Vietnam emerging as strong alternative to traditional outsourcing markets

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Visual from FPT Software website
Visual from FPT Software website

Driven by lower costs and an explosion of technology startups, Vietnam has surpassed India and China, to emerge as one of the top Asian locations for global outsourcing sector.

Leading the trend is Vietnam’s based FPT Software, which is one of the top 100 global outsourcing provider. In 2014 alone, the company won a deal with the US-based satellite broadcaster DirecTV, ahead of Indian competitors. It was the first Vietnamese company to acquire an European tech firm, RWE IT Slovakia.

Many Japan based clients have shifted to FPT Software for offshore services instead of Indian or Chinese firms. In fact, the growth in new markets has helped FPT Software achieve a revenue of VND2.9 trillion ($134.9 million) in 2014, increasing some 35 per cent compared to a year earlier.

Also Read: Startup Review 2014: Vietnam tech firms find success, expand overseas

Along with FPT Software, a spate of other Vietnam based firms have emerged as offshore service providers to the international corporations. These include, Lac Viet Computing Corp – which serves foreign banks for cloud and mobile service, TMA SolutionsTinh Van Group, and Logigear Vietnam.

The contribution of these tech firms has helped Vietnam climb by four ranks over 2014, to become the world’s leading outsourcing market in early 2015, as compiled by real estate advisor Cushman & Wakefield.

From a report by Cushman & Wakefiled
From the Business Process Outsourcing (BPO) & Shared Service Location Index 2015 by Cushman & Wakefield

 

According to the agency, the Vietnamese government has succeeded in retaining a low cost, lower risk market, while significantly improving income, per capita. A series of educational measures and incentives have also been applied to promote the technology sector.

In addition, Vietnam is exceptionally attractive due to competitively low salary of the technically skilled workforce.”While not the cheapest outsourcing destination, Vietnam is still very competitive when compared to other global locations, especially, as wage rises in India and China. This is what contributed to it surging up the rankings, to take first place in 2015,” commented Richard Middleton, Cushman & Wakefield’s head of occupier services for Asia Pacific, Middle East and Africa.

However, India remains the world’s largest BPO destination by market size.

According to research and consulting firm Tholons, Vietnam is the chosen destination for more than 1,000 software companies from around the world.

It is Japan’s second largest software outsourcing partner. Last month, tens of Japanese firms in the digital content industry came to seek Vietnamese companies for partnership, as they said that Vietnam’s IT businesses offered them the best choice mixed with low costs and skillful workers.

Also read: Japanese cos seek Vietnamese digital content partners

Several years ago, when UK based outsourcing service provider Harvey Nash chose Vietnam for developing its software business, it was hardly the most obvious option. While India, Philippines or South Africa had quickly joined the business process outsourcing (BPO) market, Vietnam was still working with boosting exports of shoes, garments and bikes.

However, a few years later, Harvey Nash’s Vietnam unit became the group’s global hub for outsourcing, delivering resources, projects and talent into end markets worldwide.

Vietnam has large pool of talent, with a lower attrition rate. Tholons believes that the country will be a new emerging alternative to the traditional outsourcing countries like India, China or those in the Eastern Europe.

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