Outsourcing Malaysia getting stale with plans, unrealistic with targets

  • Nothing new in its game plan to grow industry
  • Most targets likely not achievable
Outsourcing Malaysia getting stale with plans, unrealistic with targetsSOMETIMES, though not often, it does feel like I have been covering the tech sector for far too long. Yesterday (Feb 26) was one of those days. It came at a briefing by David Wong (pic), the chairman of Outsourcing Malaysia since 2008.
 
Outsourcing Malaysia was set up in 2006, with Wong as co-chair initially, to specifically help provide local players as a platform on which to brand Malaysia’s outsourcing prowess and to liase with government in one voice when needed.
 
At yesterday’s briefing, Wong laid out plans for Outsourcing Malaysia to hit RM7.1 billion in revenue by December, 2015 from the current RM5 billion, and with a talent pool of 88,000 from the current 54,000.
 
[RM1 = US$0.32]
 
In less than three years he also hopes to see five local outsourced players develop into outfits with US$100 million in revenue each and with 30% coming from exports.
 
But just how realistic is this? Scicom (MSC) Bhd, which listed in September, 2005 had revenues of RM131 million (US$42.2 million) in 2012. It is the second largest local player in the outsourcing space in Malaysia by revenue and probably the largest by headcount at just under 3,000.
 
For Scicom to be one of Wong’s star local companies, it has to grow revenue by two-and-a-half times in under three years.

Let’s take a company that has a more realistic chance of making it, Symphony House Bhd. It recorded RM197 million in revenue for 2012, and has 1,500 staff. It made a loss of RM2.9 million for 2012.
 
Can it grow at an average 33% over the next three years to hit the US$100 million revenue envisioned by Wong and his committee at Outsourcing Malaysia?
 
In fact, is there a cluster of 20 local companies with revenue in excess of RM50 million right now on which Outsourcing Malaysia is betting can experience super growth and help it achieve its target of five US$100 million companies?
 
Outsourcing Malaysia getting stale with plans, unrealistic with targetsEven if Outsourcing Malaysia manages to persuade government-linked companies (GLCs) to use local outsourced players for some of their needs, this target can’t be hit. Incidentally, this is one of its six key thrusts to help Outsourcing Malaysia hit its 2015 targets.
 
You just have to see how the local players do this year and based on that, either declare the Outsourcing Malaysia three-year plan a work of genius or tear it up and just ask one question, “Is this really the best you can come up with?”
 
Just a few years ago, Outsourcing Malaysia was lobbying the Government to provide it with a fund of around RM400 million to help its members acquire companies around the region so that they can acquire size and scale.
 
In a previous article, Digital News Asia already outlined the challenges facing the industry. We all know them. In fact, the challenges have been the same since at least 2004. And one of the key challenges highlighted was that Malaysia had to identify its unique selling proposition (USP) in the outsourcing space.
 
This is driven by necessity. As a nation of 28 million, Malaysia can never play a scale game in outsourcing.
 
But what did I hear yesterday? That Outsourcing Malaysia aims for Malaysia to be a top 10 player in three verticals – but that it would only determine what these verticals were after its newly set-up research unit had done a proper study.

I listened, incredulous. After all these years, Outsourcing Malaysia still had no inkling of what Malaysia’s strengths are? Which sectors we should compete and excel in to be recognized as among the best in the world?
 
Wong did mention Malaysia was already leading in Islamic finance and had strong accounting and finance and IT capabilities. All areas well tapped by the multinationals in the outsourcing space.
 
The challenge has to be to identify our own unique strengths and develop some local outsourcing players into world leaders over time. Wong mentioned healthcare, engineering and supply chain as possible areas, but those are not niche areas. They are entire markets, with a plethora of disciplines coming under them.
 
Why is it that Outsourcing Malaysia still does not know what our USP is? Why have an industry body then? I just find this hard to swallow.
 
Outsourcing Malaysia also wants to rebrand the outsourcing industry as a ‘preferred career’ within the next three years. Again, heard that before and never saw anything concrete developed that could make this happen. Again yesterday, I just heard vague statements of intent.
 
I am truly disappointed with Outsourcing Malaysia. It surely can do better. It must do better. One report on the top 100 outsourcing destinations has Kuala Lumpur as the 28th most attractive city and Penang the 77th, losing out to Manila and Cebu.
 
While I think we should not get caught up in rankings, Outsourcing Malaysia needs to find that niche(s) for Malaysia to compete in a high-value space, not slide towards commoditization. After identifying the niches, fill in the gaps in the ecosystem to ensure end-to-end capabilities for the global market.

Do that well and the rankings take care of themselves. If Outsourcing Malaysia can’t do that, then it’s time for the committee to take a hard look at itself and ask if they are the best people to get the job done.
 
Related Stories:
 
Manila, Cebu among top BPO destinations
 
Same challenge for Malaysian outsourcing       
 
Outsourcing sector keeps the wind beneath its wings (updated)
 
 
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