Outsourcing software development is the driving economic force of many emerging countries. India and China are well recognized as the industry leaders for outsourcing software development, due to their experience and human resources. Alongside with these two powerhouses is Vietnam, which is quickly emerging as a software outsourcing destination and a global IT hub.
Outsourcing to Vietnam is gaining recognition as a cost effective, high quality software development solution in Asia. CIO magazine suggests that outsourcing to Vietnam saves up to 90% of costs, compared to developing software in the United States of America. Even better, when compared to India, developing software in Vietnam costs between one third and one seventh times cheaper. These are very convincing figures for companies to start venturing their offshore development to Vietnam.
Is outsourcing a wise choice for your business?
Those who are new to outsourcing may be concerned that overseas firms are unable or unwilling to produce quality work, to communicate with the onsite teams, and/or to meet established milestones and goals with the aptitude and excellence when compared to on-site workers. Local problems include language barriers, difficulty with establishing and maintaining contact, as well as other issues might make outsourcing seem too risky as an option. But there are plenty of outsourcing companies that focus not only on delivering low-cost solutions to their clients, but also ensuring that these solutions are of the best quality, to exact specifications, with utmost dedication, and meeting all deadline requirements.
Vietnam presents a wise choice for modern outsourcing needs with its proven track record of stability and high concentration in the IT field, with university graduates already familiar with Western business practices and values, and can communicate with clients in English with little to no cultural clashes.
The benefits of outsourcing to Viource Vietnam, Anderson Vietnam estimates that outsourced person in Vietnam is only $20,000 per person compared to $40,000 per person in India.
In Vietnam, labor costs 90% less than in the U.S., which means more funds for development. According to MarketsInsider, Vietnam is ranked 5th in the “Best countries to outsource to in the World in 2019” list.
The government of Vietnam recognizes and promotes the importance of education and training. Today the country has a 96% literacy rate and 80% of the country’s college graduates hold degrees in the sciences (Vietnam Economic Times). This makes Vietnam an exceptional country for outsourcing technological projects, because the highly educated population has a high level of scientific and technical literacy.
The labor force also has much lower turnover and much higher stability than most other countries that are active in outsourcing. Overall, companies in Vietnam have an IT-related turnover rate of less than 5%, whereas in many other countries, such as India, this turnover rate can be 10% or even higher. Ho Chi Minh is considered to have “significantly low attrition rate” and “strong labor pool” as two main reasons for the city’s inclusion in its list of the top 50 outsourcing cities in the world.
Common outsourcing destinations in Asia-Pacific are often plagued by instability. Consider, for example, the 2006 coup in Thailand, the Kashmir conflicts between Pakistan and India, and the Sri Lankan military’s struggles against the Liberation Tigers of Tamil Elam. There are many U.S. travel advisories that warn Americans against traveling to these areas, but fortunately Vietnam doesn’t share these countries’ woes. In fact, Vietnam is a very stable country, which creates a hospitable business environment for outsourcing.
Vietnam’s economy is healthy and growing rapidly, with a GDP that, according to CEIC, grew an average of 7.4% in the six years leading up to 2005. This is the second fastest GDP growth in all of Asia, as published in the New York Times article, Vietnam’s Roaring Economy Is Set for World Stage, on October 25, 2006. FDI (foreign direct investment) was almost US$5 billion in 2005, which makes a favorable comparison with that of other countries that are popular destinations for outsourcing work.
Because 95% of Vietnam’s population is ethnically Vietnamese and more than 80% of the citizens do not identify themselves with any particular religion, Vietnam is largely free of ethnic/religious conflict. A 2003 UNDP (United Nations Development Programme) study concluded that Vietnam had one of the most secure environments for investment, given the conflicts in Iraq and the surrounding region. Likewise, Vietnam was ranked as the safest among the 14 countries in the Asia-Pacific Region by the Political and Economic Risk Consultancy in Hong Kong (Berth of a Nation in Time, autumn 2002).
The current government has held power since Vietnam’s 1975 reunification, meaning that there have been more than 30 years of political stability in the country. The last major conflict with a neighboring country was almost 30 years ago, in 1978. Two American presidents (Bill Clinton during his presidency and in 2006, and George W. Bush during the APEC summit) have visited the country, and Bush met with several top officials including the president, prime minister, and Communist Party chief, thereby underscoring the country’s political stability.
Vietnam has had a free market since its centrally-planned economy was reformed through “doi moi” thirty years ago. Today, Vietnams’ policies create a warm and welcoming business environment for foreign investment. The country became the World Trade Organization’s 150th member in November of 2006, thanks to a vote of the organization’s General Council.
Unlike many Asian languages, Vietnamese uses the Latin alphabet, just as English does, which makes it relatively easy for Vietnamese speakers to learn English. English is the second most popular language in the country, and the majority of Vietnam’s college graduates have high proficiency in English. Consequently, most IT workers in Vietnam are able to communicate easily in English when working on outsourcing projects.