Malaysia makes headway, issues remain

As the country celebrates its 50th National Day, industry players ponder over the challenges that need to be addressed in order to move forward.
Written by Edwin Yapp, Contributor

PETALING JAYA--Malaysia has made progress over the last decade in leveraging information communications technology (ICT) as a backbone for economic development, but as the country celebrates its 50th National Day, industry players say several issues need to be addressed in order to move forward.

According to the Association of the Computer and Multimedia Industry of Malaysia (Pikom), Malaysia's ICT progress can be gauged by its industry growth of about 12 percent per annum last year, up from 10 percent the previous year. Other indicators are perception studies, such as the one conducted by AT Kearney which ranks Malaysia as the third most attractive market in outsourcing in 2007.

Pikom Chairman David Wong said: "Malaysia [has also embarked] on several successful initiatives, such as Outsourcing Malaysia which has seen more than 30 local outsourcing providers sprouting up, and growing at a rate of 25 percent per annum.

"Companies such as EA Consulting Asia Pacific, SnT Global, Scicom (MSC) and Vsource Asia, are some [examples of] success stories," he added.

Pikom represents 644 ICT companies, or about 80 per cent of the country's ICT industry. Outsourcing Malaysia is a consortium driven by shared services and outsourcing (SSO) industry partners which include Pikom, Multimedia Development Corporation (MDeC) and Malaysian Debt Ventures (MDV).

The newly appointed Pikom chief also pointed out that local telecommunications solution providers such as REDtone Telecommunications and Green Packet have made inroads, exporting their solutions into markets like China, Middle East and the Indian sub-continent.

Homegrown e-business solution provider Skali lauded the Malaysian government for its commitment toward raising the importance of the ICT sector.

"We believe the ICT industry is experiencing high growth rates and emerging as a strong contributor to the country's employment and economic growth," said Aimi Aizal Nasharuddin, president and co-founder of Skali.

Broadband woes
Despite the country's success in growing the local ICT industry, some concerns remain over potential impediments relating to Malaysia's ambition to building a knowledge economy.

Wong noted: "Pikom applauds the government's intention to promote broadband usage, but this intent has not been matched by on-the-ground efforts.

"The quality of service for broadband access remains poor and slow, and connection speeds are often below 512kbps, which is contrary to the International Telecommunication Union's definition of broadband speeds of 2Mbps and above," the Pikom chief said.

Wong added that the lack of critical mass of broadband users in Malaysia has "choked the economic desirability of local ICT firms exploring the commercial boundaries of providing broadband-related services".

Homegrown software service provider Essentialbiz noted that a quality broadband infrastructure creates a ready market in the country for software developers to target.

"The more broadband and Internet users there are in Malaysia, the bigger the market will be," said Essentialbiz Chief Financial Officer Hisyam Halim. "This will create more demand for software developers and it will be more feasible for them to launch Web-based services or products."

Pikom's chief also called for Malaysia to benchmark its broadband infrastructure against international standards.

Wong said: "Malaysia has about 3.2 broadband subscribers per 100 inhabitants. By contrast, economies such as Denmark, the Netherlands and Korea have at least 26 broadband subscribers per 100 inhabitants.

"We ought to think about broadband subscribers per 100 inhabitants and aim at targeting more than 30 broadband subscribers per 100 inhabitants by 2010," he said. "To attain this, the government will need to directly intervene."

Cash flow challenges
Another major hurdle preventing local industry players from being a leading export-oriented ICT force is the lack of funding and the small domestic market.

According to Essentialbiz's Hisyam, the stiff market competition is a huge hurdle for budding software development companies in Malaysia to overcome.

He explained: "The problem is the market in Malaysia is too small, and since our success depends on a large number of Internet users, preferably broadband users, we face an uphill task.

"It's easy to argue that local companies should target global markets but in reality, trying to market software outside your home market is costly and not feasible for cash-starved startups. Software developers need to establish a steady income before they can try to venture abroad or they will burn up their capital," Hisyam added.

Chris Chan, chief executive of Internet-based solutions provider The Media Shoppe (TMS), noted that the “challenge is in the packaging".

"Sometimes, it's difficult to compete with the big boys," said the dot-com survivor who started his tech company in 1996 targeting small and medium-sized enterprises in Malaysia.

"To gain enough momentum and resources to be effective globally, you'll need to create adequate revenue and acceptance as the local market is small and gaining sufficient momentum is tough," Chan explained.

Pikom's Wong added: "In order to be a successful ICT exporter, local companies need good references and success stories.

"Their technology value proposition and benefits will remain unconvincing if the government and other industries prefer foreign technologies and solutions instead of local ones."

Edwin Yapp is a freelance IT writer based in Malaysia.

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