developing an outsourcing industry

Copyright © 2010 IAOP. All Rights Reserved.Copyright © 2010 IAOP. All Rights Reserved.

“Developing and Transforming an Outsourcing Industry”

Rob Cayzer, Director – Business and Market Development

MDeC Malaysia

www.IAOP.org

The 2010 Outsourcing World Summit®

Disney’s Yacht & Beach Club Convention Center● Lake Buena Vista, FloridaFebruary 15-17, 2010


The 2009Outsourcing World Summit®

Rob CayzerDirector – Business and Market Development, MDeC Malaysia

Rob Cayzer is Director of Business and Market Development for MDeC, chartered to help MSC Malaysia companies capture market share, attract investments and ventures in high-technology and digital content.

He is also founder of MSC Malaysia’s Shared Services and Outsourcing initiative and steered it to establish Malaysia as a leading global hub. Rob has been in the technology industry since 1987, holding senior posts in IT, outsourcing, software development, consulting, marketing and sales.

He developed a global business network since his arrival in Malaysia in 1997 and gained capability in economic development involving areas such as policy and incentive development, public / private partnerships, international relations. Rob is also a writer in a few publications.

Originally from Brisbane, Australia he has a degree in Information Technology from University of Queensland and is a member of Malaysian Institute of Management, Australian Computer Society and IEEE. Rob is married with four children.

Copyright © 2010 IAOP. All Rights Reserved.


TRACK FOUR: THE MANAGEMENT PROFESSION OF OUTSOURCING: BECOMING A STRATEGIC BUSINESS PARTNER

“Developing and Transforming an Outsourcing Industry”

Rob Cayzer, Director – Business and Market Development, MDeC Malaysia

Discourse on the development, management and coordination of a combination of complex global and local factors work together to ensure a fast growing yet sustainable high technology sector, while moving the Malaysian industry up

the outsourcing value chain.

Market makers, industry players and outsourcing professionals will obtain useful insights into long-term strategic technology and economic planning as well as tactical measures used for growth, competitiveness and innovation.

Key stakeholders can take advantage of this knowledge and create a win-win situation.




Context: Development of Global Outsourcing Industry

• The modern outsourcing industry is a very new industry. It is newer than the ICT industry

• The outsourcing industry’s development has just started. The industry’s evolution is nowhere near the end

• The following events are effects, caused by major changes in global landscape:– Offshoring

– “Mega” outsourcing firms

– India

– Everywhere else




The Beginning

• Preconception: The Rise of Japan

Effect: Focus on Services Sector and IT

• Conception: The Rise of Information Technology

Effect: The Rise of Outsourcing

• Awakening: The Rise of Global Telecommunications

Effect: The Rise of Offshoring,

Tapping “quick-win” talent pools




Moving into First Gear

• Moving up: Commoditisation of best practices

Effect: Rise of value based sourcing

• Current Horizon: Commoditisation of IT and communications

Effect: Rise of service automation (aca Cloud/web2.0)




Moving into Second Gear (beyond the Horizon)

• Mainstream: Global commoditisation of outsourcing SLAs

Effect: Blurring of outsourcing and traditional services

• World is Not Flat: Significant growth in emerging markets

Effect: Migration of human capital to the East




Further On

Full Service Automation

Obsolescence and Disappearance of the “classic” outsourcing Industry




• Wealth Equitisation

Shifting financial and human capital to markets that generate wealth




Approx. figures last year World USA RoW India

South East Asia

Revenue($ bil) 182.5 85.3 97.2 2.6 4.0

Jobs 323,000 152,000 171,000 12,000 10,000

($)/Employee 565,015 561,184 568,421 216,667 400,000

Wealth Equitisation in Action

1980: GeneralGeneral Electric had 405,000 employees, $22.5 bil revenues. Most employees were based in USA.

1980: GeneralGeneral Electric had 405,000 employees, $22.5 bil revenues. Most employees were based in USA.




