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Malaysia - The World's Hot New Offshore Location

AT Kearney's 2004 Offshore Location Attractiveness Index places Malaysia ahead of Singapore. Malaysia's sudden shot to fame led to some questioning the reliability of the AT Kearney report. Interestingly enough, the AT Kearney team, which conducted the survey in North America, said they were equally stunned and had re-checked their numbers a couple of times.

Some people were curious to find out where Malaysia ranked in the last year's survey. As it turned out, Malaysia did not even make the 2003 list. In its previous report, AT Kearney stated that "the country appears to have been undiscovered as an offshore location".

At Kearney's vice president Ooi Joon Leong explained to CNETAsia that the objective of the 2003 survey was to compare the countries that were well-known for offshoring. Ooi said that after analyzing last year's survey findings, Malaysia did rank among the top five. "With 2004 survey, AT Kearney decided to screen all countries and then indexed the shortlisted countries," he said, noting that the methodology used was not that different. There was some tweaking of parameters but the method was generally the same.

The study was based on objective data and not opinions or impressions of individuals," he stressed. Ooi said Malaysia lacks mindshare and its key challenge is to build greater awareness of the country as an attractive offshoring location. Ravi Aron, a professor of information and operations management at Wharton and who has been researching BPO (business process outsourcing) trends for over two years, has a different perspective. "I don't know if I'd go with Malaysia at No.3, and Singapore has been put too low at No.5," he said. Indeed, Aron finds Singapore far more competitive than India or Malaysia when it comes to high-end IT requirements. He points to Singapore's superior telecommunications and IT infrastructure, transparent financial institutions, squeaky clean legal system, and the availability of a strong pool of senior management personnel.

All these key factors substantially offset Singapore's higher wages, he said.Malaysia appears to be caught in "no man's land" between India and Singapore, and Aron doesn't think it can ever beat India in the cost game. The cost of hiring Indian workers with good analytical skills is 40 percent lower than Malaysian workers. Malaysia can produce, at best, one worker for the mid-to-high end BPO market for every 10 to 11 workers that India can offer," he said.In the high-end value segments like financial services, biotech, healthcare, and mission critical supply chain coordination, Singapore still reigns.

In contrast, Malaysia has limited domain expertise and experience. Malaysia is just not competitive in either end of the market: It cannot match India, or China, at the volume end, nor Singapore at the value end, Aron rationalized.Industry pundits say Malaysia must power on its heavy marketing machinery if it wants to lure the larger firms from China, India, U.S. and the U.K. And with the intense competition out there, the government will have to identify which service segments make more sense for Malaysia and zero in on those investors.

India 21/09/2004