afternoon highlight (30/07/12/134/608) Shared services and outsourcing set to flourish in current uncertainty

Shared services and outsourcing set to flourish in current uncertainty

PETALING JAYA: Shared services and outsourcing (SSO) have the potential to grow despite global economic uncertainties.
This is because companies will have to think of ways to reduce operational expenditure through strategies such as outsourcing non-core activities to remain competitive.
A study by International Data Corp for Multimedia Development Corp (MDeC) showed chief financial officers responding that outsourcing non-core functions of companies was a key target to reduce capital expenditure as well as operational expenditure in the current economic environment.
A separate Global Services Location Index 2011 report by A. T. Kearney noted: “Although signs of a slowdown in the growth of global services are evident in this environment, don't expect offshoring to end.
“In fact, the global services industry's full potential is ready to be tapped.”
The index showed Malaysia ranked third in SSO for eight consecutive years since 2004. While the first two spots were secured by India and China in 2011, Malaysia was rated the highest in “business environment” category, with a score of 1.83 over India's 1.14 and China's 1.31.
In fact, the Performance Management and Delivery Unit in its Economic Transformation Programme report indicated that Entry Point Project 2 (EPP2), which aims to build globally-competitive outsourcers under the Business Services national key economic area, had surpassed its target by leaps and bounds.
The key performance indicator (KPI) for overseas sales revenue recorded RM848mil, 139% more than the initial target of RM610mil. Meanwhile, 24 multinational companies outsourced their non-core operations compared with its original target of five.
EPP2 exceeded its KPI the most compared with the other five entry point projects in 2011.
According to Human Resources Minister Datuk Seri Dr S. Subramaniam who spoke to the media recently, this sector would continue to flourish in the Asia-Pacific due to the need for businesses to consider alternate locations for service and business delivery, an increase in the acceptance of offshore delivery and scarcity of skill sets in certain markets.
In a recent interview with StarBiz, MDeC director (global sourcing division) Michael Warren said SSO growth in the Asia-Pacific was three times more than the global growth annually.
MDeC chief executive officer Datuk Badlisham Ghazali said the growth would be fuelled by the growth of Asian trades, cloud services and mobility.
He said Asian countries were still booming with Internet access and the vast amount of services deployed would see opportunities for them to be outsourced.
The industry had gone through crises but was still seeing positive growth despite economic challenges, he added.
He also said information technology outsourcing was expected to grow from over US$800mil in 2010 to over US$2bil in 2015 while business process from US$187mil in 2010 to over US$700mil in 2015.
EPP2 saw a total of 2,210 new jobs created and over RM318mil in export revenue for the first quarter of 2012.

Source : The Star                 Date : 30 July 2012

afternoon highlight (30/07/12/134/608)