Recently, we’ve witnessed a surge in client inquiries from businesses outside Malaysia, particularly from the UK and US, exploring the possibility of setting up offshore centers of excellence in this rapidly evolving market. However, there’s a prevailing sentiment that Malaysia’s cost base has shifted, becoming more expensive and disrupting established cost models. In this blog, we’ll delve into the deeper understanding of Malaysia’s evolving role, as it transforms from a low-cost hub into a lower-cost center of excellence. By leveraging the best of what Malaysia has to offer, businesses can tap into highly cost-effective talent pools, all while adopting the right long-term strategies to navigate these changing dynamics.

The Changing Landscape:

Malaysia, along with emerging tigers like Thailand and Vietnam, has experienced inflating factors that surpass the norm. Despite global headwinds, the demand for tech, digital, and transformation skills continues to grow, leading to intense competition for top talent. Over the past three years, this surge has resulted in significant shifts in benchmarks and salary increments. Job-to-job average increments in these fields now range from at least 20% to over 25% in some skill areas. While Malaysia remains relatively low cost compared to Singapore and Hong Kong, the country’s robust 5-6% annual GDP growth suggests that salaries may inflate faster than the norm.

The Two-Track System:

In Malaysia, a two-track system has emerged. The first track represents locally benchmarked candidates, where inflation remains conservative. This group is associated with the perception of Malaysia as a low-cost destination. However, there’s another track, comprising globally compatible candidates possessing exceptional communication, stakeholder management, and up-to-the-minute technological skills. This elite group pushes the boundaries, challenging the cost-talent trade-off. Employers often discover this second category and realize the limitations of their cost-versus-talent models. It’s a common syndrome in the current market.

Redefining the Perspective:

Rather than viewing Malaysia purely as a bargain destination, it’s crucial to calibrate budgets, manage expectations, and explore available options in this ever-changing market. An alternative approach is to focus on hiring junior high-potential candidates and nurturing their growth through an incubation-based strategy. By investing in relatively inexperienced yet high-potential talent, employers can secure better rates, develop future cohorts, and future-proof their workforce. This approach fosters better retention and cultivates a sustainable ecosystem for all stakeholders involved.

Malaysia’s Untapped Potential:

Despite the ongoing debate, Malaysia remains an attractive market for attracting high-potential junior to mid-level talent—individuals who are smart, eager to learn, and hungry for exposure. Additionally, graduates in Malaysia are still underpaid, presenting an opportunity for businesses to tap into this talent pool. Exploring these avenues not only addresses the immediate talent needs but also sets the stage for nurturing and developing the future workforce. Such initiatives lead to better retention rates and contribute to a thriving talent ecosystem.

As Malaysia’s talent market evolves and adapts, it presents a unique opportunity for businesses seeking offshore centers of excellence. While the cost base has shifted, leveraging Malaysia’s lower-cost yet high-potential talent requires a strategic approach. By balancing budgets, recalibrating expectations, and investing in developing talent, businesses can thrive in this fluid and changing market. Malaysia offers a wealth of opportunities for those willing to embrace the changing landscape and seize the untapped potential that lies within.