>> ISSUE #12, 2009 www.the-outsourcing.

com

RM12, S$8, US$8

KDN NO: PP14967/02/2010 (023611) MICA (P) 288/07/2009

PREMIER MAGAZINE ON BUSINESS AND TECHNOLOGY SERVICES INDUSTRY

Value transformation
I SSN 19 8 5 - 1 0 0 6

through outsourcing
Newspaper
industry triggers
greater offshoring
The grand challenge
of scaling up
Outsourcing helps
US companies,
says Indian PM

Health Check
Evaluate the state of your global operations

Inside: Interview with newly appointed COO of MDeC

 C O N T

12

22

16
 E N T S
6
Malaysia must attract more foreigners,
says Dr M

Indian PM: Outsourcing helps

10
US companies

10
12 Origin and history of outsourcing

16 Health Check for global operations

6
A conversation with Ng Wan Peng:
22
Newly appointed COO of MDeC

26 US newspaper industry crisis triggers

26
greater offshoring

32
Value transformation through
outsourcing

Strong growth for SaaS market

36
in APAC

38
Law firms & outsourcing:
37
Still a long way to go

38 The grand challenge of scaling up

40
Happenings: Asia Pacific Outsourcing
40 Summit 2009

Light Takes: Much ado over flu hotline

44
outsourcing

Printed by: Swan Printing Sdn Bhd,

Lot 5249, Jalan BS 7/1
32 Kawasan Perindustrian Bukit Serdang,
43300 Seri Kembangan, Selangor DE.
Enquiries: +603-8941 7723
 Editor’s note sri@wordlabs.com.my

A strong economy begins with a well-educated

workforce. If Malaysia aspires to be a services-based
economy come 2020, the subject of talent pool is of
theteam
the significant importance to all and sundry.
With a population of 27 million – it is apparent that
Malaysia will never be able to match India and China or
even Philippines when it comes to handling high-volume
Managing Editor/Publisher: low-end services due to economy of scale. One way forward
Sritharan Vellasamy is to move up the value chain in the ICT services industry.
That’s the reality, I’m afraid.
Consultant: With the dawn of K-economy and globalisation, the
Sundra Surian need for a powerful human capital has never been so
crucial. The pervasive usage of ICT has an overpowering
impact on the development of the K-economy.
This is where the country must make its mark by
positioning itself to be a destination that offers medium to
editorial editorial@wordlabs.com.my high value competencies. While other players leverage on
costs, Malaysia must strive to leverage on competencies.
Sub Editor: Simon Vella The country will have to build a thinking, inquisitive
Art Director:Steven Choo and intelligent workforce – a landscape that is not
Graphic artist:Shafie Osman necessarily dominated by IT professionals.
Contributors: Tamyne Menon, The focus may not essentially be ICT per se, but ICT must
Dorothy Llew, Mohd Arshad be seen as a pivotal vehicle to market the ultimate human
Coordinator:James Wee asset, knowledge.
As such, future talents of any field – be it accounting,
legal, biotechnology or even publishing – must gain the
know-how to be able to leverage on ICT platforms in
grabbing global opportunities. A culture of innovation
sales sales@wordlabs.com.my must also reign amidst this.
This not an utopian dream but something that is
Vikraman Visno achievable judging by, for a start, the massive government
Resh Nathen support given towards the ICT services sector, quite unseen
in many other countries.
Besides, Malaysia have a number of other things going
favourably for it – the availability of good legal framework,
top-class business infrastructure and a stable socio-political
contact admin@wordlabs.com.my situation, just to name a few.
It is high time that a passionate talent pool brings the
industry forward.
However, the question is – will they be ready to meet and
adapt to this paradigm shift?
I leave this to you to ponder over.
In the meantime, be sure to read our profile interview on
Ng Wan Peng – the recently appointed COO of Malaysia’s
Multimedia Devlopment Corporation, a government-
WORDlabs MEDIA (001645509-W) owned corporation set up to facilitate the development and
27-1, Metro Centre, Jalan 3/146, promotion of MSC Malaysia. – Sritharan Vellasamy
Bandar Tasik Selatan,
57000 Kuala Lumpur;
Phone: +603 90564770, 90580971;
Fax: +603 90564771, 90580972
3(CIMA-Ad).indd 1 10/20/08 12:43:11 PM
Outsourcing | news bits

MDeC
appoints
Dr M: Country
new COO must attract
more foreigners
Custodian of the MSC
Malaysia initiative, the Multimedia
Development Corporation
(MDeC), announced the
appointment Ng Wan Peng as its
new chief operating officer.
Formerly vice-president of The Malaysian government can consider
MDeC’s capacity development giving permanent resident status to skilled
division, Ng will assume her new and qualified foreigners to attract them to in-
responsibilities from May 1. vest in Cyberjaya, according to former Prime
MDeC Chief Executive Officer, Minister Tun Dr Mahathir Mohamad.
Dato’ Badlisham Ghazali made “If we cater more for the people who
the announcement to the staff at want to come, I think they will come. I think
the MSC Malaysia headquarters in there must also be quality of life here as
Cyberjaya recently. that is important. They should also have a
“The position of COO and good environment to work in,” he said after
appointment of Ms Ng were delivering his speech on “Malaysia-Today’s
approved by the MDeC Board of Knowledge Economy” at the Cyberjaya
Directors at its 48th meeting on Malaysia-Bridging Business Needs Globally,
March 26,2009,” said Badlisham. Asia-Pacific Outsourcing Summit post-event
Badlisham said Ng will tour recently.
assume the responsibility for all The tour was organised by Setia Haru-
operational matters and will be man Sdn Bhd, the master developer of
in-charge of three specific areas; Cyberjaya. “We don’t allow intelligent people to
• Resource Management: “If I were in the Government today, I will come in while we allow our intelligent people
Budget, Manpower and Facilities allow intelligent people to come in. Give to go out. At the same time, people with less
utilisation through effective them a permanent resident status then, intelligence are coming in and with great
management of available resources. maybe later on, citizenship. numbers,” Mahathir said.
• Strategy Execution &
Coordination: Coordinated
planning and execution of key
action initiatives, progress reviews
and periodic reporting of results.
• Operational Quality & Two leaders inducted into
Efficiency Management: Enterprise-
wide process management,
risk management, methods and
IAOP Hall of Fame
systems deployment. The International Association of served as Minister in Malaysia’s Prime Min-
Outsourcing Professionals (IAOP) inducted ister’s Department in charge of the Economic
* See pg22 for our two leaders into its Outsourcing Hall of Planning Unit (EPU) and the Department of
interview with Ng Wan Peng Fame, the industry’s highest professional Statistics (DOS) from 2008-09.
recognition for contributions to business He was president and CEO of Maybank,
and society.

 Malaysia’s largest bank, from
The inductees are: Senator 2002 to 2008.
WITSA’s first trade Tan Sri Amirsham A Aziz, former When Tan Sri Amirsham out-
mission to Malaysia president and CEO of Maybank;
and Dr. Liu Jiren, chairman and
sourced non-core operations of
the bank in 2003, IT outsourcing
The World Information CEO, Neusoft Corporation. was still relatively new in South-
Technology and Services Alliance The inductees were honoured east Asia and the US$342 million
(WITSA) through its Global Trade at a gala dinner attended by 10-year contract was the largest
Committee organised the first hundreds of outsourcing profes- outsourcing deal in the region at
trade mission to Malaysia on May 11. sionals during the association’s the time. It has since delivered
The trade mission was to 2009 Asia-Pacific Outsourcing tremendous benefits of not only
promote and facilitate global trade Summit on May 12, in Kuala reducing costs, but also enabling
and investment in ICT for the Lumpur. the company to compete more
benefits of WITSA members and IAOP Chairman Michael effectively globally.
the industry at large. Corbett said, “These individuals Liu is the founder of Neusoft
The trade mission, hosted by represent the highest quality of and now serves as its chairman
the Association of the Computer professionals in the outsourcing and CEO. He also is a professor
and Multimedia Industry (Pikom), industry globally. Not only are and vice president of Northeast-
attracted delegates from 10 they leaders in business, they are ern University China (NEU),
countries: Bangladesh, Brunei, also leaders in society. These Hall vice-chairman of China Software
Croatia, Indonesia, Kazakhstan, of Fame inductees are at the fore- Industry Association (CSIA), and
Malaysia, Nigeria, Singapore,Taiwan front of advancing practices that a standing member of Chinese
and Thailand. are a model for all companies.” Association of Automation
Most recently, Amirsham (CAA).

6 | Outsourcing | May – June 2009

7basisBayAdvert.indd 1 5/26/09 11:24:17 AM
Outsourcing | news bits

‘Why Most of the vacancies

were in the Business

retrenched
Process Outsourcing
sector, which required
them to work odd hours
to serve the world at large

Malaysians with different time zones.

not game
– MEF Executive Director
Shamsuddin Bardan

for retraining’ Aussie banks may

Low wages are the main fac-
tor for the government’s training
initiative of providing training for
retrenched workers.


pull plugs
programme for retrenched workers
to be unattractive, according to the
The minister was reported to have
said that only 1,000 of the 18,000
on offshoring
Malaysian Trades Union Congress eligible workers had signed up for Australian banks Westpac and
(MTUC).

 the various training programmes Commonwealth Bank plan to curb
Bernama quoted its vice-president since they began two months ago.

 offshoring of back office and IT projects
A. Balasubramaniam said those Meanwhile, the Malaysian Em- to India in an attempt to address local
retrenched were mostly middle-aged ployers Federation (MEF) Executive sentiments over a shrinking economy and
with 10 to 15 years of experience Director Shamsuddin Bardan said rising joblessness.
and were already earning between the nature of the job was also an The banks are likely to demand that
RM2,000 and RM3,000 per month at important consideration for the more projects be delivered onsite, India’s
the time of their retrenchment.

 workers.

Most of the vacancies, he Economic Times reported.
“So, if you ask this group to go for pointed out, were in the business Westpac, which is Australia’s biggest
retraining and pay them RM500 or process outsourcing (BPO) sector, bank by market value, is evaluating
RM800 allowance, surely they will which required them to work odd outsourcing vendors for a contract
be reluctant,” he told the Malaysian hours to serve the world at large with estimated to be anywhere between A$200
news agency.

 different time zones.

 and A$300 million, and is demanding that
Balasubramaniam was com- “So, it is not surprising that more work be delivered from Australia
menting on the disappointment ex- retrenched workers who were used instead of shifting jobs to an offshore
pressed by Human Resource Minister to working from 9am to 5pm to find delivery centre in India or elsewhere.
Datuk Dr S. Subramaniam over the it difficult to adjust to a 11pm-7am The bank’s decision against offshoring
poor response to the government’s shift,” he said.

 follows an earlier announcement by Ralph
Norris, chief executive of Commonwealth
Bank of Australia (CBA), that his bank
would not send any jobs offshore for
three years.

Motorola sees hike in IT spending

by SMEs, govt agencies
MOTOROLA Inc is expecting riding oppor- and public safety sector, as well as across ernments and public safety agencies are
tunities for its business-to-business segment various vertical industries like private se- increasingly looking at adopting wireless
in Malaysia as IT spending is expected to curity, oil and gas, transportation, logistics, technologies for their needs, and second,
increase 4% to 5%, rising above US$6 billion construction, utilities, financial services, they are also open to exploring partnerships
mark this year based on a recent industry supply chain and hospitality. with the private sector for collaboration and
report by IDC. Vice-president of government and public investment in new technologies,” he said.
IDC also foresees the small and medium- safety for enterprise mobility solutions “We see this global meltdown as a tem-
scale enterprises to be more innovative in Phey Teck Moh was quoted in The Star as porary phenomenon and are confident that
business operations by leveraging on mobile saying that despite the downturn across the we’ll continue our role as the technology
and wireless technology, and outsourcing globe, mission-critical communications and partner of choice to our customers in the
certain business functions and mail services homeland security remained high prior- government and public safety, consumer,
to reduce operating costs. ity for governments due to rising security enterprise and wireless communications
In addition, Malaysia’s stimulus pack- threats and concerns. space,” Phey was further quoted as saying
ages are fuelling growth in the government “We see two key trends. First, gov- in the Malaysian newspaper.

