A Guide to Setting Up an Offshore Development Center in Vietnam

Trung Tran

Trung Tran

How to Set Up an Offshore Development Center

In recent years, offshore development centers have become an increasingly popular option for companies looking to tap into the global talent at a fraction of the cost of traditional in-house development teams. ODCs can provide access to a larger pool of developers and expertise in specific technologies and industry verticals. Remarkably, Vietnam has proven itself as the Asian hotspot for offshore software development services even during and after the peak time of the Covid-19 pandemic. According to a report on revenue of the software industry in Vietnam (2016 – 2020) by Statista, Vietnam reached $5.44 billion of the total revenue in 2020, which was $500 million higher than the previous year. As a result, more and more businesses in the U.S, Europe, Australia, and Singapore are turning to Vietnam as a strategic partner for building offshore development centers. This article will give you a concise checklist to go through to build an efficient offshore development center in Vietnam.

Checklist to Set Up an Offshore Development Center in Vietnam Successfully

Vietnam is one of the top emerging destinations for offshore development centers set up with a large number of ODC service providers. Therefore, if you are new to ODC, then perhaps building an offshore development center in Vietnam can pose a number of challenges. To best leverage the Vietnam ODC services for your business, you should consider going through our checklist to set up an offshore development team more efficiently.

1. Select the Offshore Development Center Model That Best Suit Your Needs

Before you rush into setting up an offshore development center in Vietnam, you’d better consider your requirements and targets to decide which ODC model will best fit into your business process. The ODC services can be broken down into two key models, and each one will serve your goals in different ways:

  • Managed ODC Services
  • BOT (Build – Operate – Transfer)

Managed ODC Services

This ODC model is designed for those clients who want to outsource all or most of the operations and services related to their Vietnam offshore development center. Within this model, clients will have their own offshore development centers built by remote third-party companies. The service vendors take on full responsibility for staffing, managing, and operating the development center. Clients are only responsible for providing the project works. As a result, this ODC model helps businesses to focus on their core competencies, minimize risks, and improve the quality of offshore teams (or services) while reducing overall costs.

BOT (Build – Operate – Transfer)

The BOT model is a popular offshore development center model. In this arrangement, you make a contract with an outsourcing company to build your ODC from the cradle to the grave, and once it is completed, the Vietnam ODC services provider will hand over the ownership of the offshore development center to your business. It is easier for you to understand the concept of this ODC model if we break the development cycle into 3 phases, comprising build, operate, and transfer.

  • Build: In the build phase, an outsourcing company in Vietnam is hired to build your offshore development center from the ground up in accordance with your requirements and needs. In other words, the clients will decide the team structure and sizes as well as other required infrastructure to serve their purposes, and then the middleman company will take care of the execution ranging from recruiting IT talent, training employees, organizing the cooperation processes, and setting up the operational units, eventually building an offshore development center as required.
  • Operate: In the second phase, the outsourcing vendor will take over the offshore development center and align it with the client company’s standards, regulations, and systems. This phase will cover the whole process from team composition, management, operation, and maintenance, to optimization until the offshore development center is completely functional and ready to be transferred.
  • Transfer: When the time is right, the outsourcing company will transfer the legal ownership of the entire offshore development center with all its assets to the client. In the post-completion process, the outsourcing vendor will provide support as an IT partner until the clients are fully autonomous with their ODC.

2. Choose the Right Outsourcing Partner for the best Vietnam ODC Services

After you have figured out which ODC model is more suitable for your business needs, the next step is to look for a potential Vietnamese service vendor who is able to accomplish your project. Currently, there are a great number of top IT outsourcing companies in Vietnam that specialize in offshore development center setup for global businesses. Each one has its own advantages, and it is up to you to make the right selection in accordance with your specific requirements. If you are still wondering about how to choose to right outsourcing partner for ODC setup, then here are a few critical factors to consider in a Vietnam ODC services provider before making an informed decision.

Technical Expertise & Experience

These are the first and foremost factors that make a good offshore development center. Since the service providers will be in charge of recruiting IT talent and building the offshore development team, it is important for these companies to have a good understanding of the technical requirements of your project as well as hands-on experience in managing ODCs. Moreover, they should also be capable of ensuring the quality of work and meeting deadlines. On the other hand, Vietnam has a large pool of top IT talent located mainly in Ho Chi Minh City, Hanoi, and Da Nang, so the outsourcing partner with good technical expertise and experience will be able to find, filter the best IT engineers and assemble a strong team for your ODC.

Track Record

To evaluate the technical expertise and experience of the outsourcing vendors, you should go through their portfolios. The list of the clients they have provided services for will tell you a lot about their abilities. Do they have experience in your industry? What kind of outsourcing services did they provide for their clients? Are there any clients with project requirements similar to yours? How satisfied are their customers with the quality of work delivered by the ODCs managed by the vendor? These are some key questions you need to ask when reviewing portfolios or when interviewing partners. The more carefully you check the track records, the easier it is for you to evaluate the potential candidates correctly. In some cases, you can contact some of the clients to get first-hand feedback about the outsourcing vendor you are considering before making the final decision.

