9 important pros and cons of outsourcing to Vietnam

1.6K

The outsourcing industry in Vietnam has grown tremendously in recent years, making it an attractive outsourcing destination for international companies. 

Today, Vietnam’s Ho Chi Minh city is regarded as one of the top cities in the world for software outsourcing. It was also ranked fifth in Kearney’s Global Services Location Index (2019).

But what factors help Vietnam stand out on the global outsourcing map? 

And are there any outsourcing challenges that business owners may face in Vietnam? 

In this article, we’ll answer these questions by sharing some of the key benefits of outsourcing to Vietnam and the challenges you may face. We’ll then cover the top software development companies to outsource your business processes. 

Lastly, we’ll give you handy tips for selecting the right software outsourcing company in Vietnam or any part of the world. 

Let’s dive in!

This Article Contains:

(Click on the links below to go to a specific section)

• 6 significant benefits of outsourcing to Vietnam 
• 3 key challenges of outsourcing to Vietnam 
• 5 leading software outsourcing companies in Vietnam 
• Tips for choosing the right outsourcing company in Vietnam 

6 significant benefits of outsourcing to Vietnam

The software outsourcing industry has become a powerful force in the Vietnamese economy in recent years. With more than 6000+ IT companies, this small nation in Southeast Asia is a key player in the global IT outsourcing market.

But it isn’t the only industry this country caters to. Vietnam also offers outsourcing services in: 

• Accounting and finance.
• Payroll.
• Human resource.
• Customer Service.

Let’s look at the key benefits that attract foreign companies to Vietnam for software development and business process outsourcing.

1. Cost savings

One of the primary advantages of outsourcing to Vietnam is the availability of skilled tech talent at low costs. The rates are significantly lower than hiring the same talent in the United States or other popular outsourcing destinations like China or the Philippines. 

According to the CIO magazine, foreign companies could save almost 90% of costs by outsourcing software development to Vietnam. For example, the cost of hiring a senior developer in the United States is around $65-$130 per hour, while it costs only $20-$45 per hour to hire a Vietnamese developer. 

Moreover, according to Outsource Vietnam (an outsourced agency), the cost of outsourcing software development to Vietnam is almost 1/3rd cheaper than India.

For this very reason, Vietnam was ranked 5th in the “best countries to outsource” globally by MarketInsider (2019.)

2. Young, educated population

According to Statista, Vietnam had a working population of approx. 74.3 million in 2020, with 40-45% under the age of 35. Vietnam is also amongst the top countries with the highest adult literacy rate (95.4%) in the Asia Pacific.

To keep its young population employable, the country has around 1900 vocational training centers. 

Moreover, realizing the rising demand for software development outsourcing, the Vietnamese government has prioritized excellence in engineering and science.

Today, Vietnam offers technical training in different programming languages via more than 250 universities and 187 technical schools. As a result, Vietnam gets around 400,000 IT engineering graduates and 50,000 IT students from its institutions every year. 

That means that the country is well equipped to meet the skilled workforce demands of employers who wish to outsource to this country. 

3. Socioeconomic stability

Compared to several Southeast Asian nations, Vietnam is relatively more socio-politically stable. Vietnam was also ranked 12th as the safest country in the Asia Pacific region by the Global Peace Index 2020.

This means that foreign companies can expect to do business in this country without any threat of large conflicts or unrest. 

Vietnam’s economy has also grown and flourished over the last 20 years. According to the World Bank, Vietnam is expected to recover from the pandemic and witness a GDP growth of 5.5% in 2022 from 2.6% in 2021.

4. Favorable investment environment

Vietnam’s new free trade agreements with the European Union and the United States, its robust IT infrastructure, improved logistics, cheaper labor costs, and a young working population have made this country a hotspot for Foreign Direct Investment (FDI.) 

Vietnam has attracted a whopping USD 143 billion from foreign investors over the past 10 years (2010-2019). It was also ranked 70th among 190 countries in the Ease of Doing Business in 2020.

According to tradingeconomics, the influx of foreign investment continues to stay strong, with USD 2.68 billion injected into the economy in January-February, 2022 (a 7.2% increase from the previous year). Singapore remains the top source of FDI for Vietnam, followed by South Korea and China.

Furthermore, the Vietnamese government has introduced Resolution 55 to bring USD 50 billion into the country as foreign investment by 2030. The resolution aims to amend the regulations inhibiting foreign investments and codify quality, efficiency, and environmental protection criteria. 

5. Presence of big IT companies

Several multinationals and tech giants already have a strong foothold in Vietnam by outsourcing their software product development, application development, and other IT support services. These companies include Intel, Microsoft, LG, and Samsung.

Other companies expanding and outsourcing their IT roles to Vietnam include IBM, Sony, Cisco, Bayer, etc. 

These names are proof enough of Vietnam’s capability of handling big outsourced or offshore software development projects. 

6. Pandemic resilience

While developed nations were grappling with the COVID pandemic, Vietnam was a star example of social resilience and technical fortitude.

Vietnam’s IT industry managed to stay afloat, and the country quickly overcame the crisis with quick thinking and robust contingency plans. In June 2021, Vietnam was also declared the largest country by population without any COVID deaths. Consequently, most IT professionals in Vietnam did not need to work from home anymore. 

