High growth potential for IT outsourcing in Vietnam

According to the October 2017 PwC article “Spotlight on Vietnam”, Vietnam Software Outsourcing is one of five business areas in Vietnam with the greatest potential for growth and investment in the near future.

In Vietnam, the Business Process Outsourcing (BPO) industry has grown considerably. According to figures from the Vietnam Software and IT Services Association (VINASA), IT outsourcing has grown 20-35% annually over the past decade, with last year’s industry revenue reaching USD 2.3 billion. Based in Hanoi, Adamo Digital is a growing, forward-thinking software company with a well-deserved position in Vietnam’s IT landscape.

Hanoi is among 10 most attractive cities globally in software production

With a population of 92 million, 65% of which are under the age of 35, Vietnam has one of the fastest growing economies in Southeast Asia. Given the growing political differences between China and Japan and with proximity and access to Japanese and Korean markets (where India and South America have challenges with time zone differences and culture gaps), Vietnam is well-positioned as a favorable destination for IT outsourcing. The cost of labor in Vietnam is approximately 50% lower than that of India, China and other Southeast Asian neighbours, and Vietnam benefits from much lower attrition rates amongst its labor force. 

In addition to tax incentives offered to investors and new policies benefiting human resource development, the Vietnamese government has sort out a replacement plan certain investment and development within the power sector to fulfill the requirements of raised industrial capability.

Although Vietnam’s BPO market is still in its early stages, there is reason to be optimistic about the potential for continued growth. According to the Global Services Location Index released by A.T. Kearney in 2017, which analyses and tracks the contours of the offshoring landscape in 55 countries, Vietnam ranked sixth out of 20 emerging markets with the highest potential for BPO growth. It jumped five spots in comparison to the previous year, surpassing the Philippines (seventh) for the first time. Vietnam has even outperformed China, becoming the second largest offshore software R&D partner for Japan in 2016. Yet Vietnam’s BPO revenue only accounts for 1% of the country’s GDP, indicative of the tremendous potential for growth in the BPO industry.

It is safe to say that Vietnam’s growth potential as an IT outsourcing destination is massive. Aside from software R&D, there is abundant talent available for other outsourcing services such as accounting, payroll management, customer service, and others. If local market players can leverage “latecomer” advantages, Vietnam’s growth in high-end outsourcing could be much faster than that of others in the region. For instance, Vietnamese firms could increase investment in knowledge process outsourcing, which requires higher expertise like market research, data mining, fraud analytics, strategic planning, and so on.

The Vietnamese government is committed to its vision for growth, with new regulations designed to attract foreign exchange and FDI in the IT industry. For example, Vietnamese government has welcomed the opening of several foreign-invested IT R&D centers, which can be considered the first building blocks of the IT ecosystem needed to support the Vietnam' Software Development sector. 

Business Process Outsourcing service providers in Vietnam hold many competitive advantages and are following a growth trajectory similar to and perhaps exceeding those of India and the Philippines. Continued engagement in large markets such as Japan and China will bring significant foreign investment to boost the development of high-tech outsourcing in Vietnam. Nevertheless, for further advancement in these services, BPO providers in Vietnam will need to transform through industry leadership and innovation to meet the ever-increasing demands of the market. This strategy is a core principal at Adamo Digital.