8 | Outsourcing | May – June 2009

 Word Labs Media presents:

one-Day sourcingrciW orkshop

ng strategies
Gain key knowledge of sou Attending this Workshop Will enAble
you to:
lumpur, Malaysia
11 Aug 2009, hotel istana, kuala • Increase your ability to manage global
relationships
Workshop outline
• Enhance value creation within your
Landscape & Industry Definitions: 4. Regulatory & Legal Clauses organisation
1. Definitions of Outsourcing ITO, BPO, IMS 5. Conditions Around Termination – Cause,
etc Convenience et al • Understand the dynamics of services
2. Lifecycle of Outsourcing 6. Negotiation – Rules & Pitfalls globalisation
3. Customer Imperatives Driving Adoption 7. Developing Robust Contracts – MSAs,
Competitive Landscape SoWs etc
8. Monitoring & Management of Contracts Note:
Strategy Session: Renegotiation – Triggers & What To Avoid Claimable under the Malaysian HRDF – SBL
1. Developing a Sourcing Strategy Scheme.
2. Components Driving Strategic Inclusions Engagement Evaluations: WORD LABS MEDIA will provide, upon request
& Scope 1. Metrics & Reports the necessary documents for clients who wish to
3. Risk & Compliance 2. What To Measure & When claim for the course under the HRDF Scheme.
4. Business Modeling 3. Evaluating Impacts – Positive & Negative –
of Risks & Lost Opportunities
Portfolio Assessment: 4. TCO vs. Base Case Comparisons I would like full I am interested
1. Creating a Viable Sourcing Portfolio details of the in Sponsorship
2. Inclusions & Exclusions trAiner Conference and Exhibition
3. Financial Modeling & Impact Analysis Bobby Varanasi opportunities
4. Creating A Transition & Management Plan CEO-Founder of Matryzel Consulting
& Governance Approach Name:

D
5. Business Model Evaluations With uring the past fifteen years Matryzel
Portfolio Risk Evaluation Models Consulting have successfully assisted Company:
Aggregation & Dis-aggregation – What & over 50 Global 1000 companies Country:
How achieve their globalisation of services Address:
objectives, including 3rd party sourcing, joint
Case Study: ventures, BOTs (Build-Operate-Transfer) and
1. Assessment Approach & Defining captive operations. Matryzel Consulting has
Transition Approaches been advising corporations and governments Tel:
2. Sourcing Process & Response Creation with their strategic evaluations surrounding
3. Governance & Management of Ongoing expansion, growth, and competencies’ Fax:
Relationships: Focus on Deepening enablement and positioning. Email:
Engagement Scope A key and integral component of
such advisory services has been enabling Tel: (603) 9056 4770, Fax: (603) 9056 4771
Sourcing Process: service provider competencies, through or Email: sri@wordlabs.com.my
1. Competitive Bidding vs. Sole Sourcing conduct of comprehensive health-checks
2. RFP, RFI and Role of Advisory Firms and diligences to establish gap between
3. Supplier Evaluation & Due Diligences capabilities and market expectations, roles
4. Evaluation Matrices, Competence and structural orientation of organisations to
Baselining etc support world-class delivery of IT services,
5. Competitive Analysis & Risk Positioning of reinvigorating senior management teams to
Vendors effectively establish structures, processes and
6. Evaluating Appropriateness of Pricing competencies such that capabilities become
Quotations w.r.t. Solutions Proposed inherently comparable to competition.
Matryzel Consulting brings to the table
Accountability Apportioning: over 120 man years of collective experience
1. Program Governance & Controlling signifying lateral experience and deep
2. Engagement Management – Contract, expertise.
Performance,Technology, Resource &
Relationship
3. Internal Resource Allocation &
Accountability Measurements

Contracting & Negotiation:

1. Term Sheet Development – Performance
Orientation
2. Service Levels Vs. Performance
Measures
3. Critical & Non-Critical
Components
Media Partners:

www.the-outsourcing.com

PREMIER MAGAZINE ON BUSINESS AND TECHNOLOGY SERVICES INDUSTRY

Outsourcing | news bits

“I am
confident
that in
not very
distant
future,
the US Infosys:
govt Demand
would
recognise may revive
this in early 2010
reality.”
Infosys Technologies Ltd
expects outsourcing demand
to revive in early 2010, but the
current business environment
was tough as sluggish world
economy crimped spending,
its chief financial officer V.
Balakrishnan said.
Infosys is looking to spend
between US$200 million to
US$300 million to acquire

Indian PM:
companies and is sharpening its
focus on newer markets such
as Australia, India, and China to
boost growth, Balakrishnan said.
“At the macro level there is

Outsourcing helps
some confidence back, people
are slightly more comfortable,
but on the ground things are still
the same,” he said, referring to
the global economic downturn

US companies
that has battered information
technology spending.
“People want a clear
direction that there could be
an economic recovery for
them to get confidence and
Any US restrictions on outsourcing from “There are I think several US corpora- start spending.That is some
India and other countries would hurt Ameri- tions who have been representing to US way to go,” Balakrishnan told
can corporations, Indian prime minister Congress that these artificial restrictions on the Reuters Global Technology
Manmohan Singh said recently. outsourcing from India and other countries Summit in Bangalore.
Prime Minister Manmohan Singh (pix) would in fact hurt the competitiveness of Last month, India’s second-
was reacting to President Barack Obama’s the US corporations themselves,” he told largest software services
recent statement promising to come down reporters during a visit to the southern city exporter forecast its first
hard on firms “that ship jobs overseas” of Chennai. decline in annual revenue as
and avoid American taxes with offshore He said that access to cheaper facilities in global demand for outsourcing
havens. India helped American companies compete slowed in a harsh economic
“It’s a tax code that says you should pay with their rivals. climate, halting growth for
lower taxes if you create a job in Bangalore, “I am confident that in not very distant India’s once burgeoning
India, than if you create one in Buffalo, New future, the US government would recognise technology services sector.
York,” Obama had said earlier. this reality,” Singh said.

Philippine BPO looks to Japan, Europe and Australia

The Philippine business process outsourc- – said with the recent economic downturn and New Zealand.
ing (BPO) sector is looking at Japan, Europe bruising the US economy, Philippine BPO In Japan alone, Ibrahim said there
and Australia as possible new sources of firms are now looking for new markets to is a US$5-billion potential market that
much-needed investments and revenues, do business with. can be tapped by Philippine-based BPO
the government said. The US has been the industry’s main companies.
Mon Ibrahim – commissioner for cyber source of revenues and contracts. Among Europe, Australia and New Zealand are
services of the Commission on Information the new markets that local players are look- also lucrative sources of new contracts and
and Communications Technology’s (CICT) ing to reach are Japan, Europe, Australia capital, he told reporters.

10 | Outsourcing | May – June 2009

 news bits | Outsourcing

Adelaide EDS staff

asked to take pay cut
About 1000 workers at a Lockleys call they agree to the cut. staff – who process mortgages for Westpac
centre have been asked by employer EDS Under the proposal, staff would give up – EDS said “cost actions” were needed in the
to take a pay cut and have no guarantee 2.5% of their pay and any salary-related face of the “current challenges”.
their jobs are safe. benefits from June 1. “We greatly appreciate your under-
The data services provider’s parent com- The Finance Sector Union has urged standing and support in this difficult and
pany, computer giant Hewlett Packard, is EDS employees to reject the offer, claiming challenging time, and trust that your efforts
embarking on a global plan to cut wages it is illegal under present wage agree- to co-operate with company policies will
by up to 20% in response to the global ments. yield positive results for the operations of
economic recession, it was widely reported HP, which bought EDS last year, an- the company,” the company said in the
in Australian media. nounced in February it would slash salaries email, titled “salary reduction letter”, a
But Adelaide EDS staff have been told globally after first quarter profits fell 13% to copy of which was obtained by Australia’s
not to assume their jobs are secure, even if A$2.5 billion. In an email sent to Lockleys Sunday Mail.

Adlabs Films
announces entry
into BPO for film
industry
India’s leading entertainment
company Adlabs Films announced
its entry into BPO for film industry.
The company is owned by India’s
leading business conglomerate
Reliance Anil Dhirubhai Ambani
Group.
Adlabs owns India’s largest chain
of multiplexes called Big Cinemas.
In 2007, Adlabs acquired all

HCL bags IT outsourcing

the properties of Rave Cinemas,
a cinema chain based in Kanpur.
The company recently acquired
majority interest in Malaysia-based
Lotus Five Star Cinemas, and will
be operating a 51 screen cinema
deal from MTV
chain in Malaysia. 

 HCL Technologies announced Comedy Central and Nickelodeon
The international network, in bagging an IT outsourcing contract apart from MTV.
addition to Malaysia, also includes from MTV Networks, which will HCL said that a offshore develop-
220 screens covering the East, Mid require the firm to develop online ment centre in Chennai, India will
West and West Coast of USA as media platform for the popular support the activities and processes
also Mauritius and Nepal. entertainment channel. for the deal while and the user in-
The BPO would be a one-point The contract covers leading terface design will be supported by
solution for the transition from brands of the network such as VH1, the firm’s Noida centre.
analog to digital and physical media
to digital data, the company said in
a statement.

Oce: Top Green 50 provider

“The globalisation of media
services is well underway. The
comprehensive services of the
media BPO enable a distinctive
and complete offering to Adlabs Oce Business Services, Inc., a leader vendors that was recognised for its commit-
worldwide clients,” Adlabs Films in document process management and ment to the environment and dedication
CEO Anil Arjun said. electronic discovery, has been ranked to achieving social goals,” said Scott
The BPO would provide as one of the top 50 outsourcing service Wilson, partner, Brown-Wilson Group and
services like restoration, encoding, providers for environmental stewardship co-author, The Black Book of Outsourcing.
transcoding, compression for the third straight year according to the “Despite a challenging economy, going
authoring, format and standards Black Book of Outsourcing 2009 Green green is a philosophical commitment that
conversion, duplication and Outsourcing Survey. Oce’s official ranking is gaining momentum among global
dubs, meta-tagging, repurposing/ is 17. outsourcing clients, many of which say
versioning, QC and broadcast “Oce Business Services is one of the that finding green outsourcing partners
logistics and archiving. leading document process outsourcing is a key priority.”

