For years, India and China have been popular destinations for outsourcing IT support. While both countries still attract seemingly innumerable businesses looking to move their support overseas, they are no longer the only major destinations in the region for outsourced IT. Vietnam has in the last several years begun to attract greater numbers of businesses looking to outsource IT needs, with more businesses choosing Vietnam for its robust and growing IT infrastructure—and this trend is likely to continue.
Why IT Outsourcing in Vietnam?
Outsourcing’s obvious appeal is cutting costs. While India and China continue to offer businesses developed IT infrastructure, they aren’t as cost effective as they once were. In 2018, India’s IT sector will experience single-digit growth for the third year in a row, and its jobless rate will climb for the second year. Influenced by both internal and international forces, India’s $150 billion outsourcing industry now faces uncertainty.
But it’s not just costs that are steering companies from India to Vietnam. For one major IT services provider based out of the United States and with offices in Ho Chi Minh City, Vietnam’s culture of workplace loyalty has influenced attrition rates between 6 and 8%. Contrasted with India’s 20%, the company sees expanding their IT services further into Vietnam. And it’s not alone; industry titans Microsoft, Samsung, LG, and Intel are continuing to invest heavily in operations in Vietnam. Why? The answer is multifaceted.
Growing IT Infrastructure
Though significant outsourcing in Vietnam is relatively new, its allure is growing—and causing concern for India. While it has a way to go to provide the scope of modern tech infrastructure in India, Vietnam has much to offer businesses that outsource there. When considering wage inflation, salaries, real estate costs, and other factors, Vietnam appears particularly attractive. And with 30-50% less in terms of cost of operations than India, many businesses are seeing Vietnam as not only a country in which to do business now, but for years to come. With a growing GDP, high technical talent, modern tech infrastructure, and high retention rates, the country will continue to attract global companies, as well as further develop its already-strong IT infrastructure.
Challenges of Outsourcing in Vietnam
While Vietnam is steadily gaining traction as a premier country to outsource IT support, it still has its challenges. The World Economic Forum’s 2017 Global Human Capital Report ranked Vietnam 64th out of 130 countries—eight spots below its 2015 ranking. And for companies who need to establish large-scale IT outsourcing, that option isn’t yet available; for a multi-thousand-person operation, Vietnam is still years away from offering such infrastructure.
But there are signals that this could be changing. Vietnam is dedicated to further developing its STEM (science, technology, engineering, and math) fields, and that may be no more evident than Cornell University advising the development of a major university in Hanoi and Fulbright University adding a campus in Ho Chi Minh City.
To get a better sense of the challenges of (and opportunities for) doing business in the country, organizations outsourcing in Vietnam should establish teams on the ground and develop relationships to better understand the Vietnamese culture before setting up shop in the country. This can benefit businesses by allowing them to optimize recruitment, understand the political landscape, tax code, and to ensure appropriate licenses and documents.
If your organization is considering IT outsourcing in Vietnam, reach out to Velocity Global today to learn how we can help with Vietnamese talent acquisition and establishing a presence in the country.