Shared Services and Outsourcing in Malaysia: Ahead of the Game
by Zulfiqar Zainuddin
At the recent Outsourcing World Summit (OWS), organized by the International Association of Outsourcing Professionals (IAOP) in Orlando, Florida, there was a general consensus that outsourcing services are slowly but surely becoming a commodity. Companies that are not able to differentiate and provide the “wow” factor are likely to find themselves unable to compete in this sector. Countries are facing a similar situation as the evaluation of a location for a global or regional center becomes more complex. One country that has managed to distinguish itself is Malaysia.
Growth consulting company Frost & Sullivan’s 2007 Global Shared Services and Outsourcing Report helps explain why 338 of the world’s top global companies ranked Malaysia among the top five shared services and outsourcing (SSO) locations. Even more significant, CEOs of these companies indicated that industry domain expertise has become as important in the decision-making process as the traditional cost, people and environment factors. Malaysia was ranked highly in three industry domain expertise areas: Banking, Financial Services and Insurance (BFSI); Energy; and Logistics and Transportation.
In the BFSI sector, top companies such as HSBC, Citibank and AIG have long had regional or global centers in Malaysia. Because global banks have been in Malaysia for more than 100 years, Malaysia today has an abundant and experienced financial talent pool. HSBC’s Global Services Center (GSC) in Cyberjaya has more than 3,500 people delivering 180 processes to 25 countries. Further, in 2007 the bank established its global resourcing headquarters in MSC Malaysia.
Deutsche Post World Net (DPWN), the corporate parent of Deutsche Post and DHL, has one of its three global centers in Cyberjaya and was one of the first companies to take advantage of Malaysia’s value proposition. DPWN’s then managing director for IT services (and now DHL Express managing director) told The McKinsey Quarterly, “We researched the best place to locate a consolidated IT center where we could centralize much of the application development…Malaysia came out on top. There was a business-friendly government, there were incentives, and the labor was skilled and affordable.”
The energy sector has always been a strong area for Malaysia, and recently the country has managed to identify a niche for providing shared services activities in this area. Norwegian-based Petroleum-Geo Services (PGS) was awarded MSC Malaysia status for its processing and technology center in October 2007 after meeting the criteria established by this national initiative. The center’s director and vice president of data processing for PGS in Asia Pacific, Jo McArdle, said, “We are delighted to be awarded this status in recognition of the high-tech nature of the data processing segment of the oil and gas service industry and in our investment in Malaysia. The computer hub will service our processing requirements globally, and having the facility locally in Malaysia provides a great opportunity for local clients to have access to largescale computing resources in-country.”
While companies continue to increase competitiveness and stay ahead of the game, it is encouraging to note that countries like Malaysia are keeping abreast of these developments and taking the right steps to continue to “wow ’em.”
Outsourcing Excellence Award
Lloyds TSB and Firstsource
Lloyds TSB is a leading provider of mortgages to the U.K. prime market, offered under the Cheltenham & Gloucester (C&G) and Lloyds
TSB brands. C&G aims to provide excellent customer service, which outsourcing has enhanced. Outsourcing extended mortgage processing over a 16-hour working window, helping to improve turnaround times, productivity and efficiency.
ENMAX and Cognera
ENMAX had a strong presence in Canada’s electricity market. But customers wanted a total energy package that included natural gas. If ENMAX didn’t enter this market, it could lose electricity customers. ENMAX outsourced enrollment and fulfillment of both commodities. The result: its winning new business based on price and the new products it can now offer.
Royal Bank of Canada and iGATE: Maximizing the Potential of an Outsourcing Relationship
Written by Kathleen Goolsby
Over the years, Royal Bank of Canada (RBC) has made dramatic operational changes to make it easier for clients and business partners to do business. With objectives of revenue generation and cost savings in a fiercely competitive business, RBC recognized that its application development capabilities in 2005 needed to grow quickly to support business demands.
RBC had outsourcing relationships with U.S. and Indian tier-one service providers but was not satisfied with their attention to the bank’s needs. RBC was also launching a disciplined approach to quality assurance and wanted innovation, so it needed a different kind of relationship.
“We wanted a company with a cultural fit with ours, one that would partner with us,” says Marjorie Mong,vice president, Application Services. “That is a hallmark of our relationship, and it paid for itself in dividends.”
iGATE Global Solutions responded to RBC’s request for proposals and hosted a trip to India to show bank executives its technical and operations capabilities. iGATE’s leadership and structure proved to be similar to the bank’s. And at iGATE’s bestpractice suggestion for ensuring alignment, they tied iGATE’s senior executives’ compensation to RBC’s senior executives’ success.
“We successfully met our objectives, and our partnership with iGATE enabled us to improve capacity management, time to market and efficiencies, while meeting the demands of internal business partners,” says Morteza Mahjour, executive vice president, Applications.
A crucial key to the relationship’s success is the commitment of both companies’ senior management to transparent communications regarding relationship health, recruitment, budgets and evolving issues.
Outsourcing Excellence Award
Microsoft and Accenture
Microsoft needed to transform its back-office operations to provide a more effective global solution to its ever-expanding business. It forged an innovative and strategic outsourcing partnership with Accenture to not only transform its finance and procurement back office into an integrated shared services operation serving 92 Microsoft subsidiaries, but also to invest in the Microsoft Dynamics AX platform to deliver key services.
Touro Infirmary and Siemens Medical Solutions
“After Hurricane Katrina, our crises were acute. Our options were limited,” says Ralph Dean of Touro Infirmary. “There was no margin for error. People were wrapped around the building waiting for help. Outsourcing freed us to focus on delivering urgent healthcare services to a devastated area. Siemens helped us prevent a looming healthcare crisis in New Orleans.”
Universal Music and buyingTeam
With the rise of the Internet, Universal (the music industry’s number one player) had to change. The old ways in times of high margins were not enough. Universal had a creative culture, and it wanted to stay creative but reconcile this with commercial best practices. Outsourcing procurement to buyingTeam made Universal leaner, leaving specialists in charge of music and procurement.
Best Financial Services
RBC and iGATE
Since 2004, “Always earning the right to be our clients’ first choice” has been RBC’s guiding philosophy. RBC’s vision led it to create best-in-class solutions. Its outsourcing partnership with iGATE helped to improve capacity management, time to market and efficiencies while meeting the demands of internal business partners.
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