May – June 2009 | Outsourcing | 11

Outsourcing | Perspective

Origins
and History:
Outsourcing
This is the second article in a series by
Dr Wendell Jones about the history and
rise of outsourcing as a global mega-trend
of this century

I
n the first part, we observed and reach the scale necessary
that outsourcing, as we at minimum cost, and the non-
know it today, owes its gen- strategic nature of IT services
esis to new ways of thinking allowed them to be performed
about services and to new externally.
concepts of organisational models And since technology permit-
and business practices. ted the physical separation of
These management and organi- management, operations and
sational changes coincided with service delivery, the outsourcing
an extended period of continuous choices were widened and the risks
and rapid technological changes of outsourcing were reduced.
and the rise of a highly competitive Concurrently, IT budgets sky
global market. rocketed with the growing use of
These convergent forces fueled computer equipment and auto-
the worldwide growth of outsourc- mated systems. And although
ing. In this second article, we trace the improving performance-to-
the effects of technological factors price ratio continuously led to
and how the changes expanded wide-spread and innovative uses
options and encouraged outsourc- of information technology, the
ing. same rapid technological changes Y2K trouble … As the business direction and as a tactic
quickly made hardware and soft- new entrants came to better predict costs and assure
Technological ware obsolete. into the market, that the organisation was paying a
Changes This placed companies on a competition fair “market price” for information
Several technology factors stimu- constant treadmill with an abun- increased, prices systems and services.
lated outsourcing growth in the dance of equipment and staff skills reduced, and Meanwhile, low barriers to entry
1990s. One was the “commoditi- that were becoming obsolete every suppliers worldwide made it possible for more suppliers
sation” of information services year. Outsourcing offered relief; it experienced to enter the outsourcing market.
with the maturation of computer was the way to reduce human and increased demand The number of IT service providers
technology and applications. equipment resources that did not for IT services. offering price competitive, quality
The “commoditisation” provided align with the strategic direction, This demand grew services increased throughout the
economies of scale in the delivery a means to access state-of-the-art considerably in decade of the 1990s.
of IT services, but at the same time resources, and a way to stay off the latter half Barriers to entry were lowered,
positioned IT as a non-strategic the treadmill. of the 1990s, as and technological change created
utility. Outsourcing was attractive to companies rushed discontinuities in needs that service
Suppliers could compete on senior management as a strategy to remediate the providers and hardware vendors
both price and quality of service to keep technology aligned with Y2K problem. exploited. As new entrants came

12 | Outsourcing | May – June 2009

 Perspective | Outsourcing

Along with mergers,

acquisitions,
partnerships
and alliances,
outsourcing has
clearly emerged as
a major strategy for
most industries.

into the market, competition increased, a robust first decade of this century. later, BPO is more than a proven practice;
prices reduced, and suppliers worldwide it is a worldwide growth industry.
experienced increased demand for IT Rise of offshoring Developed countries today are outsourc-
services. Contracting for IT services is not new. ing all types of back office functions in
This demand grew considerably in EDS and ADP, for example, have been in India, China and other destinations. BPO
the latter half of the 1990s, as companies business for decades. However, informa- typically encompasses human resources,
rushed to remediate the Y2K problem. With tion technology outsourcing (ITO) as a accounting, finance, facilities and related
increased revenues and profitability, IT strategy emerged in the 1990s, and the business processes. Presently, the hottest
suppliers could afford to hire, reward and rapid growth of offshore ITO and offshore BPO segment is IT-enabled services, such
promote the best talent, further enhancing business process outsourcing (BPO) is a as helpdesks and call centres for customer
the potential and the attractiveness of their recent phenomenon. inquiries, telemarketing, order processing,
outsourcing capabilities. BPO is presently growing at a faster pace cross-selling, benefits administration and
All of these interrelated factors rein- than ITO. In their book, Global Informa- claims processing.
forced each other and stimulated the tion Technology, Lacity and Willcocks Outsourcing is attractive in both an
phenomenal growth of outsourcing during made the point that in 2001 BPO was an economic slump and a strong economy.
the last decade of the 20th Century, and the emerging field for which only preliminary Slowdown fuels interest in offshore out-
momentum carried outsourcing forward to evidence of success exists. Now, a few years sourcing as companies look to increase

May – June 2009 | Outsourcing | 13

Outsourcing | Perspective

Making business
sense … Outsourcing
was attractive to
senior management
as a strategy to
keep technology
aligned with the
business direction
and as a tactic to
better predict costs
and assure that the
organisation was
paying a fair “market
price” for information
systems and services.

efficiency and reduce costs. In a strong countries. But how all this may are also playing in the global ITO and
economy, companies look to enter play out in the years to come BPO markets. Morocco, for example,
new markets by outsourcing to an is not clear. It is possible that is an attractive destination for French
offshore supplier that can pro- the pendulum companies. South Africa is also providing
vide a base of operations and swings from ITO and BPO services to UK-based clients.
infrastructure in a coun- time-to-time Even some sub-Saharan countries are
try or region targeted for with some building their future economies on IT.
market penetration or The Philippines, Malaysia, periods of (Lacity, 2008 )
expansion. Singapore, Vietnam, Russia, less offshore While India has focused globally, China
Ukraine and other Far East
With the countries have lately surfaced outsourcing in the has exploited opportunities in Japan and
relentless as interesting alternative coming decades. neighbouring Asian markets, where there
cost pressures destinations. But the trend so is a natural language and cultural affinity.
of the global far is toward more However, China is not yet in a position to
economy, companies are outsourcing, and displace India as a dominant outsourcer
continuously searching for the nations of Asia, in Europe and the US.
new and better ways to make Latin America, A country-to-country comparison
the value chain more efficient Eastern Europe and shows that India is clearly the leader,
and to compete more effectively other regions offering a wider due to experience, scale, and percep-
in good and bad times. Along with choice of destinations. tions. China offers cost advantages and
mergers, acquisitions, partnerships The Philippines, Malaysia, Sin- workforce availability, but lacks India’s
and alliances, outsourcing has clearly gapore, Vietnam, Russia, Ukraine depth and breadth of management
emerged as a major strategy for most and other Far East countries have lately and technical experience, and English
industries. surfaced as interesting alternative destina- fluency.
India’s outsourcing started in the 1980s tions. Markets in Costa Rica, Nicaragua,
and grew in the 1990s with the demands El Salvador, Guatemala, Honduras and
of American and European companies the Dominican Republic are attracting Dr Jones is a Professor of Management and a
for Y2K projects. Many companies spent US clients who use Central American former senior executive at Compaq, NASDAQ,
billions of dollars on Y2K remediation. suppliers in the same time zones for and McDonnell Douglas. He is recognised as
During this decade, American and Euro- Spanish-speaking call centres, help desks a leading outsourcing practitioner, advisor
pean companies have continued to fuel and patient scheduling. and thought leader. He has written many
the growth of the large Indian companies, Similarly, European companies are out- articles, and he co-authored a book still
like TCS, Wipro and Infosys. sourcing to Eastern European countries, recognised as one of the best outsourcing
Rising costs in India and China may particularly the Czech Republic, Hungary, references. His book was recently released in
move some work to the lowest wage Poland, and Slovakia. African countries a Chinese edition.

14 | Outsourcing | May – June 2009

 CapaBility DevelopmeNt | Outsourcing

By Dr Karl Ng

Succeeding in the
downturn: innovate it!
EndurE, withstand, survive – these them with a mechanism to adopt processes that realise economies of
are some of the more common words and monitor policies and processes scale and other synergies for even
many Malaysian companies are that are based on international best greater ROI.
using when they discuss their plans practices. By choosing to adopt modules
during the present economic down- With time and resources in short from a global standards certifica-
turn. However, I put it to you, that supply, it’s not a surprise to find that tion, companies are laying a foun-
this is not the optimum strategy for many companies cannot make the dation that they can build upon in
most businesses. Our successes over commitment to pursue full global better times when the means exist
these many years have been through standards certifications. However, for the company to achieve full
our focus on business flexibility and the process of certification is built certification.
agility and a commitment to innova- upon the accumulated implementa-
tion on all fronts – in our people, tion of many modules some of which FiNDiNG SUCCeSS NoW
our processes and our products and can be achieved without undue In these challenging times, compa-
services. During these challeng- burden to the company and that nies face three key challenges:
ing times, Malaysian companies yield immediate value to the busi- i) identifying and retaining tal-
must embrace these fundamental ness. CDP has identified a number ented people,
strengths because through them we of certification modules addressing ii) managing finances and driving
can and will find continued business a broad range of business activities operational process efficiency,
success. that Malaysian companies will find and
When cash flow is tight and com- both beneficial and achievable. iii) gaining product visibility and
panies are counting every ringgit, increasing sales.
words like innovation often meet re- WHeN HalF-a-loaF iS a CDP is committed to helping
sistance. After all, innovation comes GooD Deal Malaysian companies address these
at a cost. There’s no way around It’s counterintuitive to think that challenges. We have aligned our
this: if our companies are to succeed there’s merit in an incomplete 13 professional and organisational
over the next few years then they certification and in truth much is development programmes toward
must increase business efficiencies, lost. Full certification offers innumer
innumer- helping companies achieve im-
achieve prudent spending, explore ably greater benefits, but under mediate benefits through people,
new ways to work, develop employee the circumstances ... “we cannot process and product innovation.
skills, advance products and services, do everything at once, but we can If your company cannot pursue
rethink sales and marketing, and do something at once”, those are full certification now, we urge you
raise customer satisfaction. This is the wise words of former American to introduce those best practice
not something management does President Calvin Coolidge for you. processes and policies that can have
not know. The challenge they face is
bridging the gap between realising
CDP has Certifications take a holistic ap-
proach toward a business. Carefully
immediate benefit to your business.
CDP is ready to advise, guide and
what’s needed and achieving it. identified a chosen modules of a certification support your organisation through
number of can still deliver measurable busi- this change.
BUilDiNG tHe BRiDGe certification ness benefit – through operational
refinement and professional skills
For more information about
Fortunately for Malaysian com-
panies, many bodies exist to help modules development – and a fairly immedi-
immedi-
how your company can benefit
from these programmes, please visit
them build this bridge. This article addressing ate ROI. www.mscmalaysia.my/cdp
will discuss the assistance available a broad By selecting modules from a
through MSC Malaysia Capability
Development Programme (CDP), an
range of global standards, companies also
benefit from the mechanisms that Dr Karl Ng is the Senior Manager
initiative by Multimedia Develop- business exist to execute the module. With and Head of Capability Development
ment Corporation (MDeC). activities training and implementation Department of Multimedia Develop-
CDP hosts open dialogues and that methodology already in place the ment Corporation (MDeC). His re-
seminars that introduce Malaysian
companies to the measures they
Malaysian company will suffer less disruption
through the adoption process. And
sponsibilities include the directing the
development and implementation of
can adopt to raise their internal companies existing metrics will allow timely national level capability development
capabilities. Besides, it also conducts will find and accurate measurements of both programmes to enhance the competi-
clinics and workshops that show both compliance and ROI. tiveness of MSC Malaysia.
these companies how to achieve
this. CDP’s most direct assistance is
beneficial Furthermore, modules from
a certification are designed to
helping companies achieve global and be complementary. Well-chosen
standards certifications that provide achievable.” modules put in place policies and

May – June 2009 | Outsourcing | 15

Outsourcing | cover

health check
Evaluate the state of your global operations

By Atul vAshistA
shist
shistA stand the steps you need to take to the inability to reach expectations?

H
analyse your global operations. It The shortcomings can be attributed
ow do you know will guide you through a process to five main areas:
that your global that will help you understand the
operation is still problems and progress of your cur- 1 Lack of executive sponsorship
best in class? How rent operations. It will also provide 2 Failure to invest in the global
do you know what you with a plan to get better results operation
went wrong or what to optimise? from your global operations. 3 Poor governance planning and
Your offshore operations may need As the outsourcing industry implementation
a “Health Check” to evaluate its continues to make headlines, 4 Too much too soon (No road-map)
status. A Health Check can ad- global failures will continue to 5 Mismanaged and/or misguided
dress all aspects of an engagement surface. In fact, despite the rapid expectations (Not understanding
from corporate strategy, HR poli- expansion of globalisation strate- the market)
cies, infrastructure and quality of gies, most companies are unsure if
the management team to the their global services operations are When companies choose to ignore
financial health of the company, meeting expectations. We expect any of these five areas they find the
security, disaster recovery and the over 25% of global operations are reality of their global operations to
efficiency of processes. failing to meet expectations. be far from their original objectives.
This article will help you under- Why do so many deals have Clients are frustrated that they are

16 | Outsourcing | May – June 2009

 cover | Outsourcing

it is not enough to take only the first step on the path to services
globalisation. companies must persevere to achieve the full potential.
Half-hearted attempts without faith in the global delivery model will
only fall into a trap of self-fulfilling failure.

