Saturday, June 18, 2005

Shared Services - the Next Engine of Growth? 


The consolidation and sharing of services by different units within an organization. At the lower end, these services refer to non-core activities such as contact centers and network hubs. Higher end services encompass organizational development and business strategy groups, HQ operations, project management, marketing, sales and other supply chain services. Organizations in this context are usually multinationals with cross-border activities. Shared services can also apply to the sharing of services by different organisations. Examples include contract manufacturing, logistics, business process outsourcing and IT outsourcing.

The Challenge

Over 6000 export-oriented shared services jobs have been created within the MSC with an estimated 18,000 in the rest of Malaysia. The challenge is to create 60,000 jobs in the Multimedia Super Corridor (MSC) by 2008, staving off competition from Singapore, India and the Philippines.

"This is an achievable target," says Rob Cayzer, Manager of the Multimedia Development Corporation (MDC) Flagship Strategy and Planning Unit. "Our strategic direction is based on the size of the global opportunity, coupled with the inherent strengths of the MSC."

Over the next few years, an estimated 3.5 million jobs in shared services are expected to be created in the developing world. Malaysia's target is to take just 10% of this total.

According to Cayzer and his colleague Rizatuddin Ramli, Senior Manager of Client Services at the MDC, Malaysia should not be viewed as being in direct competition with India and the Philippines, oft considered the two rising stars in the outsourcing business. "A majority of their activities represent commoditized services. We are looking at the higher value space. We are attracting those that also bring along management that control budgets who develop business strategies and implement development programs such as R&D, product development, supply, sales and customer services."

"Malaysia offers an exceptional value proposition to companies wanting to invest in shared services. We can provide the highest value services at the lowest price in the world," Cayzer asserts. "Put very simply, we can give companies wishing to be closer to their Asia-Pacific clients, what Singapore has to offer at half the price."

A key incentive Malaysia offers would-be investors is commitment at the highest level of the administration. Rizatuddin stresses, "We have a bi-monthly review to ensure that Malaysia matches if not exceeds incentives offered by other countries.
Our government is totally committed to developing shared services as one of the country's engines of growth. We are currently working closely with MITI, MAMPU and MDV to ensure that relevant policies and procedures are in sync. In fact, the MDC is operating as a one-stop center and matchmaker for investors in shared services. They (investors) can come to us with their needs and we will help them identify synergistic partners, as well as guide them through relevant government procedures."

Incentives aside, a vital factor attracting investors to Malaysia is its people. "There are sufficient numbers of people in Malaysia who are multilingual. Companies find that they can service markets from India all the way down to Australia and up to China and Japan from a center located in Cyberjaya. Similarly, at the higher end, big corporations are realizing that many Malaysians have deep industry experience, good research skills and wide exposure. This makes them ideal candidates for strategy and R&D groups servicing global operations."

Already, Malaysia seems to be pulling in the right names such as NTT, whose Cyberjaya operations are its second largest R&D centre in the world. Other names include Cargill, who plan to operate an ERP development and support centre, a telecommunications and IT hub, as well as a voucher-processing centre, and HSBC who have set up a group service centre serving a variety of functions including financial services processing, a call centre and a contingency centre.

Homegrown acts are also making waves in the global shared services market. Scicom, which has six call centers in the country, services Nokia's Careline customer support operations for nine countries in the Asia Pacific region. It is also researching the development of an equivalent to ISO certification for software development. Another local company, Ship 'N' Track Global, manages regional supply chain activities and logistics for NEC in the Asia Pacific region.

"Our target is to have 200 firms offering globally competitive shared services by 2008," says Cayzer. In line with this, the MDC is actively conducting industry outreach activities and international brand development campaigns.

Malaysia is fortunate that it is already in the radar screens of many of the world's biggest firms. Its manufacturing sector, which comprises 35% of the economy, is largely FDI-driven.

"The global manufacturing industry is familiar with Malaysia's strength as an offshore hub for operations, management and R&D. However, our strength in services and technology is still relatively unknown. Leveraging on relationships within the global manufacturing community, our aim is to expand this familiarity to the services sector, which unknown to many, already comprises over half of the national GDP."

"In short," says Cayzer, "The challenge is to attain international recognition that the MSC and Malaysia is a haven for innovation and high value added services."

Over the next few years, an estimated 3.5 million new jobs in services are expected to be created in the developing world. Malaysia's target is to capture 10% of the higher value end of this total, namely in the areas of management, professional services and HQ operations.

Target Industries:

Target Investors:

Financial Services


Product Development




Logistics & Transportations


A View from an AMCHAM member, DHL

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