• Work Rebalancing

Moving jobs to markets with more efficient resources



Industry Development: The world continues to balance and Equitize

• The prize for government, industrialists and academics:

– Work Rebalancing: Increasing organisational efficiency

and competitiveness

– Wealth Equitisation: creation of high-value jobs,

promotion of modern societies based on knowledge development



Industry Development: The role of government / agencies

• Interventionalist approach vs Strategic / Policy Driven– Interventionalist government tend to closely oversee institutions. In

cases, they tweak or create institutions

– Policy-driven government tend to rely on institutions

• General perception is:– Emerging markets tend to have interventionalist approach

– Developed markets tend to use policy approach

• Developed markets tend to have strong independent institutions in public service, industry, academia and law. In some cases, public services is operated by industry as a purely private enterprise



Industry Development: Government Role in Emerging Industry

• In reality, for emerging industries: both emerging markets and developed markets take an interventionalist approach

• Implication: The outsourcing industry today plays a major role in:

1. Shaping globe’s geo-economic condition

…and by definition:

2. The international geo-social condition



Industry Development: Industry’s Role in Maturing the Industry

• Government is generally designed to deliver long-term outcomes• Industry, in general, are adept in delivering short-term results

• Industry players with a outlook of long-term, economic and geo-social forces will be the winners. They coincidentally are the ideal partners for short-term and long-term success

“Anybody can manage short. Anybody can manage long. Balancing those two things is what management is” (JW)



Industry Development: Industry’s Role in Maturing the Industry

• As the outsourcing industry matures, access to the best pools of international resources becomes a critical factor to success

• Industry professionals should consider:– countries as strategic assets

– their government as strategic partners

– key resources as critical capital

• Key to achieving this is:– understanding of country’s immediate competencies, long-term

capability and government commitment to development

– real-world understanding of economic development in action

– ability take part in critical interventions

Global User

Global Provider

Country and

Assets


Traditional Economy

(Passive / Environmental)

• Taxation• Townships• Telecomms

New Economy

(Active / Instrumental)

• Talent• Technology• Trade

Industry Development: Critical Factors for Development (Six T’s) *

*Developed by Rob Cayzer, MDeC (2003)



Industry Development: Critical Factors for Development (Six T’s)

• Intervention #1: Taxation

– Most basic factor

– Countries offers tax breaks: eg corporate, personal, sales, in exchange for jobs created ie GDP growth

– General condition: Exports in target sectors

– Tax holidays: Periodical reports required to enjoy holiday is in effect. Some authorities provide tax rebates

– Due to recent crisis, most countries are concentrating on collecting tax more rigorously to offset stimulus and other recovery programmes



Industry Development: Critical Factors for Growth (the Six “T’s”)

• Intervention #2: Township

– Roads, buses, buildings, security, Power. A big problem in less developed economies

– Some authorities design and designate zones to provide “two-way” safe zones. Two way = Safe for government and safe for industry.

– Some agencies take ownership in assets to guarantee delivery

– General condition: Employees undertake approved activities


Industry Development: Example of Specialised Township




• Intervention #2: Telecomms

– International, local, tariff, provisioning, quality. Fixed line, mobile, broadband

– Some authorities build and own their own infrastructure. Others create special pricing for the zones or activities undertaken

– Prices are generally benchmarked regionally or globally, then adjusted on regular basis




• Intervention #2: Talent

– Very complex and time critical… but very malleable

– Three categories: entreprenuers, managers and knowledge workers

– Governments around the world dream to elevate their labour force into higher value activities

– Governments generally have the resources, but not the know-how. They may develop standard training programmes (too generic) or highly-customised grants (too specific)

– Industry generally consumes what is immediately available, relying on the man on the ground to solve local problems




• Intervention #2: Technology

– Not widely available in emerging markets: This ingredient is critical for maturation of economies into fully developed nations

– Governments around the world fantasize about creating global brands based on indigenous high-technology or creative content

