Vietnam: A Smart Software Outsourcing Destination

  • Vietnam is quickly gaining popularity in the IT outsourcing world due to strong fundamentals.
  • Hiring software programmers remotely in Vietnam is a reliable, budget-savvy option.
  • Potential challenges to outsourcing in Vietnam are not as great as they may initially appear.

A Rising Star in the Information Technology World

Less than twenty years ago, the internet barely existed in Vietnam. Now, as in most modern parts of the world, it’s becoming an integral part of life—especially for the country’s increasingly young and urban population.

Despite Vietnam’s short-lived relationship with the internet, the country has quickly advanced to be an ideal location for IT outsourcing. In fact, Vietnam was recently ranked sixth in global software outsourcing according to consulting firm A.T. Kearney—a major jump from even just a few years ago.

This may come as a surprise to many readers, but it’s no mistake that IT outsourcing in Vietnam is booming in popularity. Many factors, both organic and intentional, contribute to the country’s growing strength in the IT industry.

Tech giants, including IBM, Intel, and Microsoft have established firm footholds in the country while countless small and medium businesses are constantly sprouting up in Vietnam’s increasingly bustling cities. Japanese companies, especially, have recognized Vietnam’s IT potential and have recently invested in 54 new IT projects representing a whopping 19.6 percent of foreign investment into the country, totalling in the billions of dollars.

These are just a few examples of a sector that is just beginning to shine.

From here, we’ll take a look at why Vietnam is a good choice for IT outsourcing, and the factors that contribute to its place as a rising star in the IT industry.

Positive Economic and Demographic Trends

Vietnam’s economy continues to grow at one of the world’s quickest paces. Its annual GDP has more than doubled over the last ten years, lifting millions out of poverty. Roughly half of Vietnam’s population is under 30 and the country is rapidly urbanizing, especially in major cities like Hanoi, Ho Chi Minh City, and Danang. This means that not only is there a vast labor pool to draw from, but there’s also an overarching positive economic trend that lends itself to a modernizing and expanding economy.

Far from being the agrarian backwater it once was, Vietnam is fully entering the modern era. Its cities are undergoing a vast transformation into cosmopolitan and competitive economic centers with vibrant and diverse economies.

One of the greatest symbols of the country’s transformation can be seen in the ubiquitous tech-savvy youngsters obsessed with their latest smartphone, tablet, or computer. The popularity of new software and technology is no less here than in any developed western country. In fact, newcomers to the country would be stunned to see the similarities between the online habits of Vietnamese youth and the youth of most western countries.

A Young and Eager Workforce

There are some significant differences that set Vietnam apart from western countries, however—and from countries that many consider competitors in the world of outsourcing.

A recent study demonstrated some interesting findings among IT workers in Vietnam—especially those who plan to remain loyal to their company. The insight gained is valuable in helping understand the mentality of Vietnamese IT workers, and what makes them tick.

  • 84% of Vietnamese IT workers chose the field because they love computers
  • IT workers value learning opportunities and growth—a large majority of those who plan to stay in their current job for more than a year mentioned both categories as important
  • While many workers would choose to work in product companies as compared to outsourcing companies, there is an overwhelming preference for working for foreign-owned companies versus Vietnamese companies. Thus, outsourcing companies have an edge against Vietnamese companies due to a worker’s expectations of greater opportunities for growth.
  • Vietnamese are excited to work with foreigners. Again, this is largely due to their expectations of growth and learning in their field.

Companies that treat their employees well can generally expect great loyalty from them, since a stable income, combined with future opportunities, is highly prized in Vietnam.

A Low Cost of Living, A Low Cost of Hiring

Vietnam is certainly still a developing country, but it is doing so rapidly. Nonetheless, its GDP per capita is far less than half of regional competitor Thailand, for example: wages in Vietnam are low compared to the rest of the world.