Pricing

This is one of the most important factors when it comes to outsourcing services, and it is also the main reason why a lot of businesses across the globe outsource their IT needs to Vietnam. Vietnam is well-recognized for its high-quality yet cost-effective outsourcing services. As CIO Magazine suggests, the costs of IT outsourcing services in Vietnam are 90% lower than in the U.S. However, setting up offshore development centers is a long-term investment, and there may be unexpected costs incurred throughout the development process. Therefore, it is crucial for you to compare the price quotes of different vendors to choose the right ODC services. An ideal outsourcing partner for ODC setup should be the one that can meet your specific budget and project requirements without hidden costs.

Technical Support

The outsourcing partner you choose should be able to provide technical support before, during, and after the project is completed. In case of any unforeseen issues, the company should also have a team of experienced professionals who can handle the maintenance tasks of your ODC. In brief, technical support is also an indispensable part of an ideal ODC services provider.

Working Style

Before making the decision, you should take the working style and process of the vendor into consideration. Make sure that their working style is compatible with yours. As a client, you can require to customize the offshore development centers as you want, but it is hard for you to do the same for the way of working. Because the outsourcing vendors take main responsibility for building the ODC and recruiting employees, they have a tendency to implement their own working style to the new-founded team. Therefore, it is fundamental for you to get to know the working style of the outsourcing company and how they tend to shape the ODC to decide if their working style fits yours. In addition, you can be more active by showing the vendors the style of work you want for your upcoming ODC team.

3. Integrate the Offshore Development Team with Your In-house Team

The team of IT engineers working in your offshore development center should be able to seamlessly integrate with your in-house team. So, make sure that you and the vendor work together to help the offshore team quickly adapt to your company culture and business processes. The key to successfully integrating the offshore development team with your in-house team lies in efficient communication.

There are three elements straightforwardly affecting the communication between the ODC and in-house teams:

  • Time Zone: Make sure that there is a considerable time difference between the two teams so that they can have enough time to work on the project during their work hours. You can assign a project manager who will act as a bridge between the two teams to help the ODC team in Vietnam and the in-house team work together smoothly.
  • Language: Choose a vendor whose team members can communicate in English fluently. This will help avoid any misunderstandings and miscommunications during the project development process. For this, you have no worry since the IT workforce in Vietnam is well-versed in English.
  • Cultural Differences: There may be some cultural differences between the two teams, which can impact their communication. Therefore, you should make sure that the Vietnamese vendor you choose has a team of professionals who are familiar with your company’s culture and values. Or, you can hold virtual team-building activities to help all the team members get to know each other better and build a good rapport.

4. Track Performance & Feedback

We are getting close to the end of the checklist, and this is the last but not least point you have to go through when setting up an offshore development center. You should also track the performance of your ODC team on a regular basis and give feedback to help them improve their work quality. This will help ensure that your offshore development center is working as per your expectations. Furthermore, it will also help you identify any potential issues at an early stage so that they can be resolved quickly. This is not something that you can evaluate with only a glance; you will need reports to track the performance of your ODC team precisely. The ODC services provider should assign the project managers to report on the progress regularly. These reports should be detailed and easy to understand. They should also include the KPIs and metrics so that you can get an accurate picture of their work quality.

Why Use Vietnam ODC Services?

For those who are unsure why they should hire offshore development center services in Vietnam, you have more than a reason that will surely persuade you to consider ODC services in Vietnam. Here, let’s outline some of the benefits when utilizing ODC services in Vietnam.

Cost-savings

In a study by the University of Michigan Business School and the University of Pennsylvania’s Wharton School, it is estimated that businesses can save up to 14% of software development costs annually (Approximately $56,000 per project) when it comes to offshore outsourcing. This is one of the primary reasons why ODC services in Vietnam have become a popular choice, especially for small to medium businesses. When you set up an ODC in Vietnam, you can take advantage of the lower labor costs in the country. This is because the cost of living and doing business in Vietnam is relatively low when compared to other countries in Southeast Asia.

A Large Pool of Talented Developers with Strong Technical Expertise

According to a report by TopDev in 2020, Vietnam has over 400,000 IT workers (2019) and more than 50,000 graduates from IT institutions each year. Not only the quantity, but Vietnam is also well-known for the quality of its IT professionals. The same report by TopDev indicates that Vietnamese developers were ranked No.6 in terms of programming skills worldwide, voted by TOPCODER (2016), No.3 voted by HACKERRANK (2016), and No.23 voted by SKILLVALUE REPORT (2018). With such a great source of IT workforce in both quality and quantity, Vietnam has become the next top destination for the offshore software development center and custom software development services.

English-proficiency

The language barrier is always the biggest concern of foreign companies when they outsource to non-English-speaking countries such as Vietnam. However, that trouble is no more since English has become a nearly compulsory language in universities and colleges. Therefore, most Vietnamese IT workers are now able to communicate in English well.

Conclusion

vietnam-odc-services conclusion

Obviously, there must be reasons for offshore development centers in Vietnam to become an emerging trend in the IT industry. The potential benefits that an ODC in Vietnam can bring to both service buyers and software development companies have been well-documented. However, there shall be certain risks and challenges involved in setting up an ODC in Vietnam. These need to be put into careful consideration before making the final decision. With this simple yet necessary checklist to set up an offshore development center in Vietnam, you will be able to choose the right ODC partner for your business and get started easier.