– Critical components:• availability of smart + risk capital• environment and incentives create, fail and re-create innovative enterprises• for example in MSC Malaysia, an average of one new enterprise is created

everyday• See next slide




• Intervention #2: Trade

– This is the other ingredient critical for maturation of economies into fully developed nations

– This is generally the most under-stated and under-estimated component in economic development, especially supply-oriented nations

– Critical components:• Availability of trade and growth finance• Market intelligence. More importantly business intelligence• Market positioning, packaging and subsequent branding


Industry Development: Economics in Action

Making It Happen



Economics in Action

1. Clearly Define your Niche

2. Establish Macro Expectations with Key Stakeholder(s)

3. Resolve Institutional Gaps

4. Leverage on “Maestros” and “Force Accelerators”

5. Branding through Delivery and Innovation

6. Celebrate Successes



Economics in Action: Clearly Define Your Niche

• Take stock of your capability

• Just as it is for the private sector: customer knowledge, honest feedback and performance orientation will allow you to define your niche relatively quickly

• Surveys and studies help. But only to reinforce your understanding

• Apply the “Rule of Three”*

• Challenge naysayers. But be prepared to be corrected*Do something successful three times to prove your theory



Economics in Action: Establish Macro Expectations with Key Stakeholder(s)

• Define clear economic outcomes, based onpilots and trials

• Identify key institutions and supporting players who deliver critical factors

• Develop realistic framework and operating model that involves players. ie multinationals, entrepreneurs, captains of industry, ministries, agencies, academia, infrastructure players

• Harmonisation: excite, incentivise and prepare members for action

• Apply the “Rule of Five”**Rely on the five most critical partners to make things happen over time



Economics in Action: Resolve Institutional Gaps

• Weaknesses in institutions, when exposed in the open market, will behave like an open wound

• Not all gaps are obvious, each institutionneeds a back up. Each backup needs a plan B, plan C

• Stewardship, integrity, transparency is key element in “managing” institutional improvements

• Projects - and to a lesser extent pilots, are the most effective tool for innovation



Economics in Action: Leverage on “Maestros” and “Force Accelerators”

• Promotion, advertising and PR may help

• Happy clients will propagate your story

• Thought leaders are always seeking the truth, discover new insights, projectnew opportunities and disseminate their findings

• Practice leaders are seeking to improve their trade, especially when the industry is rapidly evolving. Their experience is helpful in adopting and creating new best practices



Economics in Action: Branding through Delivery and Innovation

• Happy clients will propagate your story

• Customer service, “up-selling” and “cross-selling” is the real way to test yourmarket’s ability to innovate and take onnew challenges

• Just as in the private sector, understandingand solving client’s (industry’s) everyday and strategic problems create customer insights

• Aggregation and customer insights are the premise and power of your brand and industrial growth



Economics in Action: Celebrate Successes

• It takes a long time to move the industry one mile and or even one inch

• This type of work is tedious, convoluted, trying and sometimesamorphous

• Celebrate with all parties involved, it reminds people it is all worth it

• When something works, institutionalise the practice, put more smart money and smart people into it.



Progress So Far

• Malaysia has been globally ranked top three in offshore services by AT Kearney since 2004. Malaysia was also ranked top three globally by McKinsey Global Institute.

• Despite being relatively new, many of Malaysian outsourcing players are recognised as international leaders

• MSC Malaysia should reach 100,000 high-value, knowledge worker jobs in the next few months. Another 150,000 outsourcing jobs is estimated to have been created outside the MSC Malaysia zones

• Greater growth is expected as institutions start to work even more efficiently and the market begins to mature



Summary

• Outsourcing is not just Outsourcing. Through the maturation process, the industry has a unique and unprecedented position to be a key driver of the global economic agenda

• Players should take a long-term, technological, economic and social view of the industry’s development

• A keen understanding and working knowledge of instruments, institutions and the practice of economic development allows players to take advantage of countries resources and joint interests

• The industry continues to evolve. This is a good time to act.


Thanks. [email protected]

[email protected]

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