Moving towards high-performing shared services and outsourcing


After a flying start in the shared services and out sourcing industry, Penang now picks up the pace.

Global capitalism is changing. MNCs are now expected to build the next generation of high-performing support services operations at their offshore centres throughout the world. Cloud computing and Internet of Things (IoT) solutions are high-end IT infrastructures that can enhance shared business services in the emerging field of big data and analytics.

And that’s good news for Penang – its shared services industry is expected to benefit from companies such as Intel Penang spearheading the construction of a Cloud Data Centre and Research Lab. It is in line with Malaysia’s move to increase shared services and outsourcing (SSO) activities.

The Malaysian landscape
The Economic Transformation Programme (ETP) 2014 annual report stated that SSO continues to be a strong sector, generating RM2.02bil in overseas export revenues in 2014 and exceeding the target of RM1.83bil. This is attributable to the continuous growth shown by many value-added service providers in the industry.

On top of that, A.T. Kearney, a global management consulting firm, has placed Malaysia consistently in third place on the Global Services Location Index over the past decade1. The 2014 Global Services Location Index revealed that Malaysia performed substantially better than both India and China in business environment criteria, and slightly better than China in financial attractiveness. However, Malaysia needs to improve in people skills and availability, which includes remote services sector experience, quality, labour force availability, education and language. One way to do this is for Malaysia to leverage its business environment by incentivising shared services practitioners to increase people skills-related training.


Taking advantage of the government’s multi-pronged approach, most leading domestic and foreign shared services companies began to include shared services footprints in Malaysia. The federal government’s efforts include the Multimedia Super Corridor (MSC) status, Digital Malaysia (to promote a digitally enabled ecosystem), Outsourcing Malaysia (to support the outsourcing industry) and TalentCorp (to develop and attract talent). Today, some companies leverage their existing contact centres by evolving more complex help desk functions, customer support and knowledge-based services consisting of cost management, tax compliance, business analytics and consulting2.

And with a multilingual and multicultural workforce, along with proven expertise, Malaysia obtains greater attention from multiple source markets including the US, Europe, Asia and the Middle East.

Penang aims for analytics
Penang’s SSO industry is geared up for transformation: from a traditional transactional services hub to higher value-added knowledge-based activities. Some MNCs have already begun to expand their shared services centres to high value-add operations.

Coupled with the new investment made by Temasek and Penang Development Corporation (PDC) in developing the Business Process Outsourcing Prime (BPO Prime) in Bayan Baru and Penang International Technology Park (PITP) in Batu Kawan, Penang foresees a third wave of growth focusing on the services of knowledge-intensive and innovationled sector over the next five to 10 years. Given its existing comparative advantage and capabilities in the electronics industry, this new cluster of economic development is expected to lure global business leaders in knowledge-based sectors.

Penang launched Malaysia’s first Business Process Outsourcing – Information Technology Outsourcing (BPO-ITO) hub, worth RM3.3bil, on March 1, 2014. The hub covers a net floor area of 4.3 million sqft – 74 acres to develop a BPO Park at Bayan Lepas, 6.8 acres for BPO Prime at Bayan Baru and 100,000sqft for the Creative Animation Triggers (CAT) within the George Town heritage enclave.

The key verticals of SSO segmentation include IT outsourcing (ITO), business process outsourcing (BPO) and knowledge process outsourcing (KPO). KPO has the highest value-adding services, including market research, customer analytics, financial and stock market research, and R&D. It includes activities such as engineering and design services, medical diagnostic outsourcing, pharmaceutical R&D, market and consulting research, data analysis, taxation support, and legal processes and advisory.


The mid value of SSO is BPO, which consists of contact centres, finance and accounting, and payroll and legal services. The majority of Penang’s SSO companies are limited to BPO services; most of them set up their centres next to their manufacturing plants to facilitate these services and serve their offices in other countries.

The low value of SSO is ITO, which is a fundamental technical service and includes IT infrastructure management, network and desktop management, and IT consulting services.

The SSO sector’s future aspiration is to move up the services value chain, focusing more on high-value exportoriented SSO activities in BPO, ITO and KPO.

Penang has seen a number of forwardthinking MNCs integrate high-end services activities into their traditional manufacturing operations: AMD, Intel, Dell and First Solar are examples of companies that have relocated their global shared services centres to be closer to their manufacturing plants. These shared services centres support regional or worldwide business services, which mostly fall under mid and high value categories.

On top of that, several mature companies have moved out of their captive call centre operations and are exploring advanced in-house knowledge activities. AMD Global Services relocated its global shared services to Penang, increasing headcount from 13 people in 2002 to over 300 people in 2014. Its data input, call centre and transactional services are now obsolete and, with its MSC status, AMD Global Services has sought to strengthen its analytics team by cultivating high value skill sets to serve its worldwide offices.

Apart from the manufacturing sector, Penang also witnessed the continual growth of the SSO industry in the finance, aviation, agribusiness and knowledge management industries. In finance, Penang is Citigroup’s largest regional trade and cash processing centre. It has made Penang its strategic centre for treasury management activities, handling some 20 million transactions with an output of around RM21.7tril annually. Together with its second premises opened in 2012, the centre has approximately a 1,000 headcount to serve Citigroup’s clients in Asia, North America, Europe, the Middle East and Africa3.

In the aviation industry, Penang has attracted AirAsia’s Global Shared Services to set up its SSO operations. The MSC Malaysia-awarded company established its services in all three values of SSO, providing services in accounting, financial and administrative processes, human resource functions, procurement and IT to its offices across the globe4.

Penang also continues to attract investments from global knowledge management firms. Following the arrival of Thomson Reuters, IHS established its third Centre of Excellence (CoE) in 2012, providing a full spectrum of help desk and order management services for its customers. The investment is estimated to potentially exceed RM187mil, with a possible headcount of 1,000 employees by 20155. It is highly recommended for IHS to increase its high value activities – such as customer analytics and market research – to provide wider career advancement opportunities for the folks of Penang.

The AEC: an injection of talent
The impending arrival of the Asean Economic Community (AEC) in December 2015 opens the doors for regional talent recruitment6. Penang should leverage its geographical and language strength; more innovative and proactive individuals can be lured from neighbouring countries such as Thailand and Indonesia.

In addition, the AEC helps to address one major constraint: as shared services networks become more complex, some centres are finding it hard to attract, retain and develop entrepreneurial leaders7. Cross-border recruitment can be the solution; seven mutual recognition agreements (MRAs) have been signed by Asean member states to remove all restrictions on borderless job markets8. Potential candidates with professional degrees in engineering and accountancy are most likely to fit this gap well.

Healthcare and the cloud. Cloud computing and Internet of Things (IoT) solutions are high-end IT infrastructures that can enhance shared business services in the emerging field of big data and analytics.

Countries that still embark on low value-added strategies in the business services sector may soon see their opportunities erode; routine tasks and data entry will no longer be sustainable in the SSO industry. Some countries, such as India, have moved up the value chain to perform more advanced tasks, but for many offshore companies, it’s still business as usual.

Penang has ambitions to advance up the value chain to the KPO cluster so as to stay relevant and competitive. Its SSO industry benefits from higher-end IT infrastructure; this can be seen from Intel Penang’s adoption of IoT and its Cloud Data Centre and Research Lab, in collaboration with Collaborative Research in Engineering Science and Technology (Crest). This is expected to intensify the growth of the SSO industry in areas of big data and analytics in Penang. And with the AEC comes access to a larger talent pool – something Penang should aggressively take advantage of.

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