The outsourcing industry in Vietnam has grown tremendously in recent years, making it an attractive outsourcing destination for international companies.
Today, Vietnam’s Ho Chi Minh city is regarded as one of the top cities in the world for software outsourcing. It was also ranked fifth in Kearney’s Global Services Location Index (2019).
But what factors help Vietnam stand out on the global outsourcing map?
And are there any outsourcing challenges that business owners may face in Vietnam?
In this article, we’ll answer these questions by sharing some of the key benefits of outsourcing to Vietnam and the challenges you may face. We’ll then cover the top software development companies to outsource your business processes.
Lastly, we’ll give you handy tips for selecting the right software outsourcing company in Vietnam or any part of the world.
Let’s dive in!
6 Significant Benefits of Outsourcing to Vietnam
The software outsourcing industry has become a powerful force in the Vietnamese economy in recent years. With more than 6000+ IT companies, this small nation in Southeast Asia is a key player in the global IT outsourcing market.
But it isn’t the only industry this country caters to. Vietnam also offers outsourcing services in:
- Accounting and finance.
- Payroll.
- Human resource.
- Customer Service.
Let’s look at the key benefits that attract foreign companies to Vietnam for software development and business process outsourcing.
1. Cost Savings
One of the primary advantages of outsourcing to Vietnam is the availability of skilled tech talent at low costs. The rates are significantly lower than hiring the same talent in the United States or other popular outsourcing destinations like China or the Philippines.
According to the CIO magazine, foreign companies could save almost 90% of costs by outsourcing software development to Vietnam. For example, the cost of hiring a senior developer in the United States is around $65-$130 per hour, while it costs only $20-$45 per hour to hire a Vietnamese developer.
Moreover, according to Outsource Vietnam (an outsourced agency), the cost of outsourcing software development to Vietnam is almost 1/3rd cheaper than India.
For this very reason, Vietnam was ranked 5th in the “best countries to outsource” globally by MarketInsider (2019)
2. Young, Educated Population
According to Statista, Vietnam had a working population of approx. 74.3 million in 2020, with 40-45% under the age of 35. Vietnam is also amongst the top countries with the highest adult literacy rate (95.4%) in the Asia Pacific.
To keep its young population employable, the country has around 1900 vocational training centers.
Moreover, realizing the rising demand for software development outsourcing, the Vietnamese government has prioritized excellence in engineering and science.
Today, Vietnam offers technical training in different programming languages via more than 250 universities and 187 technical schools. As a result, Vietnam gets around 400,000 IT engineering graduates and 50,000 IT students from its institutions every year.
That means that the country is well equipped to meet the skilled workforce demands of employers who wish to outsource to this country.
3. Socioeconomic Stability
Compared to several Southeast Asian nations, Vietnam is relatively more socio-politically stable. Vietnam was also ranked 12th as the safest country in the Asia Pacific region by the Global Peace Index 2020.
This means that foreign companies can expect to do business in this country without any threat of large conflicts or unrest.
Vietnam’s economy has also grown and flourished over the last 20 years. According to the World Bank, Vietnam is expected to recover from the pandemic and witness a GDP growth of 5.5% in 2022 from 2.6% in 2021.
4. Favorable Investment Environment
Vietnam’s new free trade agreements with the European Union and the United States, its robust IT infrastructure, improved logistics, cheaper labor costs, and a young working population have made this country a hotspot for Foreign Direct Investment (FDI.)
Vietnam has attracted a whopping USD 143 billion from foreign investors over the past 10 years (2010-2019). It was also ranked 70th among 190 countries in the Ease of Doing Business in 2020.
According to tradingeconomics, the influx of foreign investment continues to stay strong, with USD 2.68 billion injected into the economy in January-February, 2022 (a 7.2% increase from the previous year). Singapore remains the top source of FDI for Vietnam, followed by South Korea and China.
Furthermore, the Vietnamese government has introduced Resolution 55 to bring USD 50 billion into the country as foreign investment by 2030. The resolution aims to amend the regulations inhibiting foreign investments and codify quality, efficiency, and environmental protection criteria.
5. Presence of Big IT Companies
Several multinationals and tech giants already have a strong foothold in Vietnam by outsourcing their software product development, application development, and other IT support services. These companies include Intel, Microsoft, LG, and Samsung.
Other companies expanding and outsourcing their IT roles to Vietnam include IBM, Sony, Cisco, Bayer, etc.
These names are proof enough of Vietnam’s capability of handling big outsourced or offshore software development projects.
6. Pandemic Resilience
While developed nations were grappling with the COVID pandemic, Vietnam was a star example of social resilience and technical fortitude.
Vietnam’s IT industry managed to stay afloat, and the country quickly overcame the crisis with quick thinking and robust contingency plans. In June 2021, Vietnam was also declared the largest country by population without any COVID deaths. Consequently, most IT professionals in Vietnam did not need to work from home anymore.
Indeed, choosing Vietnam as your outsourcing destination has some great perks. But you should also consider the challenges of doing business in this country.
3 Key Challenges of Outsourcing to Vietnam
Here are the three main challenges you may face while handing over your business process to the Vietnamese outsourcing industry:
1. No Unified Data Protection Law
Unfortunately, Vietnam does not have a national data protection law. The country follows a legal framework for protecting personal data based on multiple decrees, regulations, and acts.
This is a major setback for foreign companies planning to invest in Vietnam as there’s no dependable law to protect their intellectual property rights.
2. Low English Proficiency
Another major roadblock to business process outsourcing is the low English proficiency of the majority of the Vietnamese population. Even though English is the official working language in this country, it’s primarily spoken by foreign-educated professionals.
Vietnam also scored a low score of 66 out of 120 on the EPI English Proficiency Index in 2021. The language barrier can become a problem for engaging with an outsourced employee or software developer in business English.
3. Time Difference
Vietnam is 11 hours ahead of the United States and 7 hours ahead of the UK. Now, some companies may benefit from the time difference as it allows them to offer services to customers round the clock.
But when it comes to software development outsourcing like DevOps and agile development, you may often need to collaborate with your outsourced team in real-time. Time zone differences in such cases could become detrimental to effective communication.
Overall, the benefits of outsourcing to this Southeast Asian nation outnumber the drawbacks.
If you wish to go ahead with outsourcing or offshore software development, the next section covers the top five companies you can connect with in Vietnam.
Wrapping Up
While Vietnam offers substantial outsourcing advantages, selecting this country as your outsourcing destination ultimately boils down to your business needs and requirements.
Overall, Vietnam is a good contender for software development outsourcing in Southeast Asia due to its cost-effectiveness, socio-economic stability, vast talent pool, favorable investment environment, and resilience to the recent pandemic.
Some of the biggest tech names like Intel and Microsoft are already leveraging these benefits.
If Vietnam is on your outsourcing destination list, use the information we covered here to understand all the nuances of outsourcing to this nation and then make an informed decision.
Via biz30.timedoctor