However, the comparatively low incomes in Vietnam change dramatically when one looks at its purchasing power parity (PPP)—essentially, GDP per capita as adjusted for cost of living. Vietnam’s PPP per capita is roughly three times its GDP per capita, meaning that a dollar goes far further in this country than it would in many others. Spending any amount of time on the ground in the country would give a quick demonstration of how much this matters.

For those companies who are looking to outsource their labor, this is fantastic news. It means that a fully-qualified software programmer could be hired for as little as $12 per hour—a bargain for any western company looking to hire a programmer. It also leads to an attractive salary for any local IT worker in Vietnam: a win-win situation.

Strong Investment in Education

There are plenty of these software programmers available. One of the main reasons behind this is Vietnam has made leaps and bounds in its education over the past two decades, and the results show. In the 2015-16 PISA (Program for International Student Assessment) survey, Vietnam ranked 21st out of all countries surveyed, on par with Australia and ahead of supposed educational behemoths like the USA, France, and Sweden. The test measures scores in mathematics, reading, and science, and has been used as a benchmark for education for more than twenty years.

In addition to Vietnam’s vast improvements in its educational system, there are more than a hundred thousand Vietnamese students who study abroad each year. This gives them not only access to some of the world’s top schools, but also exposes them to cultures other than their own. As anyone who has travelled or lived abroad knows, exposure to other cultures is crucial to working well with people from other countries.

Vietnamese students don’t have to go out of the country to get a world-class education, however. A full branch of Fulbright University was opened in Ho Chi Minh City in 2016—in the city’s Hi-Tech Park, no less—and Cornell University is advising VinGroup on the opening of a world-class university to be opened in Hanoi.

These come on top of already well-established RMIT (Royal Melbourne Institute of Technology) campuses in both cities, and represent milestones on the road to further educational development in the country.

A Government with Vision

Perhaps one of the biggest differences that sets Vietnam apart from both competitors and neighbours is its government. Although many still hold the view of the Vietnamese government as rigid and hardline socialist, that is now far from true. In fact, the government has a long-reaching view of continuing to transform Vietnam’s economy into a high-tech powerhouse. To wit, in 2012 the national government set a goal to have 45% of Vietnam’s GDP derived from the tech sector by 2020.

Whether or not that specific goal is met, the point stands: the government is betting hard on the country’s tech sector, and is thus keen to favor it.

Potential Challenges

Outsourcing always comes with its potential challenges. However, those challenges may be more minor than they originally appear when closely inspected.

The Language Barrier

While it’s true that Vietnam is not as proficient in English as India, Malaysia, or the Philippines, it still ranks seventh in the Asia-Pacific English Proficiency Index.

This index, however, ranks the country as a whole—the tech sector is overall far more educated in language than the general population. Combined with the fact that English is the lingua franca of the internet and the tech sector in general, IT workers are constantly exposed to English and have a much higher command of English than the average citizen.

The Cultural Barrier

The cultural barrier between Vietnam and western countries is shrinking by the day, especially since so much of its youth is deeply involved in the internet from an early age. Although the Vietnam War is the first thing that many westerners think of when they imagine the country, most young Vietnamese see the war as a history lesson rather than as a memory. In fact, the country is open and welcoming to foreigners, and old and young alike generally express curiosity and interest when meeting a foreigner.

The Time Barrier

Vietnam is indeed far away from many western countries, especially when it comes to time zones. It’s at GMT+7—5 hours ahead of the UK and France, for example.

Companies who outsource, however, should be well aware of the potential challenges and benefits of working with time differences. If managed correctly, time differences can lead to greater efficiency as long as communications are well managed.

The Final Word

Vietnam’s role as a major player in the IT game is just beginning. With the strong foundations already laid, the country and its citizens can be expected to increase their presence in the global IT realm.

For now, companies looking for a bargain in IT outsourcing need look no further than Vietnam. It’s the perfect combination of price, ability, and flexibility. As it stands, there are numerous foreign-managed firms in Vietnam that can help you make informed decisions about your outsourcing needs.