Spotlight On Southeast Asia: The State Of Digital Transformation In Malaysia

In late 2020, we fielded a Forrester Analytics Business Technographics ® survey in two key Southeast Asian markets to understand the current state of digital transformation and cloud adoption. This blog post looks at the state of digital transformation (DT) in Malaysia.

Source: Spotlight On Southeast Asia: The State Of Digital Transformation In Malaysia

Only 46% of firms in Malaysia are on a digital transformation journey

A minority of firms in Malaysia are currently implementing digital transformation or expanding their implementation, but many more plan to start this year. As in other markets, COVID-19 is accelerating DT initiatives, spurring the plans of 34% of firms in Malaysia to start on this journey in 2021. More interestingly, of those currently driving a transformation effort, more than half say that they actually increased their spending on DT in 2020 — despite the economic crisis.

Base: 175 services decision-makers in Malaysia; Source: Forrester Analytics Business Technographics Asia Pacific Cloud And Services Survey, 2020
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Adaptiveness and CX improvements are key business priorities for Malaysian firms in 2021

COVID-19 has shown firms the critical importance of adaptiveness for business resiliency and growth. It’s not surprising that top business priorities for 2021 fall into these categories. Improving CX and improving products and services are most often mentioned as business priorities, along with revenue growth. Priorities aligned to adaptiveness make up the rest of the six most common priorities, with accelerated response to business and market changes, increasing the ability to innovate, and accelerating the shift to digital business. Reducing costs, while an important business priority, is lower on the priority scale for 2021.

Digital Transformers have boosted IT capabilities and operational efficiency

Digital transformers in Malaysia have already reaped some benefits for their transformation efforts. While the main recorded benefits concern operational efficiency (i.e., lower costs), these firms have also seen improvements in measures of customer experience quality. They also believe that IT’s ability to promote agility and innovation across the business is key factor of success. However, employee experience (EX) was not listed as an area of success for most firms. We expect this to change in 2021 as a large majority of Malaysian firms make EX a high or critical business priority. In fact, the success of their DT will hinge on their ability to attract and retain the talent they need for their transformation.

Base: 62 services decision-makers in Malaysia who are involved in their company’s digital transformation, are at firms that are currently implementing or expanding digital transformation, and consider their firm successful in some or all of their digital transformation efforts; Source Forrester Analytics Business Technographics Asia Pacific Cloud And Services Survey, 2020
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Key digital transformation challenges relate to budget, security, and technical skills

Notwithstanding these early successes, key challenges remain for tech leaders in Malaysia. Most struggle to demonstrate the business value of their DT and securing the budget required to drive it. Key challenges also include securing their digital transformation, a common situation throughout Asia, which remains behind on adopting security frameworks such as Zero Trust. A lack of knowledge, skills, and employee availability indicates a serious talent crunch. This should give firms another reason to invest significantly in EX and retention so as not to jeopardize their DT efforts.

Malaysian tech executives must do more to drive adaptiveness across their organization

Firms made progress in becoming more agile, but Forrester sees that organizations typically struggle to scale agile methods to business teams. While improvements in IT agility and innovation tops the list of DT success factors, the making the entire organization more agile is significantly down the list. To address this, Malaysian tech executives must collaborate across lines of business to drive adaptiveness in the shape of agile methods and work with their CFO to transform rigid annual budgeting cycles into agile financial planning practices that fund outcomes, not projects.

What’s next on Malaysia’s journey to digital innovation

Our data indicates that, by the end of 2021, 80% of Malaysian firms will be implementing or expanding their digital transformation. Tech executives of these companies — particularly those starting out in 2021 — must address the challenges head-on. They will need to redefine key tech management capabilities to focus on customer and business outcomes to secure additional investments and accelerate their DT, despite tight budgets.

For those still on the fence, time is running out. For small and medium-size businesses, public initiatives such as Malaysia 5.0 can help accelerate DT. Large organizations still hesitant about DT will see their competitors accelerate and will increasingly fail to attract digital talent.

Further reading

Forrester clients can access my report on The State of Digital Transformation in Malaysia.

Please connect with me on LinkedIn!

If you’d like to discuss how this affects you and your organization, please don’t hesitate to schedule an inquiry call with me.

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