In a bid to head off multiple crosswinds in today’s fragile ecosystem, Malaysia’s leaders are redoubling their ‘digital first economy’ efforts towards a sustainable future.
This also aligns with the need to ride the wave of rising regional demand for digital services. The latest move to help meet this demand is the announcement by Google Cloud of its expansion in Asia Pacific to three new regions – Malaysia, Thailand and New Zealand – which will increase the company’s total number of cloud regions to 37.
In his blog, Google Cloud’s Vice President, Asia Pacific, pointed to IDC’s Whole Cloud Forecast, 2020-2025, which expects total spending on cloud services in Asia (excluding Japan) to touch USD282 billion by 2025.
Google Cloud adds to the arsenal of other digital services providers in the region: Microsoft’s Azure cloud is in Hong Kong, Singapore, Australia, China, India, Japan and Korea with further expansions expected, including to Malaysia. Meanwhile, Amazon Web Services, Alibaba Cloud and others are already in the region.
Commenting to Disruptive.Asia on Google Cloud’s move, Dharmaraj Sivalingam, senior research manager for IDC Malaysia, said: “Google Cloud’s announcement augurs well for Malaysia, especially when looking at Malaysia’s Digital Economy Blueprint which has a key vision to transform Malaysia into a digitally driven, high-income nation and a regional leader in the digital economy.”
“To be able to drive Malaysia’s digital economy forward, which is estimated to contribute 22.6% to Malaysia’s GDP by 2025, investments into the areas of cloud, 5G connectivity and cybersecurity are crucial – thus making Google Cloud’s announcement a very welcome and fitting piece into the overall jigsaw of Malaysia’s Digital Economy Blueprint [MyDigital].”
As outlined in the MyDigital blueprint, Malaysia’s cloud services could be boosted by investments of RM12 to 15 billion by cloud service providers over five years, which makes Google Cloud’s announcement extremely timely. ‘
“As more Malaysian organisations move ahead with their hybrid and multi-cloud adoption strategies, Malaysians can expect better resilience, innovation and customer experience from service providers and government agencies,” said Dharmaraj. “The drive for cloud talent will only increase as a result, and Google’s partnership with public, private, and academic entities can foster the upskilling of local cloud talent and pave the way for further job market opportunities for Malaysians.”
Demand for digital services
Looking deeper into the ‘digital first’ theme, it’s interesting to note IDC’s Top ICT Predictions for 2022 and Beyond at IDC FutureScape 2022, which said that by 2023 digital will rule in Southeast Asia, as 1 in 3 companies will generate more than 15% of their revenue from digital products and services, compared to 1 in 6 in 2020.
An additional metric for the take up of digital services is, of course, cloud: IDC’s Public Cloud Services Tracker 2021 opined that the total Public Cloud Services market in Southeast Asia is expected to grow and reach US$11.0 billion by 2025 at a five-year compound annual growth rate (CAGR) of 21.5%.
IDC ASEAN’s Quarterly Media Briefing session in August 2022, which built on its previous quarterly briefing, themed Digital-First Economy — The ASEAN Journey and Priorities, noted that 86% of Malaysian organisation respondents said they would increase their cloud services in the next 12 months, which points to a significant opportunity for further cloud business development in the country.
Malaysia’s total Public Cloud Services market is forecast to reach US$1.5 billion by 2025 at a five-year compound annual growth rate (CAGR 2020-2025) of 24.9%.
During the August media briefing, Prapussorn Pechkaew, research manager at IDC Thailand, talked of several market drivers for cloud services in Southeast Asian countries such as Malaysia:
The drivers included infrastructure modernisation, more cloud regions/datacentres options, in-house development capability, low-code/no-code to drive development efficiency, digital economy and tech startups, customer experience, and cloud enterprise resource planning (ERP).
Additionally, government policies and initiatives are essential for the development of Malaysia’s cloud market and support Malaysia’s digital economy roadmap.
She further noted: “To address concerns about data security and privacy, the Malaysian Communications and Multimedia Commission (MCMC) announced that a light touch regulation would be implemented effective January 1, 2022. The regulation will allow MCMC to collaborate with cloud SPs to produce regulatory guidelines on data security and protection based on international standards. The new regulations will help boost the confidence of industry players to adopt public cloud services (PCS), especially in industries that prioritise data security and privacy, such as the financial, government, and telecommunications industries.”
