1. WWW.OUTSOURCINGMALAYSIA.ORG.MY PAGE 1 David Wong Nan Fay Advisor, PIKOM Chairman, Outsourcing Malaysia Global Business Services Outlook (Buyers’ Perspective)

2. WWW.OUTSOURCINGMALAYSIA.ORG.MY 2 PIKOM-OM Research & Publication Outsourcing in Malaysia: Scaling New Heights 2009 2010 2013 Vendors’ Perspective 2015

3. WWW.OUTSOURCINGMALAYSIA.ORG.MY Embracing innovation divide 10 th MP (2011-2015) Inclusive Development Broadband for General Population (BBGP) Certification in Telecentre Management Pilot Programme for Indigenous Microsourcing 11 th MP (2015-2020) Digital Opportunity Miniaturization of devices / Wearable Technology Cloud computing Cognizant computing Big Data E-commerce / M- commerce Millennials Generation Digital Divide Application Divide Innovation Divide Opportunity Divide

4. WWW.OUTSOURCINGMALAYSIA.ORG.MY Economic Outlook 2015 /16 Strong Fundamentals o Strong domestic demand o Low Interest rate o Low inflation rates o Low unemployment rate Economic challenges o Weakening Ringgit o GST exerting inflationary pressures o Falling crude oil prices o Downgrading of sovereign rating PIKOM forecast a GDP growth of 5.0% in 2015 and 5.2% in 2016 2010: 7.4% 2011: 5.2% 2012: 5.6% 2013: 4.7% 2015: 5.0% 2016: 5.2% 2014: 5.9%

5. WWW.OUTSOURCINGMALAYSIA.ORG.MY 2000: Share of ICTS to GDP 3.3% 2015: Share of ICTS to GDP 6.4% 2011: 8.8% 2012: 9.4% 2013: 11.4% 2014: 12.5% 2015: 14.2% ICT Services Outlook, Drivers & Challenges Challenges o Short supply of quality and competent graduates o Negative perception of low employment opportunities o Lack of professional recognition and accreditation like doctors o Low uptake of globally recognized certifications o Poor R&D, innovation and commercialization culture o Rampant job hopping o Job migration across borders o Slow adoption of new technologies, applications and business models o Online transaction challenges in particular security vulnerabilities Growth Drivers o Miniaturization of devices and wearable technology o Real time and multimedia content supported with mobility o Cloud computing / Big Data Analytics / IoT/ SaaS / Social media technology o Integration of process, people and institutions with ICT systems o Significant growth in Internet and mobile banking o Increased investment o Increased exports and imports of ICT Services o Double digit growth

6. WWW.OUTSOURCINGMALAYSIA.ORG.MY 6 The report discusses market potential and trends for the ‘Global Business Services‘ which includes the four segments as below: Definition: ‘Global Business Services' (GBS) market Information Technology Management (ITM) Business Process Management (BPM) Software services Infrastructure Management services IT consulting, application development, application management & support, system integration and other IT services such as website maintenance etc CRM, HRM, F&A, KPM and other industry specific business functions such as supply chain management Various type of software services such as enterprise application software, system software, mobile based software offered on license as well ‘as pay per use’ basis Management of data centers, work stations and cloud based services such as Infrastructure as a service (IaaS), Remote Infrastructure Management Services (RIMS), etc.

7. WWW.OUTSOURCINGMALAYSIA.ORG.MY 7 Scope of Research – End Users Agriculture Banking, Financial Services & Insurance Government Healthcare Hospitality Manufacturing Oil & Gas Palm Oil (Plantation) Retail Telecom Tourism

8. WWW.OUTSOURCINGMALAYSIA.ORG.MY 8 US UK Selected APAC- 13 countries I.Australia II.Brunei III.Cambodia IV.India V.Indonesia VI.Japan VII.Laos VIII.Malaysia IX.Myanmar X.Singapore XI.South Korea XII.Thailand XIII.Vietnam The report covers detailed analysis of the 15 countries mentioned below: Scope of Research – Geographic coverage

9. WWW.OUTSOURCINGMALAYSIA.ORG.MY 9 Global 'Business Services' market (CY14) USD 670bn 36% APAC USD 240bn 33% US USD 220bn 10% UK USD 70bn 21% ROW* USD 140bn * ROW include Canada, Mexico, Germany, France, Italy etc The global outsourcing market

10. WWW.OUTSOURCINGMALAYSIA.ORG.MY 10 The global outsourcing market Demand from 15 Countries Worth USD475bn @ CAGR 5% in the next 5 years Contributing Countries 1.Major- US followed by Japan & UK 2.APAC Region- Japan, Australia, India 1.Major- US followed by Japan & UK 2.APAC Region- Japan, Australia, India Growth 1.Slow growth in US & UK 2.Rapid growth in the APAC region 1.Slow growth in US & UK 2.Rapid growth in the APAC region Demand contributors 1.Major contributors :- BFSI, manufacturing and telecom 2.Growth expected in sectors such as government, healthcare, tourism and hospitality 3.Infrastructure maintenance segment is expected to grow relatively faster as compared to other service offerings 4.Cloud computing, big data analytics are going to drive the future growth of outsourcing demand. 1.Major contributors :- BFSI, manufacturing and telecom 2.Growth expected in sectors such as government, healthcare, tourism and hospitality 3.Infrastructure maintenance segment is expected to grow relatively faster as compared to other service offerings 4.Cloud computing, big data analytics are going to drive the future growth of outsourcing demand.

