Vietnam - in pole position to be tech outsourcing leader

With new trade deals in place and big investments in education, CIOs and CTOs may want to consider Vietnam for digital development.


In recent years Eastern Europe has gained an enviable position as one of the world's leading outsourced technology services markets. With a young, highly educated population that has a well-deserved reputation for hard work, the governments of the former communist European states have invested in education to ensure the next generation is not just digital natives; they are digital leaders. Global banks, media, technology and professional services firms have flocked to the region, but with the rising cost of living in Eastern Europe, Vietnam is emerging as a region CIOs and CTOs are considering for outsourcing and partnerships. Like Eastern Europe, Vietnam offers a well-educated workforce in a nation that is investing in the skills of its youth.

Vietnam's economy grew in 2020; like a number of Asian nations, Vietnam responded well to the Coronavirus pandemic and hasn't recorded anywhere near the number of deaths of countries like the UK or USA. As a result, Vietnam's economy is expected to grow by 6.5% in 2021. In recent years Vietnam has attracted major manufacturers such as Honda and Toyota in automotive, as well as electronics majors Canon, Samsung, Intel and Nokia. But it is Vietnam's growing software and digital economy that is getting the attention of CIOs and CTOs. Tech giants like Microsoft have moved in, retailers Uniqlo, as well as outsourcing leaders NashTech from the UK and Denmark's Netcompany. Research organisation the Oxford Business Group predicts that the digital economy in Vietnam could reach a value of US$25 billion by 2025, a forecast made before the pandemic. Vietnam's professional response to the virus could well boost that, as large companies look for well-led nations to be central to their business plans.

Education, education, education

Vietnam's software workforce grew by 10% each year between 2011 and 2015, according to the Vietnam Software Association (Vinasa). "There is no doubt that what attracts businesses to Vietnam is the rate card, but what convinces them to stay is the quality of the personnel," says Paul Hunt, International Pre-sales Director at NashTech. He adds that there is a low staff attrition rate and that, unlike some Asian outsourcing nations, the Vietnamese are not afraid to challenge a client. "CIOs find that very refreshing."

"It's 100% about cost," says Andrew Thornberry, Managing Director of 30KFT, an Australian transport management software provider. "When we started, we were looking at a ratio of 1:5 - I could hire five developers in Vietnam for one in Australia. You need to be realistic about the cost-benefit. I estimate that on average, a Vietnamese developer is about 60-70% as effective as an Australian developer, so as long as the ratio is better than that, then it is worthwhile."

"They have a very loyal culture, and they are paid and trained well," says James Fairhurst, Group CIO with Atlanta Group, the specialist insurance broker business for motorbikes, motorhomes, caravans and sportscars in the UK. "Demand for a place at University is very high in Vietnam." Thornberry in Australia agrees with the UK Group CIO on loyalty, important to 30KFT as the Vietnamese operation is owned and operated by the Australian business, but says it has taken a number of years to develop the culture whereby the Vietnam team challenges them; the MD sees too much hierarchy in evidence across Vietnam.

Mike Altendorf, a digital and business growth advisor who has helped leading media and financial services firms form outsourced partnerships, says of the education and skills in Vietnam: "We found that there is lots of people available, but they don't have the quality of Eastern Europe, so you have to find the best people and then invest in training. But, Vietnam is easier to work with than other Asian destinations." He adds that the universities in Eastern Europe are deeply technical, which benefits CIOs looking to recruit talent.

Oxford Business Group describes Vietnam as boutique when compared to India or the Philippines but expects the outsourcing sector to continue to grow, especially with rising demand from Japan, the USA and the UK. The UK signed a trade agreement with Vietnam earlier in 2021 that could well see Vietnam win a considerable amount of technology work from the UK.

"In Manchester and in Stoke, we are competing with Bet365 and Vodafone, and you are held to ransom by developers," insurance CIO Fairhurst says. Via an existing relationship with recruitment firm Harvey Nash, Fairhurst was introduced to the NashTech business. "They are our Vietnam team, we don't really see them as NashTech, and it is important that they feel like part of the Atlanta Group family," he says. 

Fairhurst says the loyalty and quality of skills have put Vietnam ahead of the UK and East European options for him and his organisation. "We looked at UK based firms, and they were just not cost-effective, and the contractors were just not invested in what we wanted to do. We also looked at Eastern Europe, but all of the big players are already there," he says of needing access to high-quality technology skills. New squads are being spun up in Vietnam to take on infrastructure refresh programmes Atlanta Group requires.

NashTech has been in Vietnam for 20 years and has 700 staff in Hanoi, the Vietnamese capital and 1100 in Ho Chi Minh City, 300 work on business process outsourcing, but technology development makes up the bulk of the workforce. Hunt of NashTech says the teams are skilled in Microsoft .Net, Java, OpenSource and Lamp stack technologies. "We have introduced Centres of Excellence with specialisms so that our teams talk and work as a community and create a philosophy of self-improvement," he says. "CIOs say this is the last chance they will give outsourcing, and then when they work with Vietnam, they find it really refreshing."

Traditional outsourcing challenges

As the business community has learned, organisations cannot outsource problems, the issue has to be dealt with, and outsourcing has to bring additional skills, cost savings or solutions to the obstacle.

"The different time zones remain a challenge, so we have had to adapt our shift patterns to get a larger overlap of work times," says insurance CIO Fairhurst. "Simple things like a clock on the wall showing Vietnamese time, and you have to take time to on-board people, but it has worked out well."

Thornberry says language barriers remain and that chat technology are the most effective way to communicate with the team rather than a call. He adds that there are significant differences in attitudes to 'compliance' in Vietnam in order to secure essentials like a business licence, and the Australian entrepreneur has been threatened with business closure in the past.

Advisor Mike Altendorf argues that CIOs could not expect to have an entire digital product developed and delivered from Vietnam, whilst they could from Eastern Europe.

NashTech says many CIOs forget to add Vietnam to their consideration list when looking to outsource in Asia. As part of the UK listed Harvey Nash Group, Hunt says CIOs like the security that comes with working with a business that can guarantee good levels of governance on issues such as working conditions. 

A straw poll of CIOs in the forum this scribe chairs found that the majority of CIOs that had used Vietnamese tech services were pleased. With the Vietnamese government pledging to invest over $400 million into education, including learning languages and in particular English, Vietnam looks set to become a technology powerhouse in the same way as Poland has become Europe's tech leader.

With a highly educated workforce, Vietnam will seek to make the most of new trade deals and opportunities.