MSC companies now coming into their own with domestic, international growth
Sustaining incubators will continue to be a key industry enabler
ASKED if he thought 2011 was an inflection year for MSC Malaysia companies in terms of their overall revenue performance, Datuk Badlisham Ghazali (pic), chief executive officer of Multimedia Development Corporation, thought hard for a good five seconds and answered with a firm, “No. The best is yet to come.”
That may be so, but there are challenges too. Let’s start with jobs. Badlisham acknowledges that the mismatch between supply and demand in the marketplace remains a persistent challenge. Meanwhile the fast moving industry keeps demanding more of its practitioners.
According to Badlisham, “To be employed, IT graduates today must be adept in 10 skill clusters, among which software development, database networking and security are key.”
And of course, not forgetting the continuous education that the individual needs to get to the next level.
Surprisingly, incubators are seen as a key part by Badlisham too, although not much is felt of their impact.
“MDeC continues to support the notion that incubators are an essential pillar for the nation’s ICT ecosystem. From helping to commercialize cutting-edge technologies and accelerating the growth of local industry clusters to identifying potential new business opportunities and linkages, incubators will continue to be a key industry enabler,” he said.
In the following responses via email, Badlisham takes some questions from Digital News Asia on some of the key observations we made from the 2011 performance of MSC companies.
DNA: Let's start with jobs. 119,138 jobs were created since 2007. That is an average of 24,000 a year. How does this match with the incoming talent into the market? What kind of jobs are these?
Badlisham: The total number of jobs contributed by MSC Malaysia status companies has been on a continuous upward trend from 2007 to 2011, at a compounded annual growth rate (CAGR) of 10.81%. Despite this positive growth, the issue of mismatch between the supply of ICT human resources and the demand of the ICT marketplace remains a key challenge.
This is especially so for jobs that demand in-depth technical knowledge and soft skills. To be employed, IT graduates today must be adept in 10 skill clusters, among which software development, database networking and security are key. While a tertiary degree provides a start to a career, continuous specialization and certification will elevate a person to the next level of that career.
To help meet industry demand, MDeC has over the years executed various programs on a national level via industry-academia-government collaboration to raise workforce competencies by strengthening the ICT curriculum through a demand-driven approach to narrow the gap.
DNA: In the rush to meet your KPIs, where do you draw the line and say, "This is the most we can and should do. Anything more and we might as well take over the companies ourselves!"
Badlisham: While our companies have the tenacity, perseverance, courage and vision, it is also very important for them to understand that entrepreneurial spirit is about passion, discipline, perseverance, and more importantly strategic planning to grow.
Based on our 2011 industry performance, it is evident that many of the MSC Malaysia companies are now coming into their own with both domestic and international growth, and we expect to see this trend continue moving forward.
DNA: You long ago identified marketing as a key weakness of local MSC-companies. How would you assess their marketing abilities as of end 2011?
Badlisham: Despite the export success recorded in 2011, developing and enhancing marketing capabilities of our companies has been a key area of concern that we continue to incorporate in our capability development programs, particularly for our SMEs (small and medium enterprises) to help them stay ahead in the global market place.
The continued need to enhance sales and marketing skills is also cited as a critical capability area sought by MSC Malaysia status companies in the SCORE+ Program 2011 survey.
DNA: Looking at the rate of expansion of local MSC-Malaysian companies, is growth driven by exports or domestic market demand?
Badlisham: While demand in the domestic market was encouraging in 2011, the greatest area of growth for MSC Malaysia Status Companies stemmed from exports driven from joint-ventures which showed an astounding 265% rise.
Between 2010 and 2011, the InfoTech Cluster contributed a big chunk of the revenue amounting to RM15.36 billion (US$4.91 billion); however, the cluster’s export in 2011 indicated a marginal decline of 2% from 2010 and stood at RM3.736 billion (US$1.19 billion) this is largely due to the global economic slowdown, particularly in the United States.
In the case of the Global Sourcing cluster, market continued to grow both in export and domestic sales. The period between 2010 and 2011 witnessed the Global Sourcing cluster generating exports totaling RM5.93 billion (US$1.9 billion), an overall percentage contribution of 54% and 59% respectively.
This was largely attributed to the ongoing global economic events seen mainly across the United States and Europe. While the United States remains a primary market for the Global Sourcing cluster, we have seen an increase in domestic outsource consumption in Malaysia also.
On the other hand, the Creative Multimedia cluster recorded revenue totaling RM6.1 billion (US$1.95 billion) in 2011, out of which exports accounted to RM3.65 billion (US$1.17 billion) while the remaining RM2.45 billion accounted for revenue generated from the domestic market.
DNA: Is the export growth driven by particular verticals or is equally representative across verticals?