tion, internal sabotage, lack of Each one of the above areas has
supplier understanding of client specific topics that need detailed
business environment, inadequate evaluation. The approach to lever-
performance management – the aging this framework includes:
list goes on.
All of these are mere symptoms • A current state review
of the neglect and contribute to the • Comparative review to best
overall health of the strategy. practices
So, how can companies analyse • Gap analysis
the health of their global and • Ideal/Future state
global operations? recommendation
• Implementation
heAlth check for • Monitoring and remedial work
a Hiccup-free
environment To receive a truly objective
What is a Health Check? Quite opinion, an independent party
simply, it is the process of per- should perform a Health Check,
forming due diligence on global however, it is possible to conduct
operations – whether a captive the review internally. When con-
centre, a third-party relationship sidering whether to use an internal
or joint venture. The Health Check resource, make sure that a rigorous
helps companies understand the process is established and that
underlying issues which could the team has global operations
prevent outsourcing engagements experience.
from achieving their true potential. Regardless of the internal
It can also help other companies or external choice, this type of
salvage troubled operations. exercise will need buy-in from
During this process, it is impor- executive management as well as
tant to dig deeply into all aspects the delivery location heads.
of an engagement from corporate As a result of a well-run Health
strategy, HR policies, infrastructure Check, companies will be left with
and quality of the management a thorough analysis of the global
team to the financial health of delivery location’s strengths and
the operation, security and di- weaknesses, a gap analysis with
saster recovery policies and the industry norms, best practices and
not able to substantiate the five com- finding for clues efficiency of processes that have a strategic and tactical roadmap
mon goals of outsourcing: financial … clients are been outsourced. for the future. A Health Check
gains, quality improvements, process frustrated that Health Check involves a deep carried out properly can lead to in-
efficiencies, competitive advantage they are not able dive into the global operations. sights into how to get a significant
(faster time to market) and innova- to substantiate The key areas that need to be return on investment from your
tion. More and more companies are the five evaluated as part of a Health global services partnerships or
realising that the global delivery common goals Check include: operations.
model requires executive time of outsourcing:
commitment and monetary invest- financial • Strategy Benefits of A heAlth
ment. gains, quality • People check
Companies need to be able to see improvements, • Resources There are five main areas of returns
the big picture when analysing the process • Relationships that a company can capitalise on
success or failure of their services efficiencies, • Operations during the execution of a globalisa-
globalisation strategy. Poor transi- competitive • Financials tion strategy. These are returns on
tion practices, failure to achieve advantage (faster • Contracts competitiveness, human capital,
process maturity, weak transition time to market) • Performance delivery efficiencies, technology
practices, internal resistance to and innovation. • Risk and investment. A Health Check
outsourcing, low employee morale, •Technology will help companies focus on these
low productivity, employee attri- • Compliance areas and achieve the pie in the

May – June 2009 | Outsourcing | 17

Outsourcing | cover

What is a
Health Check?
Quite simply, it
is the process of
performing due
diligence on global
operations – whether
a captive centre,
a third-party
relationship or joint
venture.

sky results promised by many A process-based analysis into and recognition programmes. An-
global service providers today. all aspects of the outsourcing other make-or-break attrition factor
programme can help validate the may hinge upon the company brand
• Return on Competitiveness: A business feasibility of the project of the global centre where a sense of
Health Check can help an organi- and reassure top management. It belonging to the global client may
sation become more competitive in can also confirm readiness to move give the offshore team an aura of
the marketplace by enabling it to to the next phase and expand ownership encouraging loyalty.
leverage its offshore presence to its the scope in volume or type of A Health Check can determine
full potential, achieve scalability process. how an organisation stacks up to
and enhance speed to market. It is industry best practices, enabling
common to find vendors unable to • Return on Human Capital: change to reduce attrition and keep
align themselves with the client’s Companies often perceive that new employees happy and on a
corporate objectives. offshore resources have a lon- career growth path.
The reasons are varied ranging ger learning curve and/or low
from not being clued in to the cli- individual productivity. Attrition Return on Delivery Efficiencies:
ent’s business goals and changing is also a mysterious challenge for Efficient delivery of services will
business drivers for the client to companies new to globalisation. occur only if the transition has been
outsourcing the wrong processes Yet, attrition is often a function well-planned, sufficient knowledge
or choosing an unsuitable delivery of the quality of training provided, transfer and process training has
model. performance assessment accuracy occurred and the delivery process

18 | Outsourcing | May – June 2009

 cover | Outsourcing

Benefits
Health check activity oratestrategy
return category •Align globalisation and corp
ix
•Evaluatechoiceof portfoliom •Validateoffshore stra tegy
Return on model eforflexibility
•Validatechoiceof delivery •Ensure effectivegovernanc
Competitiveness sorship
•Determine executivespon and control
•Assess con tractterms
ds
ndppro ceddur
roce es
ures ••Tie training tobusiness nee
al
apitital ••Validatetrainingpoliciesa ••Manageo vert ime
Return onHumanCCap oad distribu tion across on
•Evalua tew orkl
urces •Determine resource allocati
geographicallydispersed reso mp are attrition ratesto industry norms
•Co
nst rate gies rrecruiting
•Re view retentio
ew •Re-confirm brandstrengthfo
•Conductperformance revi
mes
•Define recognition program
ition
Return on •Identifyweaknesses intrans
• sess transitionefficacy
•As reas forp roductivity and process
Efficiencies
DeliveryEffi ow •Identifya
•Understand workprocessfl improvement
foroffshore delivery •Recommendchangestore
source
els
•Analysetrends inservicelev utilisationandw ork schedu ling
pro cess improvements
•Review QA
and resource
•Review volume forecasting
allocationprogrammes
tices
Return onTechnology lementation • fine datasecuritybest prac
•De
•Evaluatedata security imp ••Align disaster recovery and
business
Efficiencies em ana gem ent policies t
•Review privileg continuityactionswithclien
(for datasecurity) requirements
business
•Assess disaster recover and •Planforfuture growth
continuityreadines s
dth
•Review network and bandwi
utilisationands calability
bjectives
•Confirmrealisticfinancialo
••Evaluatesavingsrealisation fornext levelof expansion
nvestment
Return onIInve clud
incl
rcingin g
ing
udin ••Analysereadiness
•Review totalcostof outsou
productivityandvolumes

cross training. The analysis should client. Clients often find it difficult
define a roadmap for delivery im- to determine the cost savings and/
provements and enable a company or the total cost of outsourcing
to move forward with an improved because of factors such as pro-
transition process and the ability ductivity loss, quality drop and
to scale the operations. schedule failures.
A Health Check analysis of these
Return on Technology: Oppor- symptoms may reveal process inef inef-
tunities for scaling the operations ficiencies, insufficient training and
is heavily dependent upon the communication failures. By imple-
network connectivity of the pro- menting the recommendations
vider location, current bandwidth of the Health Check companies
utilisation, technology efficiencies can remain on track to achieve
and data security considerations. optimised savings.
The Health Check in-depth Several benefits of carrying out
study can recommend network a Health Check are summarised in
optimisations and assess require- the table above.
has been reengineered for a global As a result of a ments with respect to business
delivery model. well-run growth plans. Data security policy When is A heAlth check
Any flaws in transition will be- health check, implementation can also be pivotal ApplicABle?
come apparent six months into the companies will to many clients in obtaining buy-in A Health Check can bring
engagement. At this point problems be left with a from their customers for handling significant value during many
with a lack of knowledge transfer or thorough analysis processes and data offshore. stages of the services globalisation
loss of process efficiency between of the global Many times clients are not lifecycle.
onsite and offshore will emerge. delivery location’s aware of the offshore security
A Health Check review and analy- strengths and threats or the intricacies of privilege Prior to completion of the
sis of the service levels, metrics and weaknesses, a management applied to a remote sourcing stage: at this stage
project management documents will gap analysis with team. The best practices identified a Health Check can provide an
highlight the workflow and volume industry norms, by a Health Check should be used objective assessment of the organi-
management capability, the quality best practices and to upgrade the delivery location to sation’s political, technical and
assurance process maturity and the a strategic and effectively meet client expectations operational readiness for continu-
process improvement initiatives (or tactical roadmap and regulatory compliance. ing the engagement. The analysis
the lack of it). for the future. can also provide recommendations
During the review, all areas of Return on Investment: It is a on which suppliers will best fit the
delivery should be analysed, in- combination of all the four factors organisation’s culture and needs.
cluding: utilisation of resources, above that ultimately determine
spare capacity management and the return on investment for the Prior to finalising the con-

May – June 2009 | Outsourcing | 19

Outsourcing | cover

“Any flaws in transition will become apparent

six months into the engagement. At this point
problems with a lack of knowledge transfer
or loss of process efficiency between onsite
and offshore will emerge.”

Don’t turn your

back … More more
companies are
realising that the
global delivery
model requires
executive time
commitment
and monetary
investment.

tract: a Health Check at this enable the effective cross or reverse • Schedule benchmark studies
phase will determine whether the transitioning if required on global strategy, operations
contract is sustainable, attainable management, resource man-
and balanced, yet commercially Recommendations agement, infrastructure, and
challenging. It will also establish It is not enough to take only the regulatory compliance to ensure
well-defined SLAs. first step on the path to services that globalisation challenges
globalisation. Companies are met with industry best
Post-transition: Health Check must persevere to achieve practices.
work at this phase will outline any the full potential. Half- • Invest money and
remaining personnel/transition hearted attempts without resources in ongoing
issues. It will also provide a frame- faith in the global deliv- governance
work for immediate improvements ery model will only fall • Obtain buy-in from glob-
to the existing service manage- into a trap of self-fulfilling ally dispersed teams
ment and governance structures. A failure. • Choose an independent ex-
roadmap for the future will be laid An in-depth Health Check pert to guide in the initial stages
out to mitigate future surprises. analysis and review of the op- of the Health Check
erations is guaranteed to identify • Set realistic objectives
Mid-way through the life- problems earlier, lessen risks, im- If companies can follow these
cycle of a deal or one-year prove performance, reduce costs nine seemingly simple recom-
post transition completion: A and enable better control. Done mendations, we are poised for
Health Check in the middle of the right, it will also reconfirm execu- less “failure publicity” in the
life of a deal is critical to enable tive commitment to the strategy days ahead and moving towards
both parties to work through hic- and identify future opportunities. A Health Check the services globalisation of the
cups in the relationship. This will can determine how future.
minimise the effects of misalign- To ensure success in globalisa- an organisation
ment and can also breathe new tion strategies, companies must: stacks up to
life into a sick deal. • Commit to executive sponsor- industry best Atul Vashistha is Chairman of neoIT,
ship practices, enabling a leading global services and sourc-
Prior to contract termina- • Perform a regular Health Check change to reduce ing management consultancy. He
tion or extension: conducting on global operations attrition and keep is also CEO of NeoGroup, a firm
a Health Check at this phase • Focus on improving the 5 key new employees focused on outsourced programme
can assist in a quick decision on areas of globalisation return happy and on monitoring and reporting services for
the merits of competitively re- • Implement the recommendations a career governance, regulatory and compli-
tendering the contract. It will also of the Health Check analysis growth path. ance initiatives.

20 | Outsourcing | May – June 2009

Outsourcing | Personality
By sritHaran Vellasamy

T
he only safe ship in a
storm is leadership.
For the recently ap-
pointed Chief Operating
Officer of Multimedia
Development Corporation (MDeC),
the current economic bad weather
is sure to provide ample challenges
as the organisation surges ahead to
further drive the development of the
information and communications
technology sector in the country.
A 21-year ICT veteran in the
field, Ng Wan Peng is up for the
challenge.
“MDeC oversees the develop-

tete-a-tete with
ment of the ICT sector which takes
place on many different levels, in-
volving the government, industries
and with socio-economic impact.
The goal is to position the country as

ngwan Peng
a global ICT hub and a big player in
K-economy,” Wan Peng says.
Services sector has indeed been a
big driver of economic growth in the
country over the past few years.
She says: “Our economy is mov-
ing to being more service based – it’s
a good sign that we are on road A conversation with the newly minted COO
to become a fully-developed state
and therefore, efforts must be made of Malaysia’s Multimedia Development Corporation
to progress along these lines and
MDeC is here to provide the right
platform.”

