Satyam looks at M'sia to ease labor crunch

Indian IT services provider is pumping in significant resources to scale up operations in Malaysia and China, in a bid to address rising wage costs and labor crunch in India.

MALAYSIA--With the growing labor crunch and rising wages putting pressure on India's position as the world's leading outsourcing services provider, Satyam Computer Services is looking to direct resources toward expanding the company's operations in Malaysia and China.

Rather than view these two countries as rivals for the lucrative global outsourcing pie, the Indian IT services provider said it is pouring considerable resources to scale up its current modest operations in Malaysia and China.

Satyam announced last December that it is expanding its operations in China, growing its headcount of 400 to about 3,000 by 2008. Its new Nanjing campus will employ 2,500 software engineers and complement existing centers across the country in Shanghai, Beijing, Shenzhen and Dalian.

India's fourth-largest software enterprise, Satyam also announced plans in December last year that it will be ramping up its 125-seat operation in Malaysia to a 2,000-seat software development facility by 2011.

"We operate in a global marketplace, and with the saturation of IT growth and rising costs in tier-1 and tier-2 cities, we will need to look outside of India and establish development centers globally in countries such as Malaysia and China," explained Virender Aggarwal, Satyam's director and senior vice president, and head of Asia-Pacific, Middle East, India and Africa.

This strategy enables Satyam to not only remain close to where its customers are, but to also tap the advantages of cost-effective locations that are supported by world-class talents and technology, Aggarwal said in an e-mail interview.

A 2005 Gartner report had warned that a labor crunch and rising wages could erode as much as 45 percent of India's outsourcing market share by 2007. India's Nasscom (National Association of Software and Service Companies) also admitted concerns that these challenges could stymie India's strong double-digit growth in outsourcing services.

Satyam has about 35,000 employees, most of whom are based in India. In 2003, the IT services vendor established its Malaysia operations to serve as a global outsourcing center for the company's Asia-Pacific operations of some of its Fortune 500 clients.

Satyam has since worked with major organizations in Malaysia such as the Multimedia Development Corporation (MDeC), Ministries of Health and Education, Putrajaya City Council and various multinational corporations operating in Malaysia.

Aggarwal said: "With rising wage costs in India and the advantages of Malaysia as an outsourcing destination, Malaysia would complement India as an outsourcing destination." He added that Malaysia's low capital costs and world-class infrastructure facilities in the ICT hub of Cyberjaya and availability of highly-skilled local talent, are the country's key strengths.

The Malaysian government has also said that it is cutting red tape for Indian IT companies such as Satyam, to expand their operations in the country.

According to Aggarwal, Satyam received extensive support from the government and MDeC, which oversees the development of Malaysia's Multimedia Super Corridor (MSC).

For example, he said, the company has special approval and priorities for visa processing. "We have 1,000-plus approved visas for business continuity purpose applications," he added.

Outside of India, Satyam's planned software development center in Malaysia's Cyberjaya will be the second biggest of such facilities in the Asia-Pacific region, after the centers in China. Apart from being a hub for the IT vendor's operations in Malaysia and Southeast Asia, the Malaysian facility would also cater to Satyam's software export and global customers' requirements.

Meanwhile, the country's community of outsourcing providers under Outsourcing Malaysia, is looking to build a stronger alliance with its Indian counterpart Nasscom. Chairman David Wong Nan Fay said: "The objective is to encourage business partnerships between Nasscom and Outsourcing Malaysia's members." Outsourcing Malaysia is an initiative of the Association of the Computer and Multimedia Industry of Malaysia (Pikom), MDeC and Malaysia Debt Ventures, and comprises members from the local outsourcing provider industry spanning IT and IT-enabled services.

Initiatives to woo Indian IT companies were already set in motion by the MDeC last November, when it opened an international representative office in Bangalore, India.

Lee Min Keong is a freelance IT writer based in Malaysia.