Badlisham: Total MSC Malaysia exports in 2011 rose 8.5% from 2010 against a backdrop of a 16.3% increase in total revenue within the same period.
Export-growth in 2011 was led by the Global Sourcing cluster totaling RM5.93 billion, an overall percentage contribution of 59%, while the InfoTech cluster’s export in 2011 indicated a marginal decline of 2% from 2010 and stood at RM3.736 billion.
The Creative Multimedia cluster on the other hand recorded revenue totaling RM6.1 billion in 2011, out of which exports accounted for RM3.65 billion while the remaining RM2.45 billion accounted for sales accrued from the domestic market.
DNA: This revenue from IHLs (institutes of higher learning) and incubators is interesting as aside from YTL's incubator called YTL e-solutions Bhd, there are no incubators that are making money in the country. The question is, why highlight incubators?
Badlisham: We continue to highlight incubators and faculties within IHLs who are focused on ICT because that is how we have captured our data from the inception of MSC Malaysia.
MDeC continues to support the notion that incubators are an essential pillar for the nation’s ICT ecosystem. From helping to commercialize cutting-edge technologies and accelerating the growth of local industry clusters, to identifying potential new business opportunities and linkages, incubators will continue to be a key industry enabler, and all the more so in today’s ultra-competitive and digitally-enabled global economy.
These are just a handful of advantages and opportunities for MSC Malaysia companies to tap on, as they continue striving towards greater success. On the other hand, we view IHLs as a key talent pipeline for the industry.
DNA: Can you drill down more into the KPO wins for last year? Also, what role are you playing in the identified ETP opportunity in Islamic finance KPO?
Badlisham: The Global Sourcing Cluster (GSC) contributed RM9.1 billion revenue in 2011. KPO which is a subset within this cluster recorded revenue of RM1.6 billion and the creation of approximately 5,818 jobs last year. This covered all types of activities ranging from IT, Finance, HR and Engineering Design. Some of the notable investments in 2011 include companies such as IBM Global Delivery Center, Worley Parson, UOB Shared Services and Experian Marketing Services HIP.
The Islamic finance KPO which is under the Business Services National Key Economic Area (NKEA) has a six Entry Point Projects (EPPs). They are categorized into two themes, representing a two-pronged approach.
The first theme intends to build on Malaysia’s existing strengths and competitive advantage. MDeC and Outsourcing Malaysia have been given the responsibility to lead EPP2 & EPP3 which look at accelerating growth in outsourcing, IT, knowledge processing and data centers.
The second theme focuses on developing opportunities in segments with high potential for future growth, exports and job creation. Pure-play engineering design services; green technology; and Islamic banking KPO were the three EPPs identified in the Roadmap.
Owing to financial regulatory requirements, the Islamic finance KPO is being led by the central bank, and MDeC has no direct involvement in this EPP at this stage.
DNA: With 2011 revenue of RM31.7 billion (US$10.13 billion)), what is the target for this year?
Badlisham: I don’t want to speculate, but we are on track and I am confident that 2012 will prove to be a good year.
DNA: As we all want to see MSC companies grow regionally, do you monitor their physical expansion overseas i.e. direct presence, distributors, even acquisitions?
Badlisham: Yes, we do track the expansion of our companies and we do this by utilizing tools such as the SCORE+ (SCORE Plus) Program. In addition, MSC Malaysia Status companies also share their three-to five-year growth plans with MDeC. These plans, more often than not, include their regional expansion and interests in merger and acquisitions (M&A).
Finally, MSC Malaysia status companies both foreign and local have client managers assigned to specific groups of MSC Malaysia Status companies to obtain regional and international market expansion data via quarterly contact reports.
DNA: If there is one area that you would liked to have seen perform better last year, which would it be?
Badlisham: One of the reasons behind Malaysia's continued economic growth is its SMEs that constitute 93% of the country's businesses. We would like to have seen more SMEs aggressively adopt ICT to increase their productivity and enhance their contribution to the nation’s GDP by taking advantage of opportunities such as our training programs as well as the MSC Malaysia cloud initiative which we rolled out in 2011.
DNA: Will we see the end to the reorgs in MDeC too? You must have spent a lot on business cards!
Badlisham: The amount of change that is needed is nowhere near as exhilaratingly fast as the amount of change that is taking place in the world today.
As mentioned above, consider the fact that Malaysia’s e-commerce market is estimated to grow three times, from 2011 to 2015, and in exact terms, from RM1.97 billion to RM5.76 billion (or US$1.8 billion). If we look at neighboring China, their e-commerce market will grow from US$121 billion to US$420 billion, making it the biggest in the world (based on Barclay’s Group figures). That means that China’s e-Commerce market will be 233 times Malaysia’s by 2015!
This is just one reason for MDeC changing and reinvigorating ourselves, with an expanded remit such as Digital Malaysia.
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