Gloomy economic
times
It’s also understandable why Ma-
laysia is looking towards this sector
during these bleak global times.
While the manufacturing, shipping
and other sectors are seeing re-
trenchments – MSC Malaysia-status
companies will be creating 7,000
more jobs by year-end, with the
majority coming from the shared
services, business processing out-
sourcing, software solutions and
animation sectors.
Wan Peng, formerly MDeC’s Vice
President of the Capacity Develop-
ment Division, says: “By end of
next year, we are targeting about
100,000 jobs created from the MSC
Malaysia-status companies.”
There are 2,326 such companies
in the country from the earlier
humble number of 300 at the dawn
of MSC Malaysia – a brainchild
of the former Malaysian Prime
Minister Tun Dr Mahathir Moham-
mad – some 13 years ago.
Despite the negative ground
sentiments, Wan Peng says the cur-
rent economic situation is ironically in the late 1990s, we are much more organisation and complement the
providing ample opportunities for informed and wiser now in handling role played by her boss, CEO Dato’
Malaysian services firms as many such crisis, managing expectations Badlisham Ghazali.
huge foreign companies are rolling and spinning off opportunities ac- Wan Peng will assume the respon-
out initiatives to cut costs while cordingly.” sibility for all operational matters
maintaining competitiveness at the and will be in-charge of three specific
same time. new aPPointment areas namely, Resource Manage-
“This is not the first time we are As with the new appointment as the ment, Strategy Execution and Coor-
experiencing the economic turbu- COO, Wan Peng says that her im- dination, and Operational Quality
lence here in MDeC – then known as mediate goals are to further enhance and Efficiency Management.
MDC. After the previous downturn and ensure the effectiveness of the Some of the urgent issues MDeC is

22 | Outsourcing | May – June 2009

 Personality | Outsourcing

pressing ahead with are the alloca- streamlining certain processes to the key to success in any sector.
tion of resources the organisation further fuel the initiatives,” says While the country have enough
has at its disposal, she explains. “We Wan Peng, who believes in hands-on graduates to fuel the ICT industry,
are allocating the resources – be it management style to achieve the one feels that there must be a collec-
finance, human resource and others goals she has set for herself during tive effort to enhance their capabili-
– at the right place to help the body her tenure. ties at all times to keep the country
to further its cause.” competitive – a burden that must
“A lot of efforts will also be tar- Talent pool not be just shouldered by MDeC,
geted at evaluating the areas that Improving the current talent pool but also the industry, academia and
needs to be improvised to better serve is one of the overarching focuses of workforce themselves.
the industry. We are also looking at MDeC as human resource is always “I believe that at this point of time

May – June 2009 | Outsourcing | 23

Outsourcing | Personality

“We hope that our efforts will help the

local academicians to understand in
depth the requirement of the industry,
besides having first-hand experience
on the inner workings of a particular
business segment.”

24 | Outsourcing | May – June 2009

 Personality | Outsourcing

we do have enough graduates in the

country to fuel the country’s charge
towards a service-based economy,”
Wan Peng, who obtained her Hon-
ours Degree in Computer Science
from Universiti Sains Malaysia.
“However, in my opinion, the
challenge is to make sure that the
available pool is rightly equipped
with the necessary skills to correlate
with the needs of the burgeoning
ICT industry.”
She adds: “On our part, we have
been working on this all these years
through our K-Workers Develop-
ment Department, where we tackle
this issue by creating and pushing
ahead awareness programmes and
workshops targeted at undergradu-
ates.”
MDeC have also worked hand-in-
hand with a couple of handpicked
technology and business process out-
sourcing firms to provide necessary
industry training to undergraduates,
helping these companies to absorb
these trainees into their operations
along the way.

Capability
development
Five years ago, the industry body
established its Capability Develop- labus,” she says. “For an example, also be mindful not to collide head-
ment Programmes (CDP) wing to we recently worked very closely with on with countries such as India
help local ICT organisations maxi- a leading local call centre company and China where they are able
mise their potentials by adopting to train a group of lecturers on the to churn out graduates in droves
global good practices and process call centre environment and update and capitalise on the mammoth
improvements. them on the latest developments in talent pool to create value for their
At present there are 11 organi- the business.” clients through high-volume jobs,
sational development programmes Besides “We really hope that efforts such she says. As such, a good talented
through the CDP unit. the as these will help the local academi- pool of local workers will be able to
provide the right platform for the
“So far, over 120 local companies
have received global standards certi- massive cians to understand in depth the
requirement of the industry besides country to strive for low-volume but
fication and we’re now seeing a trend numbers having first-hand experience on high-value jobs.
where companies that have already of MSC the inner workings of a particular
achieved a certification are now Malaysia- business segment.” original goal
pursuing certification in other areas. As far as MSC Malaysia is con-
This is indeed very encouraging,” status Local players not cerned, it has not sidelined from its
says Wan Peng, who has been with companies neglected initial goal of using ICT to drive the
MDeC for over 10 years. being On the subject of certain local economy come 2020, she says. “We
Besides the organisational de-
velopment programmes, CDP has
churned players lamenting on the extra
support given to MNCs to set up
have never lost sight of this initial
target, however, along the way the
also kickstarted a fresh initiative for out, we base here, Wan Peng stressed that micro initiatives to reach this target
individual capability development are now the local firms are not at all being may have seen a couple of reinven-
last year. The “Get IT Certified” witnessing neglected. tion to keep pace with the changes
campaign focuses on improving
the skills of ICT professionals in
the birth “Sometime, we have to man-
age these perception that the focus
in technology and movement of the
global ICT industry.
Malaysia in delivering world-class of local is more on trying to get foreign “Our track record is for everybody
services. innovations, companies to set up shared services to see. Besides the massive numbers
Wan Peng explains: “We want to products centres here, however one must un- of MSC Malaysia-status companies
stress the importance of professional
certification programmes for the ICT
and derstand the need to balance this
ecosystem.”
being churned out – we are now
witnessing the birth of local innova-
workers as good recognition and solutions. She adds: “We need to spur the tions, products and solutions.”
skill sets will enable them to be more presence of foreign companies due Wan Peng also feels that the
marketable in the industry.” to their expertise and processes that country has all the ingredients
MDeC also approached Institutes will help create a pool of quality needed to make an indelible mark
of Higher Learning (IHLs) such as labour. And of course, at the same in the global ICT space.
local universities and reputable time we need the local companies “Here in Malaysia, we have the
colleges to exchange ideas in order to move up to higher value chain right recipe going for us, on top
to create platforms by working with and provide world-class ICT services of the language advantage, right
these institutes, whereby adding- and solutions.” infrastructure and legal framework
value to their students. This two-pronged approach will – we have proved time and again
“Depending on the readiness of a ensure a balanced ICT ecosystem in that we’re an adaptable people
particular IHL, we bring in external the industry, she justifies. due to our multi-racial and multi-
industry curriculum into their syl- The local industry players must religion background.”

May – June 2009 | Outsourcing | 25

Outsourcing | InsIghts

Us newspaper industry crisis

triggers greater offshoring

By ArAdhAnA
A KolhAt
A KAr a severe threat. the global newspaper
ewspaper Publishing Market:

G
The global newspaper market is share
hare by geography
lobally, the print news- expected to touch US$208.1 billion
paper industry has in 2010 at a CAGR of 3.1% between
shown varying growth 2006 and 2010, according to PwC.
trends across geogra- The EMEA (Europe, Middle East,
phies over the last few and Africa) is expected to have the
years. While the Asian economies largest share at US$72 bllion by 2010
are registering a growth in con- with a CAGR of 2.5% between 2006
sumption, thanks to rising literacy and 2010.
levels, the US and European markets The US newspaper industry is
are witnessing a secular downward experiencing the most severe reces-
trend in newspaper circulation. The sion amongst the major markets.
pressures on newspaper companies It is estimated that by 2010, the
in the developed economies have US market share in newspaper
intensified to a point that their publishing will shrink to 28% from Source: Derived from PwC estimates and data
fundamental positioning is under 35% in 2006. From the estimated published by Newspaper Association of America

26 | Outsourcing | May – June 2009

 InsIghts | Outsourcing

Going forward,
the companies
will continue to
build new models
that sustain
both print and
online revenues
simultaneously.
Most are following
robust strategies
to leverage the
advancements of
the digital space.
However, the print
advertisement
fetches a much
higher profit
margin compared
to a similar online
advertisement
for a newspaper
publisher.

newspaper revenues are driven by

advertising. However, evolution of
online advertising has adversely
affected the revenues of the US
newspaper industry. The overall
print advertisement revenues have
the pressures decreased substantially due to a
on newspaper shift towards online advertisement,
companies in post 2000.
the developed While print newspaper advertis-
economies have ing has shown a negative CAGR of
intensified to a 8.2%, the online adertising revenues
point that their have been growing at a CAGR of
fundamental 25% between 2006 and 2010. The
positioning is US slowdown and sub prime crisis
under a severe have further impacted print adver-
threat. tising business in the real estate,
automotive and employment seg-
ments. These three segments form
the bulk of advertising revenues for
US$65.7 billion revenues in 2006, revenues t
trends
rends Among newspapers.
the US newspaper market will drop t newspaper
top ewspaper Publishers Going forward, the firms will
to approximately US$52.8 billion in continue to build new models
2010, owing to a negative growth of that sustain both print and online
CAGR 5.3%. revenues simultaneously. Most
The overall newspaper market are following robust strategies to
in the US reached a plateau in the leverage the advancements of the
early 2000s and has been witnessing digital space. However, the print
negative growth since then. Most advertisement fetches a much
of the leading newspapers show a higher profit margin compared to
downward trend in revenues except a similar online advertisement for
for McClatchy as evident from the a newspaper publisher.
exhibit. Newsprint and ink form a major
portion (47%) of the cost of news-
dwIndlIng AdvertIsIng paper production. Rising costs of
revenUes Source:ValueNotes’ Report, newsprint is another issue faced by
Typically, as much as 75% of print “Offshoring by US Newspaper Publishers” newspaper publishers. Over the past

May – June 2009 | Outsourcing | 27

 Outsourcing | InsIghts

in ew pa she y ne iss sp singer e

fa s an ts o cti new7% ajo d
th ub ed thef ne n. Rspa of th
) r
n
co rod t of n ( a mnt a

n e li b r w i p
in romrea print eigs. Owsp e nt
p s io m i
co ort for spr

r
u ri
n 00 S d co t y r e
4

to 20 U se t h ve ap
in New

20 o 20 34 s h ars
ve
o
p k

08 US p % a
“

in t $5 by st e

00 on
i s u

r
pe
t
.” $7 er
p c o

f c s s r

eight years newsprint costs have increased

by 34% from US$520 per ton in 2000 to
US$700 per ton in 2008. going cyber …
The costs have been increasing steadily typically, as
t
since 2003 and registered a steep increase much as 75% of
(26%) in 2007. Several newspaper publish-
publish print newspaper
ers are reducing in newsprint consumption revenues are
by reducing edition size or doing away with driven by
some editions of newspapers advertising.
however,
stePs to control costs evolution
Given the rising pressures on both the top of online
line and bottom line, the newspaper indus-
indus advertising
try has been drastically reducing manpower has adversely
during the last two years. In 2008 alone, affected the
the top US newspaper companies have revenues of the
announced more than 7000 job cuts. Apart Us newspaper
from the reported job cuts, we believe that industry.
there were an equal number of unreported
job losses in the industry. Out of these an
estimated 3,000 were journalists. maintain margins. like McClatchy, Media News Group, Copley
At present, the most adversely affected Several leading newspaper companies Press among several others have begun
jobs include editing, copy desk, journalism, are being forced to rethink their business offshoring to Asian countries.
printing operations and sales jobs. The models in an era of evolving technologies Sensing opportunity in the newspaper
newspaper companies are consolidating and challenges. There is limited potential to market in the western geographies, the
their production processes in order to reduce cut costs by reducing news coverage, news- offshore vendor landscape is beginning to
the overall cost of operations and bring paper size, editions etc. Most of the large shape up.
down duplication in services. newspaper companies are experimenting While offshoring in this segment is yet
As the pressure on the US newspaper with multiple imperatives to control costs. evolving, the industry is steadily adding
industry is mounting, most players are Several newspapers are outsourcing printing capabilities manpower and clientele and
adopting a two-pronged strategy to survival: within the US and many are experimenting gearing up for optimistic times ahead.
Cost cutting and adding revenue streams. with offshoring prepress services.
While several family-owned smaller news- Over the last couple of years, there
paper companies are looking to exit the has been an increasing trend of US-based Aradhana Kolhatkar is the Principal Analyst
business by selling out or shutting opera- publishers offshoring to India along with – Publishing Services at ValueNotes, a leading
tions, the large publishers are focused on sporadic instances amongst UK-based research provider focused on the outsourcing
leveraging new opportunities in order to ones. Several leading newspaper groups industry.

