Vietnam is known as a “paradise” not only because of its world-class beaches and beautiful mountainous regions but also as an emerging powerhouse for outsourcing services.
What is Outsourcing?
It is a popular trend in the world today, being an effective tool to save time and money for many businesses. It can often be a way for companies to focus more on what they excel at, and outsourcing their other business functions into companies that Excel in their own way; for instance software development.
According to Forbes, “India has always been known as the world's largest ship for outsourcing IT’’ (BPO - business process outsourcing), “While India is struggling to figure out how to adapt to the changing needs of the world, Vietnam is emerging as a potential IT outsourcing Center.’’ This growth of Vietnam Outsourcing Services is due to several important factors.
History of Vietnam IT Outsourcing Industry: A Leap
In fact, Software Outsourcing in Vietnam is still a relatively new concept. More than a decade ago, Harvey Nash, Intel and Oracle started to invest in the high-tech workforce in Vietnam. In addition to the new policies which help attract IT entrepreneurs, the government of Vietnam has invested strongly in STEM education (Science, Technology, Engineering and Mathematics). As a result, Vietnam has educated, powerful and therefore quality technical engineers.
Technology industries and outsourcing services in Vietnam have been growing steadily. From 2016 – 2017, as announced by AT Kearney Consulting Firm about the ranking of the Top 55 most attractive countries for Global Outsourcing Services (GSLI 2017), Vietnam’s outsourcing services world ranking has risen up 5 levels from 11th to 6th. These favorable results of the Vietnam software outsourcing industry reflect the growing popularity of business process outsourcing service centers (BPO). Vietnam’s BPO industry reached 2 billion USD in 2015 and has grown at a rate between 20 and 25 percent annually for the past decade.
The boom of Vietnam in recent years has started making Vietnam competitive with India for companies like Intel, IBM, Samsung Display, Nokia and Microsoft who continue to invest in Vietnam.
The Amazing Parts of Vietnam
HIGH-QUALITY IN LABOR FORCE
Vietnam has a young, tech-savvy population with a strong interest in IT careers. The government policy strongly encourages investment in high-tech zones, software parks; tax incentives and the development strategy of high-tech human resources. Nowadays, Vietnam is developing its workforce to become highly skilled to compete with the neighboring countries in the region such as Singapore, Malaysia, and the Philippines. The size of this IT workforce is increasing each year with over 40,000 new Youthful graduates in IT engineering from more than 290 universities across the country.
(According to HackerRank)
LOYALTY IN CULTURE
One factor that is said to be favorable for IT outsourcing development in Vietnam is the staff loyalty. Due to the base values of Buddhism, which is the main religion, most people, even if not religious, still practice the core values of this religion. One of these values is that loyalty is rewarded. As Loyalty is such a large part and value of Vietnamese culture, the staff turnover in Vietnam is very low. Employee retention within the IT industry ranged from 94% to 92% within Vietnam. However, in India, this percentage has continued to fall to 80% in recent years, with India’s engineers ready to leave the country and pursue career opportunities abroad.
PROFICIENCY IN COMMUNICATION
One of the main problems with outsourcing can be difficult communication, however with the government has heavily invested an incentivizing the use of native English speaking teachers, and Vietnam’s Education System, over the past 10 -15 years, the English proficiency of Vietnam has increased to be equal or very close to that of France or Italy (According to the 7th edition of the English Proficiency index in 2017). Furthermore, a significant percentage of the predominantly young Vietnamese population is fluent in English. Due to French influence, the written language of Vietnam was changed to a Latin format the same as most languages in the West, meaning English is easier to learn than most other Asian countries, for the Vietnamese people, with most Young professionals speaking English to a high level.
(Vietnam ranked 34th at EF English Proficiency Index in 2017)
FLEXIBLE TIME ZONE
For most businesses, the challenge in Vietnam is geographic disparities. Most businesses believe that the time zone can be a problem, however, depending on the location, it can play to an advantage. Here is an example; the client will set the tasks at the end of their working day when they come to work in the morning, the Vietnam based company has completed the tasks, meaning the client has had work completed in what would seem 0 business hours. If properly managed, the challenges can become benefits.
The near 24-hour production cycle with the software development life cycle can be effectively doubled. Therefore, the time difference is rarely a problem, and sometimes even an advantage in situations when the development, maintenance, and testing work is best done at night.
POLITICAL AND ECONOMIC STABILITY
From the early 90s onwards, Vietnam has always actively looked to "external forces" for assistance in Economic Development. Vietnam joined the WTO in 2007, became a member of the APEC in 1998 and has hosted APEC in 2006 and 2017, an effort to engage foreign investment operations in Vietnam. The investment from the West and East (Japan) are considered good signals for economic growth, and during 11 years Globalization, this has given the people of Vietnam high adaptability.
Vietnam is the black horse of this industry, being one of the fastest growing markets and the most consistent, over the past decade. Furthermore, Vietnam’s GDP has grown by 7.4% on average each year, according to the CEIC in the same period. Vietnam is also one of the safest countries among 14 countries in Pacific Asia by restricting the minimum conflict to social politics and religion. From this, it can be claimed that Vietnam is a country with enough positive factors to form working environments that are safe and stable to ensure the project can be operated efficiently and on schedule, minimizing risks for companies.
OUTSOURCING PROSPECTS IN VIETNAM
While India is experiencing many challenges; Nasscom Trade Association said, ‘’India’s BPO Industry has just witnessed the biggest slump employment in the past seven years, while the unemployment rate in the Information Technology Industry (IT) is increased in the second consecutive year.’’
Vietnam’s outsourcing services have been busy developing and growing silently, gaining momentum in the background whilst its main competition’s light is diminishing.
Although Vietnam is a rising star, it isn’t without its challenges Although the quality of human resources is well evaluated, Vietnam’s offshore service companies still need to spend a lot of training time to become harmonized with the process of international work standards.
Recognizing this challenge, some software companies like Sioux that combine the best of both worlds, Dutch working processes united with the resources and people of Vietnam. Sioux High Tech Solutions – this Danang based subsidiary of a Dutch company, backed by a much larger company of 750+ employees, it’s safe to say that the formula works, with large clients having used their services: ASML, Philips, Thermo Fisher Scientific, Kulicke & Soffa, Canon, Zeiss, Technicolor, DAF, NIKO, Cisco and Bosch.
Vietnam is known as a “paradise” not only because of its world-class beaches and beautiful mountainous regions but also as an emerging powerhouse for outsourcing, a country that has captured the spirit of technology and is home to talented people.
Having over 22 years in software outsourcing industry, Sioux hope our sharing is valuable for you. Sioux support high-tech customers in developing and building smart modules and software with impact. We add value by way of our strong focus on quality, functionality, reducing development times, integrity and scalability. In doing so, we achieve sustainable competitive advantages for our customers at optimal prices. If you are looking for an innovative and effective software solution, you are welcome to ask for consultancy from Sioux HTS.
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