Outsourcing Software Development to Vietnam: Is It a Good Choice for 'Business Growth Hacking'?

Trung Tran

Trung Tran | 16/08/2022

Outsourcing Software Development to Vietnam

In the past few years, we have been witnessing the incredible disruption of software outsourcing on a global scale. In particular, the total revenue of the Vietnamese IT service industry hit 7.32 million U.S dollars in 2020, which is a million higher than the previous year. Additionally, it is projected to keep or even speed up its pace of development in the following years. Look like the world’s IT outsourcing demand is changing its direction from the giants like China and India to other destinations with more competitive advantages, and Vietnam is one of the top-rated options, among others. This partially explains the booming of software outsourcing companies across different regions of Vietnam and the massive increase of software outsourcing services within the country. In this writing, we will delve deep into the current status of the software outsourcing industry in Vietnam, as well as its potential to become one of the world’s leading destinations for outsourcing services. Before we jump into the main points, it will be easier to catch up with the ideas if we look back at the basic understanding of software outsourcing first.

What Are the Basics of Software Development Outsourcing?

Software development outsourcing is widely used by various interchangeable terms, ranging from simply software outsourcing, IT project outsourcing, and IT outsourcing to more specific ones like offshore software development. At its core, this is the act of delegating to an external third-party software outsourcing company the responsibility for designing, coding, testing, and maintaining software products on behalf of the business. The decision to outsource software development is usually made by businesses that have little or no in-house expertise or resources to complete a specific project within their company.

Software development outsourcing is no longer something new around here; on the contrary, it has become way too popular in the current IT world, especially due to the aftershocks of the Covid-19 pandemic and globalization. According to Statista reports, the fast-growing market for IT outsourcing services was valued at $1.2 trillion worldwide by 2022. And guess what? Software outsourcing is foreseen to keep its unstoppable pace across the borders, with the spending predicted to exceed $1.3 trillion at the end of 2023. While a lot of people agree that the concept of software outsourcing has been around for over 40 years, nobody is able to exactly confirm its genesis or the time when it showed up, but one thing all can be so sure about is the undeniable benefits it brings its stakeholders. Therefore, worldwide businesses, both IT and non-IT, are considering turning to custom software development services as an effective shortcut to business growth.

If previously, India and China are well-known as two giants dominating the ITO industry, now their positions are being steadily replaced with the presence of more new promising outsourcing destinations, such as Thailand, Cambodia, Philippines, etc., but typically among them, Vietnam is the most potential one. How come?

The Rise of Vietnam as the new Software Outsourcing Powerhouse in Asia within Recent Years

Listed in most and every one of the top countries for outsourcing software development, Vietnam has become the new IT outsourcing hotspot in the Asian Pacific region as well as on the global IT map. The nation was ranked #1 in Global Outsourcing Destination in 2015 (By C&W), #5 in A.T. Kearney Global Services Location Index in 2019, #13 in the Top 50 Digital Nation in 2019 (Tholons Services Globalization COUNTRY INDEX), and many other achievements.

Coming out of nowhere, Vietnam is currently the favorite IT hub for many multinational technology corporations, such as Intel, IBM, Samsung Display, Nokia, and Microsoft. These corporations are taking different forms of Vietnam software outsourcing solutions, such as offshore software development services, custom software development, web application development, mobile application development, business process outsourcing, IT staff augmentation, quality assurance (QA), and other digital transformation services to help them drive rapid business growth and meet their strategic business goals.

In addition, the Vietnam software development industry is receiving foreign direct investment (FDI) from various countries oversea. According to a recent research report of the Vietnam Software Association (VINASA), up to now, there have been more than 1,600 foreign enterprises investing in the Vietnamese IT industry, with a total registered capital of over $13 billion. The U.S is still the leading investor, followed by Japan, South Korea, Singapore, and China.

A report by NTT indicates that 45% of global corporations planned to outsource more work during the pandemic. This buys Vietnam – a rising IT outsourcing hub, more opportunities to get foreign direct investment from different regions across the globe, even in the “darkest time” of the business world. Obviously, while the pandemic nearly shut all kinds of business sectors around the world down, it seems not to cause any severe harm to the ITO industry worldwide as well as in Vietnam. On the contrary, the outbreak of Covid-19 even opens more opportunities for its unstoppable growth during the peak time of the pandemic and the further future of the ITO industry.

So, some of these eye-opening statistics and insights help us come up with the answer to the question ‘Is outsourcing software development to Vietnam a good choice for rapid business growth? And it is a yes. However, if you are not persuaded properly, then let’s go through the following reasons for utilizing software development outsourcing services in Vietnam.

Why Outsourcing Software Development to Vietnam Is a Good Choice

There is a multitude of reasons making Vietnam your reliable IT outsourcing “ally” in comparison with other destinations in the Asia Pacific region and around the world.

