Malaysia Wants a Piece of Outsourcing Action

A number of U.S. corporations are considering setting up operations in the country, which boasts lower costs than India or China

The government is hoping to upstage outsourcing favorite India by clinching several mega insourcing deals within the next few months.

Malaysian authorities this week revealed there has been an upsurge of multinationals exploring possibilities of setting up insourcing centers in the country.

Rob Cayzer, co-chairman of Outsourcing Malaysia, said a number of multinationals are considering setting up operations in the country of up to 10,000 seats. This time last year, companies were only looking at setting up operations of no more than 1,000 seats.

Outsourcing Malaysia is a non-profit organization jointly established by the Multimedia Development Corp. (MDeC), Association of the Computer and Multimedia Industry of Malaysia (Pikom) and Malaysia Debt Ventures (MDV). Launched during the World Congress on Information Technology 2006 in Austin, United States, the initiative aims to position the country as a one-stop center for outsourcing providers and to channel investments related to outsourcing and shared services.

Offshore insourcing essentially allows companies to set up their own process centers overseas, taking advantage of the cheaper local resources while maintaining control of their back-office work and business processes.

Cayzer said: "Malaysia is becoming an attractive offshore option for many multinationals because the cost escalation in countries such as India, China and the Philippines is now much higher than [that in] Malaysia." As a result, the cost advantage previously found in those countries has diminished.

He added that Malaysia, currently ranked among the top three most competitive locations for offshore services, had taken steps to further improve its competitiveness and increase its pool of qualified workers.

About a dozen U.S. companies are currently in discussions with Outsourcing Malaysia and the MDeC about setting up their offshore operations in Malaysia, Cayzer said.

"These corporations range in size of about 40,000 employees to as large as 300,000 employees," he added. The organization's co-chairman also expressed confidence a number of deals would be successfully inked within the next six months.

Cayzer also urged local outsourcing companies to join Outsourcing Malaysia and the Multimedia Super Corridor (MSC), as these big multinationals "would be looking for sub-contractors" when they set up their centers in the country.

According to the government, Malaysia had 48 shared services and outsourcing companies in the MSC at the end of 2005. Together, these companies employed about 12,000 people and generated revenues of about 2.6 billion ringgit (US$706 million) in 2005. High-profile multinationals which operate shared services centers in Malaysia include Shell, HSBC, Standard Chartered, IBM and DHL.

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