current and future champions of the new world, helping these firms take full advantage of the Best of All Worlds, right here in MSC Malaysia.
As Matthew Barsing, Head of SSO Business Development at MDeC puts it, “MSC Malaysia SSO doubled last year, while still maintaining low attrition and wage inflation. Give us a call, and we’ll show you what Best of All Worlds really means.”
For more information on how to take advantage of the MSC Malaysia proposition, please email MDeC at sso@mdec.com.my.
Visit their web site at http://sso.mdc.com.my/
For more information on Outsourcing Malaysia, go to http://www.outsourcingmalaysia.org.my/ |