Competitive Production & Service Costs

Considered the first and foremost benefits of outsourcing to companies in Vietnam, the standard costs of software development solutions and outsourcing services here are much lower than in most countries, including China and India, as well as others in Southeast Asia. Specifically, the CIO magazine claimed the fact that the outsourcing costs of Vietnamese software development companies are 90% lower than that in the U.S and are 50% cheaper in comparison with China and 30% compared to India. This means wherever your business is located in, or even if you are on the other side of the globe, you can save a fortune if offshore outsourcing to Vietnam. The cost gap between Vietnam and other outsourcing destinations lies within the lower costs of living and working, including the expenses of office space rentals, employee salaries, as well as other associated business costs. All of these make the Vietnam software development outsourcing services more cost-efficient and the country a more affordable destination for businesses to consider.

A Vast High-quality IT Workforce at Hand

Speaking of the IT workforce, Vietnam dominates other countries in multiple aspects.

Vietnam Has a Rich & Sustainable Source of Tech Talent

The overhead costs for IT recruitment and the shortage of qualified software engineers in developed countries (E.g., the U.S) causes businesses of all sizes, especially startups, headaches in balancing budgets and the quality of staff. Meanwhile, this is not something you should worry about when it comes to finding IT resources in Vietnam. The country outnumbers other outsourcing destinations, such as Singapore, Cambodia, or Malaysia, with a large number of IT talent – estimated 430,000 software developers and around 1,030,000 individuals currently working in the ICT industry. Vietnam boasts a considerable number of approximately 50,000 tech graduates from 149 colleges and universities across the nation. Moreover, there are around 412 IT institutions generating around 12,000 new talented developers ready to join the ITO industry each year, constantly boosting the IT workforce of Vietnam. This makes hiring software developers in Vietnam much easier.

Vietnamese Software Developers Are Young, Dynamic, & Motivated

Besides the quantity, the quality of the Vietnamese IT workforce also sets the country apart from others on the market. Vietnam owns a force of young, fast-learning, and dynamic IT professionals with an average age of under 30, located mainly in Ho Chi Minh City, according to the Vietnam IT Market Report by TopDev. A majority of them are millennials and gen Z, making them promptly exposed to new emerging software development technologies, such as artificial intelligence, big data, blockchain, machine learning, cloud computing, virtual reality / augmented reality (VR / AR), etc. In addition, Vietnamese IT students have a solid foundation for programming skills thanks to the national obligatory STEM education system, and their backgrounds are secured with the exceptionally high admission rates at Vietnam’s IT colleges and universities.

Last but not least, the local software developers have diverse sets of technical skills ranging from Backend (E.g., C, Java, .NET, PHP, Python, NodeJS, Ruby/Ruby on Rails, Pers, Scale, and Goland), Frontend (E.g., Angular and ReactJS, HTML, CSS, JavaScript, WordPress, and Magento), and Full-stack to Database and so forth. This gives them the ability to adapt and conduct a variety of software development projects.

Vietnamese People, Culture, & Government Makes Software Outsourcing Easier

The culture and the Vietnamese people themselves make the country an ideal place to do business. The country is well-known for its friendliness, hospitality, and helpfulness. These characteristics help create an amicable and hospitable business environment, whether you are collaborating with a local outsourcing company or working with remote employees. Moreover, the majority of Vietnamese people can communicate fluently in English, which acts as a common language between businesses and IT outsourcing service providers, making communication a lot smoother.

That’s why hiring developers in Vietnam and outsourcing software development projects to this country can empower business growth with so many advantages.

The Business-Friendly Government

In recent years, the Vietnamese government has been striving to make the country more appealing to businesses and investors. The government understands that a strong IT industry is pivotal to attracting foreign investment and developing other sectors, such as Vietnam’s agriculture, construction, education, retail, and healthcare. Therefore, it creates a number of policies and regulations to facilitate businesses and the IT industry’s development, including tax incentives, e-government, and relaxed visa policies. A typical example is the National Digital Transformation Program (2025 - 2030). In brief, the ambitious program focuses on driving the country’s digital transformation and elevating Vietnam to one of Southeast Asia’s leading nations in terms of digitization. It means the government is providing all the best conditions for clients worldwide to do business and work with the leading software outsourcing company in Vietnam. In addition, high social stability and a rapid-growing economy make Vietnam an even better option for outsourcing IT needs and business expansion.

In conclusion, outsourcing software engineering needs to Vietnam buys businesses of multi sizes and shapes the advantages they may not be able to get when onshore outsourcing or hiring offshore software companies in other countries. As you can see, a lot of top software development companies in the Asia Pacific region are Vietnamese or based in Vietnam, which means you have so many options at hand. What you need to do is to choose the right outsourcing company that suits all your specific requirements and needs. You can simply pick the most potential one from the list of top software outsourcing companies in Vietnam. Don’t forget to approach their references and interview them to get more insights into their previous work and experiences before making an informed decision.

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