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Wednesday August 26, 2009

Outsourcing joins billion dollar club


PETALING JAYA: Outsourcing in Malaysia has just become a billion-dollar business as revenue for the sector has jumped 18% to hit the US$1.1bil (RM3.6bil) mark this year, according to a report by Indian research firm, ValueNotes Database.

The figure includes revenue from IT services, Business Process Outsourcing (BPO) and knowledge services, and is expected to grow 15% annually for the next five years. This is due to Malaysia’s multilingual capability and infrastructure, said the report.

Still, the Malaysian outsourcing sector cannot afford to rest on its laurels as outsourcing remains at less than 1% of the nation’s Gross Domestic Product.

Rather than relying on plain-vanilla call-centres, the report said that there are niches that local outsourcing companies could strive to fill. Some of the these niches include legal, engineering, manufacturing design and animation services.

Arun Jethmalani, chief executive officer of ValueNotes said that the key concern for the outsourcing industry in Malaysia is to move up the value chain to offer high value services, as opposed to highly commoditised services in IT or BPO.

“There is a huge market for specialised engineering design talents. With Malaysia’s experience in manufacturing and oil and gas services, it could look at moving into this area, instead of just callcentres,” he said.

“The billing rates for specialist jobs like this are two to three times that of a callcentre,” he added.

Bobby Varanasi, an outsourcing consultant, said that an example of a Malaysian company moving up the value chain in outsourcing is Strand Aerospace Sdn Bhd. The company does computer-aided stress testing on the aeroplane engines of Boeing and Airbus.

Outsourcing Malaysia chairman David Wong said that the country could also find an outsourcing niche in Islamic banking.

“Islamic banking is complex and we have 30 years of experience in it. We could cooperate with a Middle Eastern player to advance Islamic banking,” he said.