Vietnam: A Rising IT Outsourcing Destination

In recent years, Vietnam has emerged as an attractive destination for IT outsourcing, particularly in the information technology (IT) sector. The combination of cost-effectiveness and a high-quality workforce has drawn global businesses looking to optimize costs and enhance operational flexibility. However, outsourcing in Vietnam also comes with challenges that require careful consideration.

Overview of Vietnam’s IT Outsourcing Market

• Geographical Location: Southeast Asia
• Time Zone: Indochina Time (GMT +7)
• Population: 98.17 million (2021)
• GDP per capita: $3,684
• Key Industries:
  • Electronics
  • Steel
  • Food and beverage processing
  • Agriculture
  • Tourism

Despite being one of the fastest-growing economies in Southeast Asia, Vietnam remains a lower-middle-income country. This creates a favorable environment for accessing globally competitive talent at an affordable cost, contributing to the increasing popularity of IT outsourcing.

Popular IT Outsourcing Services in Vietnam

• IT staffing outsourcing
• Software development outsourcing
• System maintenance outsourcing
• Infrastructure management outsourcing

IT Outsourcing in Vietnam’s IT Industry

Vietnam’s IT industry generated $136.1 billion in revenue in 2021, doubling the figure from 2016. Additionally, major tech giants such as Intel, IBM, Samsung Display, Nokia, and Microsoft have invested in Vietnam, reinforcing its reputation as a regional technology hub in the Asia-Pacific. These achievements have positioned Vietnam as a top destination for IT outsourcing.

For further insight, Vietnam ranked 6th in Kearney’s 2021 Global Services Location Index. This index evaluates a country’s IT outsourcing potential based on criteria such as financial attractiveness, skills & availability, business environment, and digital capabilities.

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Opportunities for IT Outsourcing in Vietnam

1. Cost-Effectiveness

Vietnam offers high-quality IT outsourcing services at competitive costs, enabling businesses to optimize budgets without compromising quality. The affordability of Vietnam’s IT market is primarily due to lower salary requirements for software engineers compared to other countries. As a result, Vietnam has become a potential IT outsourcing hub for businesses looking to expand and develop advanced technology applications at the best costs in the region.

Vietnam ranked 5th in the “Best Countries to Outsource in 2020” list by MarketInsider and is well-known as a cost-effective destination for offshore software development services. Depending on skill set and experience, Vietnamese developers charge between $14 and $40 per hour. Leveraging top-tier software outsourcing services in Vietnam can reduce operating costs by up to 90% compared to outsourcing in the US and by 50% compared to China. Therefore, investing in Vietnam’s software industry is a strategic financial decision, offering both cost savings and access to skilled software developers.

2. Young and Talented Workforce

With a young, dynamic, and highly skilled workforce, Vietnam meets the demand for quality talent in IT outsourcing. Vietnamese IT professionals are on par with those from leading outsourcing countries like China. The following charts highlight the capabilities of Vietnam’s IT developers.

3. Business-Friendly Environment

The Vietnamese government has been actively supporting businesses, particularly in the technology sector, through favorable policies and administrative reforms.

Foreign companies may have concerns about the rigidity of a communist political system, but in reality, this system provides a stable and secure foundation for the country’s rapidly growing economy. The Vietnamese government is making efforts to modernize and create a more business-friendly environment.

Vietnam welcomes foreign investment, making it easy for international organizations to set up businesses. Additionally, the government plans to establish 20 more IT training institutions, collaborating with businesses to provide short-term training programs for young professionals. This initiative aims to equip them with practical skills and keep them updated on the latest technologies.

Challenges of IT Outsourcing in Vietnam

• Language and Cultural Barriers: Differences in language and work culture may lead to misunderstandings in communication and project management.
• Time Zone Differences: Vietnam operates on GMT+7, which may pose challenges for coordination with partners in Europe or the US.
• Infrastructure Limitations: While Vietnam has made significant improvements, infrastructure in some areas still lags behind the high demands of large-scale IT outsourcing projects.

Who Should Consider IT Outsourcing in Vietnam?

• Small and Medium Enterprises (SMEs): Businesses looking to optimize costs while maintaining high service quality.
• Startups: Early-stage companies that need to scale quickly on a limited budget can benefit from Vietnam’s affordable and skilled workforce.
• Large Corporations: Enterprises aiming to expand operations in the Asia-Pacific region can view Vietnam as a strategic outsourcing destination.

Conclusion

Choosing the right outsourcing destination depends on various factors and personal preferences. However, given Vietnam’s strategic location, skilled talent pool, and cost advantages, it is emerging as a reliable and attractive hub for IT outsourcing.

Despite existing challenges, Vietnam is making continuous efforts to become a leading nation in technology, particularly in software outsourcing services.