Software Outsourcing to Vietnam: A Major Challenge

Submitted by tomo on December 2, 2011 - 11:10pm

This post comes out of a conversation I had with my friend Prithvi, who has years of experience in the outsourcing industry both here and in China and other countries.

Outsourcing is a huge industry here in Vietnam. It solves several problems for Vietnam. First, it brings in much needed income. Second, it does so without requiring a high ratio of expensive imported inputs (compare this to making shoes which are exported for a cheap price, but most of the costs come from materials which must be imported). Third, it helps advance domestic use of technology, which should make all industries more efficient.

Customers have a choice when choosing a destination for their software outsourcing needs. Why do they choose Vietnam? The primary reason would be cost. Vietnam has a low cost of living (which is rapidly being degraded by endemic inflation) and thus a low labor cost. A rule of thumb is that an Indian engineer can make half what an American engineer makes, while a Vietnamese engineer can make still half of what an Indian engineer makes. India, which has made a name for itself as a global leader and destination in software outsourcing, can now look to Vietnam as a supplier which they manage.

Another reason that companies choose Vietnam for outsourcing is the pool of talent. Young Vietnamese people see the IT industry as a large source of employment with attractive salaries even with little experience. The wages and work conditions certainly beat working in a factory. And their parents view education as an investment worth pouring money into.

But education is only a piece of what can make a Vietnamese outsourcing industry successful. A complaint about the American university system for software engineers is that years are spent studying theory and little time is spent learning practical knowledge. In Vietnamese universities and training centers, practical knowledge of the most currently in-demand technology brands such as Microsoft .NET or PHP are taught. However, there is still a gap between what is learned in school and what global industry best practices are now being used. Students learn how to build web sites using PHP, but they don't realize that even a PHP-based website nowadays isn't just hand-coded in straight PHP.


Another massive failing of the education system is in foreign language. The largest market for offshore development shops looking for customers, especially well-paying ones, is the English-language market. Furthermore, nearly all software technology comes from the US, and even if not then the developers still use English to write all their documentation (nginx might be a notable exception). All programming languages use English keywords. Generally, programming books, which cost up to $100 in the US, can be pirated online as ebooks, or copied at local photocopy shops, which is a normal practice for distributing textbooks in Vietnam. But the number of texts in Vietnamese will always be far less than those in English, and nevertheless be behind the curve. So English language competency is key for any developer who wants to pick up basic skills on their own, and then do further research on blogs, reference sites, and community-edited answer sites like stackoverflow.

In English language skills, other Asian countries have an advantage. Hundreds of millions of Indians already speak English, many using it to communicate with each other. It's a similar situation in the Philippines, both countries with a large number of regionally popular local languages where English is a main lingua franca. In Malaysia, like India a former British colony, English is a commonly used tongue which receives support from both the government and business communities.

So the Vietnamese outsourcing industry has a bit of a disadvantage when it comes to language. Despite English language centers booming in the country, where increasingly affluent families are able to afford relatively expensive instruction from substandard schools, most Vietnamese students are only able to obtain competency in English through persistent self-learning. Distribution of English language publications is restricted and English-language television, which could easily benefit tens of millions of young people, is limited rather than promoted.

Without sufficient language abilities, the industry depends on a select few who have mastered the language enough to interface over written communications like email wth their foreign clients. For face to face, video, or in person communication, a great potential source lies in the overseas Viet Kieu community. Viet Kieu not only can speak English in a way that minimizes miscommunication, they understand the culture and how to find and sell to customers, especially through their existing networks. Despite government hurdles, a lot of Silicon Valley Viet Kieu have come to Vietnam to start businesses.

On the bright side, a growing sector of Vietnam's software industry is in Japanese outsourcing. Japanese companies are already here in Vietnam, primarily in manufacturing. But with a growing number of students choosing to study Japanese instead of or on top of English, Vietnam can become Japan's chosen destination for its outsourcing needs. While some Japanese companies still use English as a lingua franca within their Vietnamese operations, by making use of Nihongo possible, Vietnam can level the playing field with some of their neighboring competitors.

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Jason N. Moffat (not verified)

In terms of economical growth, Vietnam has a fair advantage and knowing the Japanese economic stability, Vietnam would never left behind.

Other Asian countries like India and Philippines have proved it's worth in the outsourcing industry to the point that an Australian BPO company became the largest provider of home-based careers - yes, careers. This makes me wonder that if a Japanese company invest in Vietnam's talent pool, sooner or later, it would catch up with the mentioned countries.

Software Outsourcing Services Providers Blog (not verified)

You made some decent points there. I looked on the internet for the issue and found most individuals will go along with with your website.

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