What does this mean for Malaysians?
Some industry commentators, adopting a humanised approach to digital transformation, see data as the lifeblood of a ‘future ready’ economy, with data centres as the heart, driving data through connectivity infrastructures as blood vessel networks, and so forth.
In this analogy, Malaysia’s position in the region has much potential as a hub for various components of the larger digital economy.
For example, in a recent local media interview, Frankfurt-headquartered carrier-and data-centre-neutral internet exchange point DE-CIX’s Malaysia board member Wong Weng Yew said Malaysia has the ‘potential to become a sub-regional interconnectivity hub for Southeast Asia’.
According to Research and Markets Malaysia Data Centre Market – Investment Analysis & Growth Opportunities 2022-2027 report, Malaysia’s data centre market is ‘one of the most mature markets after Singapore in the Southeast Asia region’.
This reflects and drives the rising adoption of smart devices, services such as big data analytics, frontier technologies such as IoT, and the adoption of gaming and cross-sector industry digitalisation.
At the edge
In addition to digital connectivity (fibre and 5G), digital skillsets cornerstones of phase 1 (2021-22) of the MyDigital blueprint is the cloud and data centre hub vision. In particular, hyper-scale data centres enable big data, AI (artificial intelligence), IoT (internet of things) and other applications to enhance and strengthen government services.
Initially, four CSPs had been given conditional approvals to build hyper-scale data centres in Malaysia over the next five years: Microsoft, Google, Amazon and Telekom Malaysia. The CSPs will invest between RM12 to RM15 billion during the next five years.
In this group, Telekom Malaysia (TM) was appointed by the government as the only local Cloud Service Provider (CSP) to play a pivotal role in the MyDigital initiative to support Government agencies’ digital transformation journey. Promulgating a collaborative platform, TM has also been building a partnership network of services with significant players in the market to enrich available services.
In addition, the recent launch of a new TM group venture led by industry veteran Krish Datta, CEO of Credence, is acting as a digital transformation partner to enterprises, offering deep industry expertise and digital services to Malaysia and beyond.
In an in-depth Disruptive.Asia 2022 outlook interview, Shazurawati Abd Karim, executive vice president, of TM One, TM’s enterprise and public sector business solutions arm, said the company’s people-first approach underpinned the company’s overarching strategy.
“One defining moment is when we enhanced the capabilities of α Edge (Cloud Alpha) with AI last year – thus becoming an Intelligent Industry Cloud Platform, with full-stack hyperscaler capabilities hosted at TM ONE’s Tier-III Data Centre in Malaysia. This is Malaysia’s only hyperscaler cloud with end-to-end services, which meet local, residency and sovereignty data requirements as well as AI capabilities that comply with the highest industry standards.”
Shazurawati explained that the end-to-end cloud services and future fit solutions help to better secure and strengthen businesses’ operations and transformational initiatives.
For example, artificial intelligence capabilities to support all types of business innovation; machine learning (ML) functionalities to deliver actionable insights at more incredible speeds; edge computing to process data close to collection points; resource monitoring tools for identity and access management; advanced security tools & cybersecurity support to enable continuous real-time visibility & predictive protection.
“As well as providing peace of mind to organisations when hosting critical applications and classified data, industry verticals across the board were in a better position to boost their productivity and performance, especially during these challenging times,” she said.
She spoke to TM One’s human-centred approach: “This is to develop a matrix of trust with AI-driven smart services and other technologies to augment human life. One of the central aims for smart services is enhancing customer experience and transforming the way we work, live and even innovate.”
TM One aims to build connected and intelligent ecosystems, transmitting data in near real-time, to form a crucible for generating new revenue streams, greater efficiencies, and empowering people.
At TM One’s 2021 edition of its flagship LEAP Summit, Shazurawati advised leaders to manage changes in digital services by (a) adopting scaled agile practices, processes and mindset, (b) embracing digital coalition and co-creation, and (c) being responsive to change and to pivot to a cloud-first principle to be future ready.
Held annually, the LEAP Summit is TM One’s signature event, which cross-sector leaders from the public and private sectors attend.
“When strategically and innovatively applied and combined with devices, sensors and data, smart services will help manifest many benefits,” she said. “Coupled with inclusivity, sustainability and the enhancement of quality of life, Malaysians will be able to forge new economic opportunities and boost our overall progress as a digital nation.”
