It’s really no surprise that the No 1 request Accenture gets for outsourcing in this crisis is improving cash flow. Trying to come up with ways to achieve that is another story altogether. As companies scramble to become more liquid, Mark Boyle, who is managing director for Accenture’s Asia Pacific Outsourcing, believes that we will see an emergence of cloud computing.

“I’m talking about the fully integrated cloud model. It’s going to come to us rapidly. Gartner has been pointing to it in the last two to three years. There are some pros and cons to it, but there will be a significant shift in the marketplace,” says Boyle.
Khoo Kok Yew, director of outsourcing in Accenture Malaysia, concurs. He is seeing a trend where companies are moving towards a pay-per-use basis to cut down investments in capital-intensive software and IT infrastructure.

“For example, a hi-tech industry client commissioned us to design, build and run billing application and operation services. The client wanted to pay the fees based on the number of customers it has,” he explains.

Besides cloud computing, companies are also outsourcing the non-transactional functions of their shared service centres to further drive costs down. One of the key outsourcing drivers identified in the Asia-Pacific region is the growing number of regional centres that are being set up. China and India hold a large percentage of Asia-Pacific outsourcing, but Boyle believes that they wouldn’t be able to cope with the language requirements of other Apac countries as multinationals set up regional centres within the region.
Based on data from Gartner & IDC, Accenture has forecast that the addressable outsourcing market size in Asia-Pacific will see a compound annual growth rate of 7.2% from 2008 to 2012. The largest growth will come from application outsourcing — a sector that cloud computing can actively play a role in.

Boyle further indicates a trend towards “best of breed” outsourcing instead of a one-stop-shop approach during the crisis. However, this has nothing to do with the recent Satyam fraud case. If anything, the scandal only made customers look at their service providers through a magnifying glass instead of dropping the option completely. According to Khoo, this is just a further initiative by companies to ensure they get the best bang for their buck.

But in the light of President Barack Obama’s stance on protecting jobs in the US, would the Asia-Pacific’s role in outsourcing be damaged? Khoo thinks not. Countries will always compete with each other to attract outsourcing investments in the face of a changing climate. Furthermore, companies which are comfortable with their current business models will not pack up their bags and leave so soon.

However, Khoo believes that Asia-Pacific countries cannot afford to compete on cost alone. As their per capita income increases, their competitive cost advantage will decrease. One way to avoid this is to stop relying heavily on offshoring opportunities in countries like the US and opening up the local outsourcing market with local companies.
Another option is of course to find niche segments that they can tap. For Malaysia, Khoo says our multilingual society and strategic time zone are the obvious advantages.

“We are four hours ahead of Dubai and four hours behind New Zealand. So, if you think logically, we can support countries between them in one 8am to 8pm shift for non-time sensitive functions, whereas India, which is 2.5 hours behind us, would need two different shifts for this,” he says.
Government incentives are also important to attract investments. “In the last few weeks, the government has been talking about moving away from our middle-income-based economy. But it is quite a Catch-22 situation because companies do consider Malaysia from a cost perspective in outsourcing. Incentives therefore will count when it comes to encouraging companies to set up their R&D work here which will subsequently improve our capabilities,” says Khoo.

This article appeared in netv@lue2.0, the technology section of The Edge Malaysia, Issue 771, Sept 7 - 13 2009