28 | Outsourcing | May – June 2009

Subscribe Now! The Outsourcing
P r o v i d i n g t h e r i g h t p l a t f o r m f o r p r o v i d e r s a n d s e e k e r s

Premier magazine on the

outsourcing industry
YES, I would like to subscribe to The Outsourcing.
I will receive ONE YEar (6 issues) / TwO YEarS
(12 issues) of The Outsourcing effective from the next
issue.

Please tick ( ) where applicable.

MaLaYSIa
1 year subscription (6 issues) @ rM75

A business to 2 years Subscription (12 issues) @ rM140

Includes delivery charges

business magazine SINGaPOrE

for the Outsourcing 1 year subscription (6 issues) @ S$50
Industry’s decision 2 years Subscription (12 issues) @ S$100
makers.” Includes delivery charges

rEST OF wOrLD
1 year subscription (6 issues) @ US$60

2 years Subscription (12 issues) @ US$110

Includes delivery charges

Name:...........................................................................
Job Title: .......................................................................
Company/organisation:................................................
Address: .......................................................................
......................................................................................
......................................................................................
Postcode: .....................................................................
Country:........................................................................
Tel:................................................................................
Fax:...............................................................................
E-mail: ..........................................................................

Enclosed is my crossed cheque / money order/postal

order No.____________________________________ for
RM/S$/US$ ___________________________ payable to
wOrDLaBS MEDIa.

Send subscription order to:

wOrDLaBS MEDIa
27-1, Metro Centre,
Jalan 3/146, Bandar Tasik Selatan,
57000 Kuala Lumpur, Malaysia
Tel: +603-90564770
Fax: +603-90564771
E-mails: admin@wordlabs.com.my
URL: www.the-outsourcing.com
Outsourcing | INSIgHTS

To beor notto be
Are you ready to transform your cost-centre into a profit-centre?

By ADITYA BHALLA &

SHREE PHADNIS

T
Not all support he recession has hit sup-
port functions such as IT,
functions may HR, Training much harder
be easily able to than revenue generating
departments.
directly translate Management across the board is
their work demanding cost rationalisation from
support functions. Departments,
into revenues. the world over, are going through a
Examples of such painful cost-cutting exercise. Travel
budgets are frozen, training budgets
departments slashed, and IT investments of even
include legal, $1 has also become a taboo subject
administration in some organisations.
The dilemma facing the manag-
and infrastructure ers of support functions is how to
management. demonstrate the true value of the
work done by their departments so
However, with that they can get increased budget-
budget
a little effort ary allocation and not the inevitable
axe.
the revenue In the previous issue, we high-
contribution lighted the trend of service providers
leveraging these troubled times to
opportunities opt for different business models to
for these move up the value chain with their
clients.
departments can In this article, we share a similar
be easily worked trend of in-sourced support functions
transforming themselves from cost-
out. centre to profit-centre.

UNTAPPED: HUmAN
cAPITAL
APITAL
Top management in some pioneer-pioneer
ing organisations has realised that
cost cutting has limited potential
and it needs to find alternative ways
to generate revenues. In addition to
revisiting the strategic directions and

30 | Outsourcing | May – June 2009

 INSIgHTS | Outsourcing

the business models, the focus has

also shifted to leveraging a relatively
untapped human capital – the sup-
port functions.
Support functions have been
mandated to find ways to become
profit centres. The concept is not
simply a charge-back for services of of-
fered but actually demonstrating the
incremental revenue on account of
the work done by the departments.
This is a paradigm shift for many
employees in these departments.
They have become so used to the Hold on … While
concept of operating as cost-centres the concept of an
that the very idea of generating internal support
g
revenues for the organisation is function generatin
ar
paralysing at first instance. revenues may appe ht
aling, it is fraug
It is only when the staff realise the appe
power they already wield in terms with its attendant
of their ability to generate revenues
challenges.
that the initial shock is replaced
by enthusiasm. It is an enlighten-
ing journey for many to discover
that they form one of
critical elements
i n f l uencing the Example:contribution to Revenue
various customer
touch points and it Consider the scenario where the support
is only a matter of functions Marketing Research and
developing the keen Marketing Data Analytics independently
eye. decide to form themselves into profit
centers contributing to the generation of
coNcEPTTo revenues.
ExEcUTIoN The challenge will be to differentiate
While the concept of the revenue impact by these teams from
an internal support that contributed by the work done by
function generating Marketing teams comprising of Product
revenues may appear Development teams and Sales Promotion
appealing, it is fraught teams.
with its attendant
challenges.
The first challenge the support functions are: evaluation scorecards in line with
confronting the support func-
func Incremental revenue genergener- the changed dynamics within the
tion teams is that for the first time they ated by the ideas resulting in new organisation.
have to collectively make a sincere
attempt to understand the business “It is an products
Incremental revenue gener- coNcLUSIoN
processes of their organisation. enlightening ated in existing products by the A few leaders have grabbed the
The next challenge is the struggle
to ascertain how the departmental
journey for recommendations of the support
function. This is the trickier of
opportunity handed down by
recession to drive their support
activities contribute to making the many to the two. It will involve a dialogue functions to transition into profit
business stronger.
The challenge is even more
discover between different stakeholders
based on reasonable assumptions
centres with revenue generation
capabilities.
pronounced for large organisations that they of projected revenue. This will While the move is laden with
where certain departments and teams
evolve over time without a clear-cut
form one establish the baseline revenues for
assessing the contribution of each
several challenges, the correct ex-
ecution will enable cross-functional
business imperative and sometimes of critical support function. teams to move from inward focused
even duplicating the work done by
teams in other departments. Ex-
elements Not all support functions may
be easily able to directly translate
to customer-focused approach to
shore up the bottom line of the
amples of such teams could be teams influencing their work into revenues. Examples organisation. It will also create a
involved in audit, analytics, and
financial comptrollership functions.
the various of such departments include legal, formidable organisation where
administration and infrastructure every function develops the keen
The third challenge is to deter- customer management. However, with a eye and the confidence to generate
mine how the revenue contribution
of support functions can be dif-
touch little effort the revenue contribu- revenue for the organisation.
tion opportunities for these depart-
ferentiated from the contribution points and ments can be easily worked out.
of revenue-generating functions it is only a The remaining challenge is to Aditya Bhalla and Shree Phadnis
such as Marketing (refer example in are Senior Consultants with QAI In-
box). It is scary for some and there matter of create the environment conducive
towards formation of cross-func- novation Practice. They are Six Sigma
are big concerns on putting any developing tional teams with the ability to take Master Black Belt, and MA TRIZ Level
commitments on paper.
The two revenue streams that the keen the ideas and recommendations of
the support functions to execution
3 certified. They can be contacted
at adityabhalla@yahoo.com and
need to be broadly accounted for by eye.” and to work out the performance shreephadnis@usa.net respectively.

May – June 2009 | Outsourcing | 31

Outsourcing | Insights

Value
transformation
through
outsourcing

Scaling the heights …

Value Transformation
Outsourcing is a very
exciting journey that
transforms an inward
looking company
towards a business
driven culture.

32 | Outsourcing | May – June 2009

 InsIghts | Outsourcing

Keys to success …
By Value-based Pricing
CK Mah is an integral
part of Value
transformation
Outsourcing,
which is aligned
to the business
performance and
driven by the
same commercial
key performance
indicators.

V
alue Transformation Outsourc- • Step 1: Simplify involve the human element of subjective
ing is a “pro-active” outsourcing Eliminate non-essential work steps and perspective, which needs to be handle deli-
model targeted to deliver im- streamline remaining work steps to cately with guidance and counseling from
proved business results through lower exception processing costs; experience human resource specialist.
continuous improvement for • Step 2: Innovate Some of the more mechanical hin-
s trategic change operation of existing
strategic Re-assign work items in accordance to drance such as lack of quality of service,
business processes. The values contributed resource pyramid to achieve economies transformation cost and lack of internal
by this transformation model are measured of scale and labor arbitrage; and process measure, are more objectively
against business outcomes or selected Key • Step 3: Standardise and defined and would be much easier to
Performance Indicators, either of a depart-- Automate overcome when measured against a
ment/organisation or senior management Automate manual processes by sustainable business case.
such as CEO, COO or CFO. implementing common or standard While there are both drivers that en-
Value Transformation Outsourcing takes processes. courage the enforcement of such Value
an internally focused operational excellence • Step 4: Globalise Transformation Outsourcing, similarly
model in reducing cost to an externally Stabilise repetitive business processes there are hindrance that may pose a chal-
business focused model aligned to strategic (in particular back-office processing) lenge to such successfully outcome.
business initiatives. This is achieved through and redeploy resources towards market However, most organisation that have
the synchronisation of change efforts across or business growth activities. any commitment to such outsourcing
the management, operational and support initiatives are very likely to have recent top
processes. These processes are interlocked executives changes, slowing of business
and differ by their respective process area These simple steps are driven by cost growth, negative growth, accelerating
of focus based on the three hierarchy levels, reduction, improve shareholder value, losses, recent mergers or acquisitions,
namely, management, operational and improve service level, focus on core busi- significant layoffs or plant closing, or-
support levels. ness and introduction of process inno- ganisation restructuring or labour unrest
vation. Similarly, there are significant or trouble.
APPROACh challenges or obstacles that may hinder These signs and symptoms are evidence
The key of Value Transformation Outsourc- the implementation of such business of a potential environment where such
ing is to target on the key business process process improvement to yield significant Value Transformation Outsourcing may
evolution that drives a business-focused value transformation activities. be implemented effectively and success-
organisation. This is aimed to remove the Fear of loss of control, company culture, fully.
operational and administrative process employee unrest and threat of specific
burden, encouraging a tactical approach team are some of the more emotional tRAnsfORMAt
ORMA IOn
ORMAt
that focus on core functions by: and less predictable obstacles since these Value Transformation Outsourcing will

May – June 2009 | Outsourcing | 33

Outsourcing | Insights

Complete the puzzle …

The level or depth of
transformation possible is
largely based on the ability
to streamline, standardise
and consolidate the
various internal support
business processes.

