Malaysia IT outsourcing industry: practices, models, trends and challenges from a case of an offshore global service provider

Abstract: Malaysia IT outsourcing (ITO) practices have been around after the Kodak effect but was not widely publicized until massive public sector computerization projects and automation of financial systems after Asian financial crisis in 1997. Thus, many service providers, including world-class firms, providing ITO business models can be found in operating in Malaysia. ITO models evolve from traditional to innovation phase in 2010 onwards. One of the innovative models in Malaysia is the global offshore service delivery model which is based on four pillars, namely: Experienced Leadership; Global Best Practice; Human Capital; Domain Knowledge. To be able to compete globally, Malaysia has equipped its companies with higher capabilities and competencies via international certifications and continuous skills developments. Several advantages proposed by Malaysia include: economic stability, political stability, multi-lingual, world-class infrastructure, affordable lifestyle, value propositions and many others. In this paper, we present the detailed views of a senior executive management on two open-ended in-depth interviews and one CEO roundtable discussion.

1. Introduction
The IT/IS outsourcing has advanced practically which can be seen from the innovative business models developed in each service provider firms. In order to convince their world-class high capabilities and competencies1 to the clients, they acquired international standards such as Capability Maturity Model and Integration (CMM or CMMI), International Organisation for Standardisation (ISO), United Kingdom Accreditation Service (UKAS), local supervision bodies such as MSC-status (Multimedia Super Corridor managed by Multimedia Development Corporation) and Standard and Industrial Research Institute of Malaysia (SIRIM) in Malaysia and others [4]. In Malaysia, Outsourcing Malaysia and MDec work closely and in concert to raise the standards of shared services and outsourcing (SSO) providers generally and IT outsourcing providers particularly with the international capability and competency models and certifications. Malaysian institutes of higher learnings (IHLs), providing ICT courses, also incorporate the industry requirements and expectations of the graduates in their curriculum or courses in order to continuously supply capable and competent knowledge workers [1][2].

1 Capabilities are expressions of „what technology enables‟ that is technological realities, based on the „what & how‟ that technology can deliver. Whereas competencies are expressions of the „human ability to exploit‟ these capabilities that is innate human factors, plus experiential depth and breadth, training and education of people, teams, departments and companies (Sykes, 2004).

2. Literature review
2.1. Global IT outsourcing practices and models
Currie [5] identified six typology of outsourcing models in US companies which include (1) consultancies/service providers; (2) hardware vendors; (3) system houses; (4) generic outsourcers; (5) niche player consultancies; and (6) niche player IT suppliers. In parallel to the trends of ITO markets and in looking out for lucrative outsourcing contracts, service providers are attempting to enhance their products and services portfolio to include newer models like demand utilities, application service providers (ASP), business process outsourcing (BPO), customer relationship management (CRM), knowledge process outsourcing (KPO) and knowledge management (KM) among others [1][2][3][4].

2.2. IT outsourcing in Malaysia
Ever since the Kodak Effect, outsourcing has an impact in Malaysian public sector mass-modernization and automation projects. The move was initiated by the then fourth Prime Minister to upgrade the Prime Ministerial Office (PMO) and all the ministries especially MAMPU, a government IT agency, in order to improve the service delivery of public services [7]. Following the 1997 Asia economic crisis, Bank Negara Malaysia urged all financial institutions to merge and improve their businesses via adoption of information and communication technology, reduce costs and improve services and governance. Private sectors which were quick to world business issues especially on cost factor and technology advantage also began to adopt IT outsourcing.