11. WWW.OUTSOURCINGMALAYSIA.ORG.MY 11 Global outsourcing market by end user industries for CY13 BFSI Highest contributor BFSI, Manufacturing & Telecom accounts to 52% of the industry Demand from BFSI segment is expected to grow steadily as banks are under pressure to reduce cost of operations, offer seamless customer service and replace legacy systems. Outsourcing demand from telecom sector is expected to witness a slowdown globally. However Telecom outsourcing from the APAC region is expected to register a higher growth due to rise in demand for application service delivery, service provisioning, activation services and billing services. Government sector is expected grow faster due to increase in IT penetration across government services across different countries. Healthcare related outsourcing is expected grow mainly in US and UK.

12. WWW.OUTSOURCINGMALAYSIA.ORG.MY 12 Geographic preferences for vendor locations

13. WWW.OUTSOURCINGMALAYSIA.ORG.MY 13 Trends in GBS market Level of impactHighMediumLow Countries US UK Japan Singapore Australia Rest of APAC countries End user industries BFSI Telecom Retail Healthcare Government Manufacturing Agriculture, Plantation Oil & Gas Hospitality Tourism Impact of Big data and analytics Among different end user industries, majority of buyers are from BFSI, telecom, retail and healthcare segment while government and manufacturing companies have very small share. Rest of the industries do not have any significant demand for big data and analytics.

14. WWW.OUTSOURCINGMALAYSIA.ORG.MY 14 Trends in GBS market Level of impactHighMediumLow Countries US UK Japan Singapore Australia India Rest of APAC countries End user industries Manufacturing Retail Healthcare Telecom Government Hospitality Tourism BFSI Agriculture-Plantation Oil and gas Impact of cloud computing The adoption of cloud technology among different end use industries is low due to low awareness, data security concerns and lack of proper cloud related rules and regulations. As per KPMG's 2014 Cloud Computing Survey, -53% respondents mentioned data loss and privacy, -50% risk of intellectual property theft and the impact on their IT organization -49% as the top three challenges in adopting cloud computing.

15. WWW.OUTSOURCINGMALAYSIA.ORG.MY 15 Government currently contributes ~11% to overall GBS demand. APAC region is expected to witness very high growth (12- 15% CAGR) as compared to US, UK (7-8%) in next five years, - driven by increasing IT penetration in government sector across different countries. Government Sector Demand

16. WWW.OUTSOURCINGMALAYSIA.ORG.MY 16 ITM demand from developing countries in APAC region such as India, Thailand, Indonesia and Malaysia is expected grow faster as compared to developed countries. Increasing technology penetration in developing countries is one of the main driver for higher growth. ITM Market

17. WWW.OUTSOURCINGMALAYSIA.ORG.MY 17 BPM Market BPM represents ~20% of the BS demand from selected 15 countries. It valued at USD 98bn in CY14 and is expected to grow at a CAGR of 5% in next five years. The BPM demand from APAC countries is expected to grow relatively faster than US and UK HRM and F&A segments are expected to grow relatively faster than other BPM segments mainly driven by increasing demand from manufacturing sector across the globe. With increasing adoption of cloud technology, the demand for Business Process as a Service (BPaaS) is expected to witness significant growth. BPaaS can be used for contact centers, specialized HR solutions, payroll and finance and accounting etc. Big data and analytics is expected to drive the growth in demand for KPM related services such as data mining & collation, data conversion, data analysis etc

18. WWW.OUTSOURCINGMALAYSIA.ORG.MY 18 Key Message Service provides to focus in these sectors as there is an increasing need for IT adoption and growth in e- commerce. India, South Korea, Malaysia and Singapore- GBS demand growing at a CAGR of ~10-15%. Government Sector rapid growth Government and GLC’s to look at partnering with local players to meet their requirements Rapid growth in retail, hospitality and tourism Service provides to make use of this research to further enhance their service delivery by focusing on the demands from the market in order to move up the value chain rather than selling service provider solutions. Opportunities Call to Action Big Data & analytics BFSI, manufacturing and telecom APAC providers should continue to focus in these sectors as it continues to be the growth sectors Another areas of focus as buyers are using big data for different applications for BFSI, Telecom, Healthcare, Retail, Government and Manufacturing.

19. WWW.OUTSOURCINGMALAYSIA.ORG.MY 19