help redefine the stages of a com-

pany and their intended visions.
The stage or nature of the company
depends on the maturity of their in-
ternal operations and go-to-market
approach. The level or depth of
transformation possible is largely
based on the ability to streamline,
standardise and consolidate the
various internal support business
processes.
These have to be coupled with
the identified business drivers to
help reduce or improve the go-to-
market response time and relocating
scare resources towards a business part of Value Transformation Out- •  Phase 2: Detail Evaluation
strategy that is pro-market growth. sourcing, which is aligned to the Based on the result from the
The various Value Transformation business performance and driven high level assessment, next
Stages are: by the same commercial key per- would be to define detail
formance indicators. Most senior For most requirements, solution, gov-
•  Below-Par: Have not outsourced management staffs are reviewed companies, ernance structure, in-depth
nor transformed any business based on a set of commercial key
performance indicators.
Value financial business case, transi-
tion planning and human
processes. Likely to be at a finan-
cially disadvantage scenario. These will then be translated Transformation resource communication
•  Bare Minimum: Decent compa- into its corresponding business Outsourcing plan.
nies with some of their business metric pricing. For example, the would be •  Phase 3: Initiation
With the detail information
processes outsourced. CEO may be measured by sales
•  Transformed: Transformed target which in turn is translated best achieved consolidated from the evalu-
companies with outsourced to its corresponding transaction jointly with an ation phase, both parties need
business processes that increase volumes, which will be used as established to start the contract negotia-
shareholder value. the basis of value-based pricing to tion and finalization including
•  New View: Companies that ensure the payment of such service outsourcing detail performance metrics,
remove the departmental silo are a direct result from the business vendor. This service level and reporting
view and seek to transform entire performance (other example include is to minimise structure, coupled with joint
enterprise business process sup- hydro meters, insurance policies, relationship driven workshop
port operations. calls, bill of lading etc).
the required as a successfully Value Trans-
•  Leaders: Companies that trans- In addition, appropriate service immediate formation Outsourcing is
form and outsource entire enter- levels will be drafted to drive towards investment “partnership”.
such performance. In the same
prise to be leading companies for
the future. example, a typical service level
in terms of Value Transformation Out-
may be success rate of those same resources sourcing indeed is a very excit-
The primary objective is to ensure transaction volumes. and capital, ing journey that transforms an
the transformation activities are but the most inward looking company towards
aligned to their identified strategic Moving Forward a business driven culture. The
priorities, regardless of the stage the For most companies, Value Trans- challenging chosen outsourcing partner for
company is at currently. Some of the formation Outsourcing would is the this journey is one of the sup-
key strategic priorities are: be best achieved jointly with an
established outsourcing vendor.
technical porting pillars to ensure success
of such transformation.
1) integrating departments or units
efficiently; This is to minimise the required “know-how. Similarly, internally there is a
2) supporting a strong business immediate investment in terms strong demand for clear visions
growth agenda; of resources and capital, but the and leadership to drive such
3) improving shareholder value most challenging is the technical cultural change within an organi-
through cost reductions and “know-how”. A proven approach sation for the collective benefits
efficiencies; to start would be to establish a joint of the company holistically and
4) focus capital and resources on partnership such as: respective employees.
core business initiatives; and
5) enabling business agility by
driving differential customer •  Phase 1: High Level Assessment CK Mah specialises in the area of in-
experience. Define the business objectives, frastructure outsourcing, application
scope, technical surrounding outsourcing and business process
Pricing Model or environment, key issues and outsourcing and has written numer-
Value-based Pricing is an integral business cases. ous articles on these subjects.

34 | Outsourcing | May – June 2009

Outsourcing | survey

Drop in global outsourcing

market, says Everest
G
lobal outsourcing market those of traditional global suppliers cial services (BSFI) sector actually
saw a 7% drop in transac- declined by 2.2%,” said Nikhil Rajpal, picked-up momentum to register a
tion volumes in the first Principal, Everest Group. 30% growth in transactions, fuelled
quarter of 2009 against The North American outsourcing especially by increased activity in
the preceding quarter, according to market witnessed a 15% decrease Europe.
Everest Research Institute. The global in transaction volume during the Everest said that captive-related
annual contract value (ACV) dropped quarter. Although Europe witnessed a activities (establishment of new
16% to US$2.97 billion during the reduction in transaction volumes, its captive centres) included 20 new
period. ACV was higher than quarter ended announcements in the first-quarter,
According to the latest “Market December, primarily pushed up by compared to 22 in each of the previ-
Vista: Q1 2009 report” on global some large deals. ous two quarters. Asia continued to
outsourcing and offshoring activity H. Karthik, Research Director, dominate offshore delivery.
tracked by Everest, the transaction Everest Research Institute, said that “We expect the overall market
volumes in the BPO space fell 15%. while other industries inked lesser activity to start picking up by the
ìRevenues of offshore-centric sup- number of outsourcing deals in the fourth quarter of this year,” Rajpal
pliers registered a 2.3% decline, while first-quarter, the banking and finan- pointed out.

Hike inCC
applications
spending: Frost
Contact centre
applications spending in the
Asia Pacific region increased by
14.8% last year, a Frost & Sullivan
survey on the regional ICT
industry said.
According to the study,
the growth is bolstered by
the resurgence of self-service
applications, the increasing
demand for hosted contact

Strong growth for SaaS

centre services, and the 2008
Beijing Olympics, among others.
The IVR (Interactive Voice

market in Asia Pacific Response) market, it said, grew

by 22% in 2008, fueled by major
deployments in the telecom
The market for enterprise resource tions, contributes 7% of the total SaaS and banking sector.The need
planning (ERP) applications delivered market in the region. for self-service applications was
through the software-as-a-service Balaka Baruah Aggarwal, senior coupled with IVRs to improve
(SaaS) model is set to grow to US$193 market analyst, emerging software customer relations while cutting
million by 2012 in the Asia-Pacific at Springboard, said: “We expect this operational costs.The study
excluding Japan region, according to market to experience faster growth, sees a sustained growth in this
a new study. given the relatively low current level of segment in 2009 as an effect of
A Springboard Research survey of on-premise ERP application penetration the global recession.
SaaS users across the region revealed in the region, particularly in the growth Mid-market spending last
that 35% of potential SaaS buyers were markets of China and India.” year similarly showed an uphill
interested in procuring SaaS-based ERP The increasing availability and turn as small and midsize
in the next 12 months. According to the reliability of broadband and the overall businesses realise the benefits of
survey’s findings released Friday, 20% dynamism of the emerging markets fully-operational contact centres.
of SaaS users across the region were across the region will fuel the demand Technology spending in this
already using SaaS ERP. for such applications, said Aggarwal segment, said the study, grew by
Springboard expects the SaaS ERP in a press statement announcing the 10%, due largely to increasing
market to grow from US$35 million survey’s findings. demand in hosted services.The
in 2008 to US$193 million by 2012. SaaS ERP’s penetration has been the study predicts a similar growth
The market, which includes supply most in the manufacturing segment, in these services next year as
chain management (SCM) and product with China showing the highest SaaS companies enact measures to
lifecycle management (PLM) applica- ERP adoption level in the region. cut costs and promote efficiency.

36 | Outsourcing | May – June 2009

 Insights | Outsourcing

Law firms & outsourcing:

Still a long way to go
A
lthough legal services out- ceived benefit of outsourcing legal about the benefits from offshoring,
sourcing has garnered a lot services amongst law firms and if especially amongst those who
of media attention, there not addressed this is likely to stunt offshore. However, for the majority,
still is a sizeable proportion the growth of the LPO industry. the drivers do not seem to be strong
of the legal community that has not Most of the law firms are enough. Obviously, the benefits
considered outsourcing legal services relatively new in terms of their do not appear to be substantial to
to lower cost destinations. offshoring initiative and have not help over-ride their concerns.”
Offshoring of legal services to integrated offshoring in their over- Data security and quality of
India began way back in 1995 when all strategy. A large number of law work delivered emerged as the
law firm Bickel & Brewer opened a firms, irrespective of their size, are key concerns of law firms. Given
captive facility in India. The legal apprehensive about sending their the confidential nature of legal
services outsourcing industry started legal work to another country. documents, it is understandable
to attract significant attention only While this does result from that law firms have apprehensions
around 2005. In just a matter of few lawyers not being convinced about on the security aspect.
years, the industry has grown to the benefits of offshoring, they also While several leading and
reach US$225 million in revenues indicate concerns such as data experienced offshore legal service
in 2008. security, client confidentiality and providers take adequate precau-
However, this is only a very small quality of work delivered. tions to ensure that there is no
portion – 5% of the addressable According to Neeraja Kandala, data theft, this needs to be com-
market. According to the recent Lead analyst – Legal Services, municated to the law firms in a
survey results, there is a low per- “There seems to be some awareness more convincing manner.

May – June 2009 | Outsourcing | 37

Outsourcing | management

The grand
challenge
of scaling up

W
hile discussing some of veloped a close rapport with each other in and people need to be frequently reminded
my consulting projects the same manner that a highly successful of them. Cultures develop whether you
with a colleague, he re- sports team develops instincts about each carefully design them, or by default. You
marked that one of the other’s movements during a play. may as well define those you wish to see
times when I am of the As the organisation grows, the executive carried out. This is especially important as
most value to my clients is when they are staff brings in new people. Successful you increase the size of your team.
scaling up. I agree. organisations know that in order to scale Don’t expect that your new managers
When in startup mode, companies are up effectively they need to create structure, will understand the values and culture you
fun, friendly, and everyone feels fulfilled. policy, procedures, expectations, as well as are creating just because you articulate
Each member of the team has been care- carefully describing the vision, mission and them. They are not as closely related to
fully hand-selected and because of their culture. As you start to scale, it is the time to you as the family and friends you gathered
shared values, friendship, and goals, create a structure that will be informative, together in start up mode. 
each will pitch in and do whatever work is helpful, and flexible. In my lectures, I often talk about the dif-
needed to get the job done and meet their It can’t be too tight, or it will stifle ference between the way a CEO envisioned
combined goals. initiative and creativity. It can’t be too his concept of “Constructive Criticism” and
This is similar to dealing in crisis mode. loose because that causes confusion, lack how that trickled down in different depart-
The adrenaline is pumping. The stakes of cohesion and chaos. ments. Some managers understood it to
are high. The starting team consists of As I said, scaling up requires the devel- mean that people need to be thoughtful
people who know each other from before, opment of corporate vision, mission and and where they disagreed, articulate that
possibly as family, or friends, or colleagues values. The corporate culture and values disagreement so that the best possible ideas
in another business venture. They have de- need to be determined, taught, rewarded, and solutions will reign.

38 | Outsourcing | May – June 2009

 management | Outsourcing

By Dr ArLyne
Diamond

Dizzying heights … As the organisation grows, the executive

staff brings in new people. Successful organisations know
that in order to scale up effectively they need to create
structure, policy, procedures, expectations, as well as
carefully describing the vision, mission and culture.

reward. It’s the least successful. who think, behave and believe
The issue of job descriptions differently?
and job requirements needs to be Hiring managers and recruit-
re-visited. Hiring managers and ers or interviewers from HR need
Human Resource people need to to work together to sort through
be re-trained to get away from resumes so that the best come to
what I think of as a laundry list of the top – not the most mediocre
Others saw it as permission to When in startup requirements and come to realise and conventional. All too often I’m
create insults and ridicule. The CEO mode, companies they are seeking talent – talent of told HR misunderstands the real
never imagined that people didn’t are fun, friendly, all kinds. needs of the hiring managers and/
understand his intent. and everyone feels These candidates might come or is afraid of those who are too
Consequently, he didn’t oversee fulfilled. from “the worst schools” instead smart, too creative, or too different
the manner in which his idea was of only “the best.” B and even C from the norm.
implemented throughout his or- students are sometimes better and Policy, procedures, process
ganisation. more talented employees than improvement, even the filing
Managers need to be trained the A folk, who are sometimes too system needs to be evaluated and
and held accountable. You need dedicated to winning and being improved so that the company can
to observe from time to time to perfect. Four and a half years indeed scale up successfully.
make sure your values are being experience might be just as effec- All of this takes re-thinking. 
carried out in the manner you wish. tive as “a minimum of five years This is the time for planned
Rewards and recognitions should experience.”  Organisational Development.
be designed so that you get the best Diversity becomes a critical is-
ideas, performance, internal and sue. Can your hiring managers see
external customer service, motiva- past the cultures in which they were Dr ArLyne Diamond is an Organi-
tion, morale, loyalty and longevity. raised to find the talented people sational Development and Human
These don’t come about by accident. available from those cultures that Resource Consultant with over 30
And, don’t think for a minute to use look and behave differently? years. She can be contacted at www.
money as your primary source of Can managers manage people diamondassociates.net

May – June 2009 | Outsourcing | 39

Outsourcing | happenings

APAC Outsourcing
T
he recently concluded Asia Pacific Professionals (IAOP).
Outsourcing Summit in Kuala Lum- The event saw good reception towards
pur – which was held for the first time extensive programmes of thought leadership
in Asia – saw a strong presence of content around multiple tracks, presentations
business and industry leaders from and panel discussions.
Malaysia, the region and across the world. Further, the event also included World
The event, organised by Outsourcing Malay- Information Technology and Services Alliance
sia, is part of the world summit series owned by (WITSA) member company business opportuni-
the International Association of Outsourcing ties, a pre-event networking golf tournament,

40 | Outsourcing | May – June 2009

 happenings | Outsourcing

Summit 2009
a customer-only networking session, a global services
exhibition, the “Outsourcing Hall of Fame” induction
which recognised two industry captains (for the first time
a Malaysian was inducted – Tan Sri Amirsham A. Aziz,
former President and CEO of Maybank Berhad and Dr.
Liu Jiren, Chairman and CEO of Neusoft Corporation), a
gala dinner and a post-event tour to MSC cyber-cities where
delegates participated in a dialogue with former Malaysian
Prime Minister Tun Dr. Mahathir Mohammad.

