February 29, 2024

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Malaysia must continue to push digital transformation efforts

While Malaysian enterprises are making strides in digital transformation because they generally see the benefits of doing so, the industry nonetheless still face several impediments that could stifle their efforts to be fully digitalised in the coming years.

Malaysia’s overall IT spending is forecasted to be approximately US$11 billion by 2020 and that a large proportion of that spending has shifted to managed and cloud services, suggesting that enterprise digital transformation is somewhat playing a role in Malaysia.

While over 55% of CEOs in Malaysia have acknowledged the need to digitally transform, the remaining proportion suggests otherwise. The question is whether there is a fear or resistance to spending.

The tactical stage

While the benefits are clear, many businesses are stuck at the tactical stage of their digital transformation journey.

Digital transformation is accelerating in Southeast Asia, as it is expected that by 2021, at least 48% of the region’s GDP will be derived from digital products and services. However, when comparing Malaysia to the rest of the region, it trails behind countries such as Singapore, Japan and South Korea.

It appears that the lack of technical knowledge and organisational silos are the two biggest impediments to fully embracing digital transformation; this reflects the maturity of businesses.

However, government initiatives and increased collaboration with technology partners, are enabling a steady growth in technology adoption among Malaysian companies, and this trend is expected to continue.

Who is transforming?

According to a recent survey, 44% of nearly 200 respondents in ASEAN cited digital transformation as their top priority, followed by infrastructure modernisation (41%) and cybersecurity (36%).

The priorities are not surprising, given that more enterprises are coming under pressure to remain competitive in the face of digital disruption across industries, such as financial services, logistics and telecommunications.

In Malaysia, digital transformation spans a wide gamut of industries and while not all industries are equal in their maturity curves, industry watchers note that verticals such as media, digital content, healthcare, education and some spots of manufacturing and even property developers – touting smart living and townships – have begun some form of digitalisation.

But perhaps the clear winner in digitalisation is found in the banking, financial services, and insurance (BFSI) sector, particularly in the fintech realm, observers note.

One expert argues that fintech startups and forward-looking Malaysian policies such as the Financial technology regulatory sandbox framework and the Exposure draft on the licensing framework for digital banks have led to encouraging digital advancement within the industry.

Besides this, the upcoming commercialisation of 5G networks could boost digital transformation in the manufacturing sector.

Malaysia’s national industry 4.0 framework has earmarked strategic initiatives to drive smart manufacturing adoption including the internet of things (IoT), sensor technology, artificial intelligence/machine learning (AI/ML), mobile connectivity, robotics, and 3-D printing.

Infrastructure projects

The Chairman of Malaysia’s National ICT Association (Pikom) noted that the government has put in place some positive infrastructure projects, such as the RM 20 billion National Fiberisation and Connectivity Plan (NFCP) over the next five years.

In terms of verticals, the aviation, BFSI, e-commerce and medical sectors are currently ahead of other verticals in digitalisation.

Future challenges

So how will the small and medium-sized (SME) sector, widely acknowledged as the bedrock of many ASEAN economies, including that in Malaysia, fare?

While 85% of organisations polled are in the midst of their digital transformation journey, only 7% in Southeast Asia can be classified as digital transformation leaders – organisations that have at least a third of their revenue derived from digital products and services.

Pikom’s Chairman points out that many SMEs struggle because they have lacklustre leadership and may lack the agility to adapt. Additionally, they may not have the right understanding of the importance of digital transformation and can be perceived as costly to implement.

There is a need for Malaysian enterprises to adopt a leaders’ mindset to fully build their digital ecosystem to grow their value chain, and this change of mindset must happen now.

The need for more innovative startups

More alarmingly, Malaysia lacks innovative start-ups rather than companies that merely copy business models that work in other countries, such as e-payments, ride-sharing and the like.

The market can only support a small number of players serving the same need, one expert noted. Another challenge plaguing Malaysia is that many companies tend to do software research and development (R&D), something he says is easier compared to hardware R&D, which he claims is far more complex.

Pikom’s Chairman recommends that for SMEs to holistically embrace digitalisation, strong management and long-term vision are needed to drive the agenda. A company’s management cannot just have short term goals to drive profitability and the bottom line.

In most cases, research has found that accountability is holding a lot of enterprises back. And the reality of the situation is that digital transformation is difficult and must be seen as a long-term effort, something that takes guts, investment and an appetite for risk to execute – regardless of the size of the enterprise.

Many enterprises tend to wait as long as they can to get into such investments because the aforementioned issues are occasionally enough to allow them to put off the agenda.

The issue of IT skills

Besides mindset changes, Malaysian organisations embarking on digital transformation are also being challenged by a lack of the right IT skills.

