The state of digital transformation in Malaysia

A minority of firms in Malaysia are currently implementing digital transformation or expanding their implementation, but many more plan to start this year. As in other markets, COVID-19 is accelerating digital transformation initiatives, spurring the plans of 34% of firms in Malaysia to start on this journey in 2021.

In late 2020, Forrester fielded a Forrester Analytics Business Technographics survey in two key Southeast Asian markets to understand the current state of digital transformation and cloud adoption. This content looks at the state of digital transformation in Malaysia. 

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Only 46% Of Firms In Malaysia Are On A Digital Transformation Journey 

A minority of firms in Malaysia are currently implementing digital transformation or expanding their implementation, but many more plan to start this year. As in other markets, COVID-19 is accelerating digital transformation initiatives, spurring the plans of 34% of firms in Malaysia to start on this journey in 2021. More interestingly, of those currently driving a transformation effort, more than half say that they actually increased their spending on digital transformation in 2020 -- despite the economic crisis. 

Adaptiveness And CX Improvements Are Key Business Priorities For Malaysian Firms In 2021 

COVID-19 has shown firms the critical importance of adaptiveness for business resiliency and growth. It's not surprising that top business priorities for 2021 fall into these categories. Improving CX and improving products and services are most often mentioned as business priorities, along with revenue growth. Priorities aligned to adaptiveness make up the rest of the six most common priorities, with accelerated response to business and market changes, increasing the ability to innovate, and accelerating the shift to digital business. Reducing costs, while an important business priority, is lower on the priority scale for 2021. 

Digital Transformers Have Boosted IT Capabilities And Operational Efficiency 

Digital transformers in Malaysia have already reaped some benefits from their transformation efforts. While the main recorded benefits concern operational efficiency (i.e., lower costs), these firms have also seen improvements in measures of customer experience quality. They also believe that IT's ability to promote agility and innovation across the business is key factor of success. However, employee experience (EX) was not listed as an area of success for most firms. We expect this to change in 2021 as a large majority of Malaysian firms make EX a high or critical business priority. In fact, the success of their digital transformation will hinge on their ability to attract and retain the talent they need for their transformation. 

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Key Digital Transformation Challenges Relate To Budget, Security, And Technical Skills 

Notwithstanding these early successes, key challenges remain for tech leaders in Malaysia. Most struggle to demonstrate the business value of their digital transformation and securing the budget required to drive it. Key challenges also include securing their digital transformation, a common situation throughout Asia, which remains behind on adopting security frameworks such as Zero Trust. A lack of knowledge, skills, and employee availability indicates a serious talent crunch. This should give firms another reason to invest significantly in EX and retention so as not to jeopardize their digital transformation efforts. 

Malaysian Tech Executives Must Do More To Drive Adaptiveness Across Their Organization 

Firms made progress in becoming more agile, but Forrester sees that organizations typically struggle to scale agile methods to business teams. While improvements in IT agility and innovation tops the list of digital transformation success factors, making the entire organization more agile is significantly down the list. To address this, Malaysian tech executives must collaborate across lines of business to drive adaptiveness in the shape of agile methods and work with their CFO to transform rigid annual budgeting cycles into agile financial planning practices that fund outcomes, not projects. 

What's Next On Malaysia's Journey To Digital Innovation 

Our data indicates that, by the end of 2021, 80% of Malaysian firms will be implementing or expanding their digital transformation. Tech executives of these companies -- particularly those starting in 2021 -- must address the challenges head-on. They will need to redefine key tech management capabilities to focus on customer and business outcomes to secure additional investments and accelerate their digital transformation despite tight budgets. 

For those still on the fence, time is running out. For small and medium-sized businesses, public initiatives such as Malaysia 5.0 can help accelerate DT. Large organizations still hesitant about DT will see their competitors accelerate and will increasingly fail to attract digital talent. 

To understand the business and technology trends critical to 2021, download Forrester's complimentary 2021 Predictions Guide here.  This post was written by Principal Analyst Achim Granzen, and it originally appeared here