May – June 2009 | Outsourcing | 41

Outsourcing | happenings

Big Blue unveils

performance
management
solution
IBM Malaysia Sdn Bhd
unveiled the IBM Cognos Financial
Performance Management
solutions to help clients make
critical business decisions in a
timely manner.
KPMG The IBM Cognos has the
ability to measure, understand,
China has influence and optimise financial and
12 offices operational performance. Using it,
clients can now analyse conditions
in Greater and alternatives and then optimise
China outcomes for predictable financial
and operational performance along
employing with timely, sustainable compliance.

more than “Users can also leverage on its
integrated platform which enables
8,500 pro- them to forecast, based on their
fessionals. current data, and develop budgets
on a very short timeframe which is
crucial to the business world.


“At present, with the
fluctuations in economic conditions,
the reality is hard to determine
and its even more important
for companies to develop and
make business decisions on a
sudden change of direction in
the economy,” said IBM Head of

KPMG inks deal

Cognus Innovation Centre Asia
Pacific, David Morton at a media
briefing.
He added that in good times,
companies can make profits easily.

with Chinese
“But the hallmark of a company is
to make profits even in tough times,
and the IBM Cognos is even more
needed for companies to make

Ministry
right decisions,” he explained.


Vantage Point’s Service

KPMG CHINA, the first interna- strength.
Beyond Software
tional accounting firm to be granted Ning Wright, who is the partner VANTAGE POINT CONSULTING – a local
a joint venture licence in China, in charge of Sourcing Advisory for business and IT consulting provider – has embarked
recently has signed a memoran- KPMG China, said that the MOU into Software as a Service (SaaS), a model of software
dum of understanding (MOU) with enables the company to directly deployment whereby a provider licenses an application
China’s Ministry of Commerce contact decision-makers at the solution to customers for use as a service on demand.
(MOC) to stimulate the development MOC. The company will be one This is the first on-demand solution in the Asia Pacific
of the service outsourcing industry of the main consultancy services Region that runs on SAP.
in China, the Shanghai Securities for China’s service outsourcing Rahim Osman, its Chief Executive Officer said:“The
News reported. industry. recent economic crunch pushing many to develop ways
The MOU is part of the Chinese The government has also decreed to ride out the current global economic woes.With this
government’s “Thousand-Hundred- other stimulus measures, including in mind,Vantage releases its latest offerings called ‘Service
Ten Project” plan for enhancing tax concessions, financial subsidies Beyond Software’, or commonly known as Software as a
the service outsourcing industry, and intellectual property right pro- Service.”
which aims to promote the service tection, to support the development Rahim adds:“IDC predicts that SaaS will make greater
outsourcing industry and help coor- of the service outsourcing industry. strides in Malaysia this year due to the changing market
dinate the economic development KPMG China has 12 offices in dynamics.Trying time such as this will be a push factor for
of different regions in China so as Greater China employing more organisations to adopt the SaaS model because of its low
to enhance the country’s economic than 8,500 professionals. upfront cost compare with traditional licensing.”

42 | Outsourcing | May – June 2009

 happenings | Outsourcing

partners with British

iaOp er society
Comput TIONal Association oefBritish
ErNa ) and th
ThE INT Professionals (IAOP d their two
u rc ing o un ce
Outs o S) ann vance IT
Society (BC llectively ad
Computer are partnering to co
s
association of more th
an
g.
outsourcin mbined memberships ther to promote
With co ge
ill work to utsourcing through
e groups w o
100,000, th ism and careers in IT publications,
,
professional and events, research development
s al
conference and other profession
ifica tio n ciations
cert er two asso
es.
programm tnership brings togeth respective
“This par cing their
are le ad ers in advan efit IT outsourcing
who mutually be
n g the
d in enterin
industries tos and those intereste l Corbett.
professional OP Chairman Michae g professional
IA in
field,” said ased BCS is the lead 65,000 members in
The UK-b working in IT.With ody for
ose qualifying b
body for th 00 countries, it is the
1 ).
more than Professionals (CITP arding body for a
IT
Chartered is an international aw th users of IT and IT
BCS also ualifications for bo
of q
wide range
specialists.

Byte Craft joins google

enterprise
nterprise partner
programme
Byte CrCrAft Sdn Bhd, an MSC Malaysia Status company,
announced recently it has joined the Google Enterprise
Partner programme, which extends the reach of Google
search technologies across the enterprise and helps
customers get more value out of their Google enterprise

RM1 million
deployments.
The Google Search Appliance and the Google Mini
enable businesses of all sizes to quickly and easily search
for information behind their firewall, all while using the

carrot for
simple Google interface.
“The Google Enterprise Partner Programme will help us
to provide Google search to businesses to harness the value
of their information assets. Companies can now utilise

content creators
Google’s search technologies
to find business informa-
tion across their corporate
content, including com-
pany Intranet, databases,
business applications and MALA SIAN digital content
MALAy comic, and mobile games. “In
public websites,” said Azrin creators will be given up to past awards, 74 projects so far
Zainal Abidin, Managing US$284,000 (RM1 million) in have been given grants, totaling
Director of Byte Craft Sdn awards, said government agency US$731,558 [RM2,590,000], as
Bhd. Multimedia Development Corpo- well as the opportunity to pitch
The Google Enterprise ration (MDeC). in front of international animated
Partner programme in- MDeC vice president Saifol broadcasters.”
cludes developers, consultants and independent software Bahri Mohd Shamlan said: “The Malaysian creative mul-
vendors that provide value-added services for Google “Malaysia’s Intellectual Property timedia industry sector is worth
enterprise products. “Google is excited to have Byte Craft Creators Challenge [IPCC] 2009, about US$780 million [RM 2.4
Sdn Bhd as a partner in the Google Enterprise Partner which is the fourth in the annual billion], and our target is to reach
programme. We’re looking forward to Byte Craft extending search for local talent to explore US$847 million (RM3 billion) by
the power of Google search by providing deployment and developing digital content for the the end of 2010,” Saifol said. “Even
integration services to customers,” said Bee Loon Tan, Head global market, is open for entries in these trying times, we expect to
Enterprise Sales for Google South East Asia. in four categories.” sell good content and it is time to
The Google Enterprise Partner programme includes He said July 2 is the closing create more contentpreneurs with
developers, consultants and independent software vendors date for the four categories, global appeal.”
that provide value-added services for Google enterprise which are animation, computer For more info visit www.msc-
products. casual games, digital interactive malaysia.my

May – June 2009 | Outsourcing | 43

Outsourcing | Light takes

Quotable Quotes
• A life in a hurry

“There is more to life than “For any organisation

increasing its speed.” to put something up
– Mohandas K. Gandhi
quickly, put together
“Stress: The confusion created when hundreds of lines with
one’s mind overrides the body’s basic
desire to choke the living daylights lots of people and
out of some jerk who desperately software ... is very
deserves it.”
– Unknown difficult if it’s not your
business.”
“For fast-acting relief, try slowing
down.”
– Lily Tomlin (American actress,
comedian, writer)

“Stress is an ignorant state. It

Flak over
believes that everything is an
emergency. Nothing is that
important. Just lie down.”
– Natalie Goldberg (American author)

flu hotline
“The mark of a successful man is one
that has spent an entire day on the
bank of a river without feeling guilty
about it.”

outsourcing
– Unknown

“We live longer than our forefathers;

but we suffer more from a thousand
artificial anxieties and cares. They
fatigued only the muscles, we

T
exhaust the finer strength of the
nerves.” housands of New Yorkers the association, based in Albany,
– Edward George Bulwer-Lytton have been calling a state New York.
(English Poet) health department hotline Both the state and the St. John’s
to get advice on the swine company itself suggest that the firm
flu, unaware that the was ideally equipped to handle such
operators giving out information at a short-term job, responding to a
the other end are 1,200km away in fast-developing health issue.
Newfoundland. “For any organisation to put
Now the outsourcing contract that something up quickly, put together
has raised the ire of the state employ- hundreds of lines with lots of people
ees’ beleaguered union, Canada’s and software ... is very difficult if it’s
“There’s never enough time to do all National Post reported. not your business,” said Cindy Roma,
the nothing you want.” The hotline job was awarded to Telelink’s CEO.
– Bill Watterson (Creator of Telelink, a Canadian company based The state turned to Telelink after
‘Calvin & Hobbes’) in St. John’s, partly because of its hiring it earlier to handle a hotline
ability to get the swine-flu service up for residents concerned about an
“Stress is nothing more than a and running in a matter of hours. outbreak of Hepatitis A in western
socially acceptable form of mental For the Civil Service Employees New York, said Claire Pospisil, a
illness” Association, however, the outside con- spokeswoman for the health depart-
– Richard Carlson (American author) tract was a red flag after New York’s ment.
governor threatened to axe 9,000 Pospisil said she has heard no
“Tension is who you think you should government jobs to help balance his complaints about the swineflu line,
be. Relaxation is who you are.” budget. The work should have been which is available 24 hours a day
– Chinese Proverb given to some of those workers, said and can handle up to 1,500 calls an
Steve Madarasz, a spokesman for hour.
“Stress is a designer ailment that
many of the so-called afflicted
suffer from with pride.”
– Janet Street-Porter (English journalist)

44 | Outsourcing | May – June 2009

 4HEPERFECTINGREDIENTS
FORTHEBESTRESULTS
-AKE-3#-ALAYSIAYOUR'LOBAL)#4AND3ERVICES(UB
3OMEMAYSAYTHATAGOODDISHISONLYTHESUMOFITSPARTS)NGREDIENTSHOWEVERINTHIS
INSTANCECOMBINESYNERGISTICALLYTOSERVEUPATHRIVING)#4HUBn-3#-ALAYSIA
)TSLOCATIONATTHEHEARTOF!SIA0ACIlCPROVIDESAPERFECTLAUNCHPADFOR
YOURGLOBALASPIRATIONS!FACTTHATHASNTGONEUNNOTICEDASMANYOF
THEWORLDSBIGGESTCOMPANIESHAVEMADEUSTHEIRCHOICE
3OIFYOUREREADYTOTASTESUCCESSCOMETO-3#-ALAYSIA

-3#-ALAYSIAn"ESTOF!LL7ORLDS
s 3TRATEGICALLYLOCATEDGATEWAYTOTHE!SIA0ACIlCREGION
s )NDUSTRYDOMAINEXPERTISEn&INANCE%NERGY3UPPLY#HAIN%LECTRONICSAND2ETAIL
s 3TRONGEMPHASISONHIGHERVALUEACTIVITIESn2$)4%NGINEERING3OFTWARE$EVELOPMENTAND&INANCIAL3ERVICES
s 7ORLDSTHIRDMOSTATTRACTIVELOCATIONFOR33/n!4+EARNEYBASEDONPEOPLESKILLSlNANCIALSTRUCTUREANDBUSINESSENVIRONMENT 

9OURONE STOPSUPERSHOPTO-3#-ALAYSIA

-3#-!,!93)!#,)%.4#/.4!#4#%.42%#LI# s   WITHIN-ALAYSIA ssCLIC MDECCOMMYsWWWMSCCOMMY