KPO and Malaysia’s Journey in Global Business Services

Published Date: 25/07/2016

Back to Media

Years ago, developed countries started bringing their elementary processing, administrative and support functions to Malaysia. The digital journey has started then has continued on and now the focus is on the knowledge process outsourcing (KPO), the high-end part of the industry.

 

Noor Helmi and Amzari Tajudeen founders of IX Telecom 1

CEO of IX Telecom Sdb Bhd’s Noor Mohd Helmi Nong Hadzmi(right) and Deputy CEO Mohd Amzari Tajudeen. Both are founders of the company

Noor Mohd Helmi Nong Hadzmi had just started a dot.com company in web hosting and web design when the Malaysian government launched the Multimedia Super Corridor in 1996. This was a government initiative to make Malaysia a global hub for ICT and multimedia innovation, operation and services.Things did not go as planned for Helmi. He felt there was a lot more he needed to learn about running an IT business, and so the telecommunication engineer went back to being employed. The experience he gathered as a network systems engineer in a budget airline and in technology startups more than prepared him for the next phase of his life.

During this time, Malaysia started nurturing the growth of small and medium enterprises in the IT industry and attracting global ICT companies to invest in and develop cutting edge digital and creative solutions in Malaysia. The MSC Malaysia was set up and it became the main front for IT expansion in the country.

MSC status is granted to ICT and ICT-facilitated businesses that develop or use multimedia technologies to produce and enhance their products and services. They are entitled to a set of incentives, rights and privileges.

MSC Status Companies
In the mid-2000, Malaysia decided to venture into the shared services outsourcing (SSO) industry and try to get a good portion of the global market. Its multilingual and multiethnic population and adequate infrastructure gave the country the tools needed to make it an ideal location for global call centres. Trade missions were sent overseas to promote Malaysian SSO companies.
Performance of companies in MSC
Shortly after that in 2008, Helmi and his college roommate Mohd Amzari Tajudeen set up IX Telecom Sdn Bhd that also provides shared services and outsourcing. They offer virtual network operator services and are also a network service provider and application service provider.

“We started with RM30,000 as investment,” Helmi, aged 37, tells InvestKL. “Some of the services IX Telecom now offers include providing fast, reliable and highly secure private networks for communications between multiple locations worldwide, running through conduits built around fibre optic or copper cables, and satellites”.

ENTER KPO

By 2010, there were almost 180 companies in MSC Malaysia‘s SSO cluster, performing various shared services and outsourcing activities. Malaysia decided to focus on started moving up the value curve. In 2011, there was a government initiative to make Malaysia a developed digital economy by 2020 through Digital Malaysia.

Malaysia started gravitating towards higher value chain where knowledge and specialised skills came into play. This was when businesses operating in Malaysia started to venture into Global Business Services and its subsets Business Process Outsourcing (BPO), IT Outsourcing (ITO) and Knowledge Process Outsourcing.

The GBS industry is one of the core focuses in the economic development of Malaysia towards its transformation into a high-income, knowledge-based economy by 2020 through policies, government incentives, modern infrastructure access, skilled talent pool and resources in ICT that includes hardware, software, and services.

KPO is characterised by niche offerings, highly skilled staff and a relatively small scale. It cuts into the traditional “core competencies” of many organisations. The emphasis is far more on talent than on physical infrastructure and it is more knowledge centric rather than capital centric.

“KPO is one of the services offered by our company,” says Helmi. “Among the tasks that fall under KPO are airline network design, project management, productisation of global connectivity and managed services.”

“The reason why we ventured into KPO even though that is not our main focus is because we have the expertise in that area especially airline network and global connectivity,” he adds. His experience as a telecommunications engineer in a budget airline has certainly given IX Telecom the edge. IX Telecom has its main office in Cyberjaya with 40 employees, and offices in Indonesia, Hong Kong, Singapore and US.

“KPO itself is a very challenging industry because the company venturing in it must have the expertise in those areas.”  Helmi sees great potential and is keen to expand his business to the region. “We are currently focusing on Asean and the incentives and support we received from government agencies like Matrade and MDeC are crucial in making this thing happen,” he says.

 There is much excitement because the global KPO market is expected to grow at a CAGR of around 23% from 2015 to 2019. Companies are looking for more analytical and specialist expertise, and KPOs are seen to be increasingly fitting such requirement of companies that are eager to outsource to third party service providers, according to the Global Knowledge Process Outsourcing Market 2015-2019 report.

MALAYSIA’S EDGE OVER THE REST

This is where Malaysia stands out. Since 2004, global management consulting firm, AT Kearney has consecutively ranked Malaysia third in their Global Services Location Index. This measures financial attractiveness, people skills and availability, and business environment. Malaysia is also ranked 18 in World Bank’s Ease of Doing Business Report and 14 in IMD World Competitiveness Ranking 2015.
Global services location index 2016
The global finance shared services market is expected to grow from US$27 billion in 2010 to US$38.45 billion in 2015. Malaysia is expected to reach up to US$997.39 million in 2016 from US$537.78 million in 2011, with a compound annual growth rate (CAGR) of 13.1% over the forecasted period. In 2014, export revenue of outsourcing companies in Malaysia reached RM2.02 billion, surpassing the target of RM1.83 billion.

With a government that is fully committed to the digital agenda, Malaysia will continue to grow. Malaysia is in the 31st position out of 139 economies in the Networked Readiness Index 2016, a key component of the World Economic Forum’s The Global Information Technology Report 2016.  This is a key tool in assessing a country’s preparedness to reap the benefits of emerging technologies and capitalise on the opportunities presented by the digital transformation.

Malaysia moved up one spot from 2015 and is leading the developing Asian economies in 2016. The future of KPO in Malaysia looks highly promising.
Multimedia super corridor initiative