In his blog, Telekom Malaysia (TM) Group chief executive officer Imri Mokhtar emphasised the importance of human-centred technology in TM’s role to help fundamentally transform the country: “We are at the cusp of transforming the daily lives and experiences of every Malaysian. From the humble paddy farmer to the government school teacher, to the engineers on Sarawakian oil rigs, all the way up to CEOs of multi-national corporations, TM’s renewed purpose, and concordant solutions delivering human-centred technology will transform the way we live, work, connect, and evolve!”
Reframing an inclusive ‘digital first’ strategy
As confirmed by various analysts, organisations in this region are continuing to ramp up Digitalisation as a critical component of their drive to sustainable growth.
While the message to be more strategic is clear from the latest studies, IDC’s Dharmaraj said that smaller companies could also become more ‘digital first’ enterprises.
“Small and medium enterprises (SME’s) in Asia Pacific have been racing to pivot to a digital first approach. In fact, IDC predicts that in 2022, 50% of Asia Pacific SME’s of all sizes will have digitised the essential components of the customer buying journey.”
He stressed that “Digitalisation is now a matter of survival for SME’s but there will be challenges for SME’s such as skill shortages, low technology adoption, process automation and cash flow restrictions. It is therefore recommended for SME’s to adopt the following listed recommendations in their digitalisation journey:-
Collaborating towards resilience
Recently, the EY business pulse survey, covering more than 500 large to micro, small and medium enterprises (MSMEs) businesses, confirmed that the majority of businesses have learnt – during the pandemic – to prioritise technology adoption (77%).
Dato’ Abdul Rauf Rashid, Malaysia managing partner, Ernst & Young PLT said, “Despite two years of challenging conditions, businesses have remained focused on building their resilience, but they must continuously evolve to capture the opportunities ahead.”
The Business pulse survey: Living with COVID-19 and winning together, which aimed to assess the business preparedness of Malaysian companies in the new normal, also revealed that 43% of the respondents are optimistic on business recovery to pre-pandemic levels within the next one to two years.
EY concludes that both the large companies (48%) and MSMEs (37%) said that technology had the most positive impact on their business during the pandemic.
According to IDC’s Future Enterprise Resiliency Survey (FERS) 2022, the top three areas of improvement for ASEAN (inclusive of Malaysia) organisations because of DX investment were increased business agility and resilience, and a reduction of business risk. The same survey states that these three areas continue to be the top business priorities for ASEAN organisations in 2022.
IDC’s Dharmaraj commented to Disruptive.Asia: “Malaysian organisations should continue to view cloud adoption as a foundational pillar for collaboration, innovation, and transformation. The portfolio of mobile and digital application capabilities, artificial intelligence (AI), intelligent automation, and big data and analytics (BDA), is primed for the cloud.”
“Organisations should look towards leveraging microservices, containers, and new orchestration tools to make their applications true cloud-native to achieve a significant competitive edge. Consider cloud for an efficient way towards enterprise intelligence, data-driven innovation, and ecosystem collaboration.”
Enterprise players can help stimulate Digitalisation among SMEs, he continued. “Establishing a dynamic partner ecosystem with larger enterprises can help SMEs augment their reach and capabilities, contributing to higher business resilience. Technology enabled ecosystem players and startups can support SME’s digitalisation needs through workforce augmentation in the gig economy, payment platforms, on-demand logistic needs and online marketplace platforms.”
Meanwhile, he suggested the government’s continued focus on putting in place economic policies to help promote the usage of technology, coupled with plans to upskill or reskill the Malaysian workforce could be amplified by increased collaboration with industry players.
For Malaysia, technology is an important part of the ‘digital first’ formula for the foreseeable future. Automation, digital technologies and the development of a future ready workforce are expected to be significant themes in Malaysia’s forthcoming Budget 2023 in early October 2022. “Current uncertainties have put the focus on resiliency, with many organisations investing in digital resiliency to prepare for future disruptions,” concluded Dharmaraj. Work resilience will be underpinned by longer-term hybrid-first work strategies. With ecosystem value becoming a differentiator, digitally enabled industry ecosystems will be strategically essential. Digital software innovation at scale and speed is becoming critical to keep pace with new customer and employee experiences and revenue streams.”