Vietnam Gearing up to be Next Asian IT and Outsourcing Tiger

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Outsourcing and BPO industry web site Outsource Portfolio does an in-depth analysis about Vietnam's potential to be the next outsourcing destination after India and China., the website which is a prominent outsourcing industry organ has come out with a definitive research( report on Vietnam, spelling out in detail the opportunities available to the nation in the realm of outsourcing with particular emphasis on IT outsourcing. The report addresses the key issues of the factors responsible in driving this growth, the role of the government, and the key operating facts, costs and risks involved.

According to the report Vietnam has had one of the highest rates of growth in the world second only to China’s over the last ten years, and this trend is set to continue for the time to come and this generally augurs well for the economy. That apart Vietnam has followed a highly successful policy of creating niche export markets, which could not be serviced by China. It is well positioned to do the same with IT outsourcing.

The fact that IT is the fastest growing industry in Vietnam and between 1995 and 2008 it has attracted investment from 332 overseas IT firms bringing in a total investment of US$2 billion gives one an idea of the growth trajectory. The total investment is IT is slated to touch a figure of $3.5 billion by 2013.

At present revenue from the IT sector is a minuscule 5 % of the country’s GDP which if the present annual growth rate of 40% continues would reach a figure of 2.5% of the GDP at $6.2 billion by 2020. A good indicator of the way things might shape up is the case of Ho Chi Min city, which houses some 12000 IT businesses earning US$1.9 billion or 40% of the country’s total economic revenue.

The report shares some revealing insights into the dynamics of the emerging IT sector of the country. For one the IT outsourcing industry in Vietnam is highly fragmented and of the 10000 firms licensed to provide IT services only 3000 are operational. That notwithstanding a lot of global players are present in the country including FPT Software with 2700 employees, CMC and Global Cybersoft. In fact a slew of global companies such as Accenture, Alcatel-Lucent, Bayer, BMG, Cisco, Sony, Oracle and so on have outsourced IT related work either directly or through third parties to Vietnam.

There have also been a series of critical mergers and acquisition between global and local IT firms. Cases in point being the one between Cap Gemini and IACP Asia and between CPR International and the Sara group. The Vietnamese government too as extended whole hearted support to the industry by way of liberalizing the investment environment around technology start ups and setting up more than 186 industry and five software zones that offer tax incentives, value added tax rebates and services for processing tax and business applications and relaxed rules pertaining to the entry and exit of expatriates. The government also plans to invest US$ 58 million by 2012 to boost the country’s software and digital content industry.

In terms of the regulatory environment the country fares moderately with a 40% of the country’s GDP coming from state owned enterprises. But the government is doing what it can to promote privatization including a 30% reduction in corporate tax for small and medium sized businesses. In terms of intellectual property rights Vietnam is at 77th position out of the 115 countries surveyed and could do with some improvement there. In network readiness too Vietnam has made rapid progress being at no 70 against India’s 54 and China’s 46.

In so far as infrastructure is concerned, Vietnam with its long legacy of war performed creditably at number 70. The government has pledged to spend 11% of GDP on further ramping up architecture. In terms of Human Capital Vietnam has the advantage of possessing a highly educated and well trained work force which takes quite well to computer training. Add to that the lower salary costs (30% to 66 %below India and China’s) and you are looking at serious competition. Vietnam is also making every effort to have quality benchmarks in place.

What makes it particularly attractive is the perception that it is a moderate to low risk country with a stable polity. Corruption and susceptibility to natural disasters were the down sides to an otherwise fairly sanguine outlook. You can find more information about Vietnam outsource potential from is the most prominent site in providing reliable information about outsourcing. It's main vision is to offer a platform for outsource professionals from all over the world to share their experience through blogs, articles, vendor analysis, and research reports. It provides honest and objective opinion on the globalization issues to its visitors and members. The website is the brainchild of Twin Cities,Minnesota based IT professional Mani Malarvannan who started the site in 2008 using the expertise he acquired by running his own IT consulting services firm Cybelink and very quickly made it the definitive voice of the BPO and outsourcing industry.


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Vipin Labroo
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