Malaysia has the right skill sets in the electronics sector but concedes that there is lack of skills in niche IT sectors, such as Industry 4.0, that are needed to propel the country’s digital transformation ambitions.

This challenge is exacerbated by the fact that much of the IT support infrastructure and software systems are proprietary.

The world is now moving toward open-source frameworks and ever-evolving programming languages. IT professionals need to re-skill themselves on the right platforms. Overall, we still lack experts in different stacks, embedded systems, IoT hardware designers.

However, another expert warns against oversimplifying the IT skill sets issue, noting that it’s more complex than a binary “do we have enough or not enough” answer.

On the demand side, there may be a shortage of some skill sets in certain areas. But the more important question for government agencies and the IT industry as a whole to ask is why people with the right skills are hopping to neighbouring countries, he contends.

Training programmes

Meanwhile, on the supply side, the industry should also re-design and re-develop training programmes for existing employees.

The typical budget for training stands between 3% and 4% of employee costs. If that mentality doesn’t shift, it seems like we will be discussing this issue once again in 2025.

There is a need to identify skills gaps within each enterprise and to pursue training and development programmes that address these gaps. Beyond that, organisations should also look to attract, recruit and retain a diverse workforce with complementary skills and build them into collaborative teams.

PARTNER

Qlik’s vision is a data-literate world, where everyone can use data and analytics to improve decision-making and solve their most challenging problems. A private company, Qlik offers real-time data integration and analytics solutions, powered by Qlik Cloud, to close the gaps between data, insights and action. By transforming data into Active Intelligence, businesses can drive better decisions, improve revenue and profitability, and optimize customer relationships. Qlik serves more than 38,000 active customers in over 100 countries.

PARTNER

CTC Global Singapore, a premier end-to-end IT solutions provider, is a fully owned subsidiary of ITOCHU Techno-Solutions Corporation (CTC) and ITOCHU Corporation.

Since 1972, CTC has established itself as one of the country’s top IT solutions providers. With 50 years of experience, headed by an experienced management team and staffed by over 200 qualified IT professionals, we support organizations with integrated IT solutions expertise in Autonomous IT, Cyber Security, Digital Transformation, Enterprise Cloud Infrastructure, Workplace Modernization and Professional Services.

Well-known for our strengths in system integration and consultation, CTC Global proves to be the preferred IT outsourcing destination for organizations all over Singapore today.

PARTNER

Planview has one mission: to build the future of connected work. Our solutions enable organizations to connect the business from ideas to impact, empowering companies to accelerate the achievement of what matters most. Planview’s full spectrum of Portfolio Management and Work Management solutions creates an organizational focus on the strategic outcomes that matter and empowers teams to deliver their best work, no matter how they work. The comprehensive Planview platform and enterprise success model enables customers to deliver innovative, competitive products, services, and customer experiences. Headquartered in Austin, Texas, with locations around the world, Planview has more than 1,300 employees supporting 4,500 customers and 2.6 million users worldwide. For more information, visit www.planview.com.

SUPPORTING ORGANISATION

SIRIM is a premier industrial research and technology organisation in Malaysia, wholly-owned by the Minister​ of Finance Incorporated. With over forty years of experience and expertise, SIRIM is mandated as the machinery for research and technology development, and the national champion of quality. SIRIM has always played a major role in the development of the country’s private sector. By tapping into our expertise and knowledge base, we focus on developing new technologies and improvements in the manufacturing, technology and services sectors. We nurture Small Medium Enterprises (SME) growth with solutions for technology penetration and upgrading, making it an ideal technology partner for SMEs.

PARTNER

HashiCorp provides infrastructure automation software for multi-cloud environments, enabling enterprises to unlock a common cloud operating model to provision, secure, connect, and run any application on any infrastructure. HashiCorp tools allow organizations to deliver applications faster by helping enterprises transition from manual processes and ITIL practices to self-service automation and DevOps practices. 

PARTNER

IBM is a leading global hybrid cloud and AI, and business services provider. We help clients in more than 175 countries capitalize on insights from their data, streamline business processes, reduce costs and gain the competitive edge in their industries. Nearly 3,000 government and corporate entities in critical infrastructure areas such as financial services, telecommunications and healthcare rely on IBM’s hybrid cloud platform and Red Hat OpenShift to affect their digital transformations quickly, efficiently and securely. IBM’s breakthrough innovations in AI, quantum computing, industry-specific cloud solutions and business services deliver open and flexible options to our clients. All of this is backed by IBM’s legendary commitment to trust, transparency, responsibility, inclusivity and service.

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