Indeed, choosing Vietnam as your outsourcing destination has some great perks. But you should also consider the challenges of doing business in this country. 

3 key challenges of outsourcing to Vietnam

Here are the three main challenges you may face while handing over your business process to the Vietnamese outsourcing industry: 

1. No unified data protection law

Unfortunately, Vietnam does not have a national data protection law. The country follows a legal framework for protecting personal data based on multiple decrees, regulations, and acts. 

This is a major setback for foreign companies planning to invest in Vietnam as there’s no dependable law to protect their intellectual property rights.

2. Low English proficiency

Another major roadblock to business process outsourcing is the low English proficiency of the majority of the Vietnamese population. Even though English is the official working language in this country, it’s primarily spoken by foreign-educated professionals. 

Vietnam also scored a low score of 66 out of 120 on the EPI English Proficiency Index in 2021. The language barrier can become a problem for engaging with an outsourced employee or software developer in business English. 

3. Time difference

Vietnam is 11 hours ahead of the United States and 7 hours ahead of the UK. Now, some companies may benefit from the time difference as it allows them to offer services to customers round the clock. 

But when it comes to software development outsourcing like DevOps and agile development, you may often need to collaborate with your outsourced team in real-time. Time zone differences in such cases could become detrimental to effective communication.   

Overall, the benefits of outsourcing to this Southeast Asian nation outnumber the drawbacks. 

If you wish to go ahead with outsourcing or offshore software development, the next section covers the top five companies you can connect with in Vietnam. 

5 leading software outsourcing companies in Vietnam

The outsourcing industry in Vietnam is booming, with several companies scaling up to meet the global software product development demands. 

Some of these companies are even offering software outsourcing services to tech giants like Abbott, Panasonic, Microsoft, AT&T, Intel, etc. 

Here are the top five Vietnamese software development companies you can reach out to: 

1. Saigon Technology

Saigon Technology is a leading Vietnam-based agile software outsourcing service provider with offices in Ho Chi Minh and Da Nang cities. 

This outsourcing company was awarded the Certification of Excellence in Software Outsourcing in 2019 and 2020 by the Vietnam Software Association. 

Key features

• Familiar with different software development methodologies such as agile, scrum, DevOps, lean, and more.
• Offers outsourcing services like custom software development, mobile application development, and cloud migration services. 
• Has 250+ software engineers in its Ho Chi Minh and Da Nang offices.
• Offers expertise in technologies like ReactJS, Java, PHP, Ruby on Rails, and AWS. 

2. FPT Software

FPT Software is a global IT outsourcing service provider headquartered in Vietnam. The company has 30,000 employees present across 26 countries. 

This software development company has partnered with more than 600 companies, some of which are Fortune 500s.

Key features

• Offers software outsourcing services in smart factories, digital platforms, artificial intelligence, IoT (Internet of Things), BPO, etc. 
• Holds experience in industries like aerospace and aviation, automotive, banking and finance, and logistics and transportation.
• Has 4,000+ certified experts for platforms and technologies like AWS, Azure, Predix, Cloudera, etc.
• Follows the agile approach to validate ideas and provide prototypes within a week.

3. KMS Technology

KMS Technology is another leading offshore software development, consulting, and testing service provider. The firm has offices in Ho Chi Minh and Da Nang cities in Vietnam.

KMS Technology was awarded as one of the top 10 ICT Companies In Vietnam in 2021 for its excellent offshore software development services. 

Key features

• Has expertise in the software and healthcare technology industry.
• Offers software development services such as application and platform modernization, cloud app migration, mobile application development, and quality assurance.
• Partners with all major cloud providers and is proficient in most tech stacks (combination of software development technologies.)
• Offers technological consulting on artificial intelligence (AI), machine learning, cloud computing, and more. 

4. Orient Software

Orient Software offers the capability and experience to offer custom software development for any project size. It’s headquartered in Ho Chi Minh city and has a branch office in Da Nang city.

This outsourcing company has completed over 200 projects and has more than 100 clients worldwide. 

Key features

• Uses the agile process for providing customized software development.
• Has a pool of tech talent with experience in technologies like React, ASP.NET, TensorFlow, etc. 
• Offers software development services like UI/UX design, cloud computing, big data, web application, desktop application, and mobile application development. 
• It’s an ISO 9001 and ISO 27001 certified company.

5. Savvycom

Savvycom is an agile development outsourcing company headquartered in Hanoi, Vietnam. It’s ranked amongst Vietnam’s top digital technology firms. 

This software outsourcing company also grabbed a place in the top 30 global mobile app developers recognized by Clutch in 2017. 

Key features

• Offers outsourcing services like web application development, mobile app development, cloud computing, and DevOps.
• Services industries like eCommerce, retail, healthcare, education, entertainment, and enterprise management.
• Has a cross-functional group of experts with 20 years of experience in software development.
• Adopts a scalable resource model to help meet client demands quickly. 

While each company listed above offers its own set of benefits, you should consider a few things while hiring an outsourcing company.

Let’s find out what they are.

And if you want to dig deep, here’s a comprehensive guide on outsourcing software development. 

Tips for choosing the right outsourcing company in Vietnam

Before hiring a third party to take care of your business process, you need to be aware of three things: 

• Your software development priorities.
• The performance indicators you’ll use to assess the company.
• Your growth expectations from the vendor. 

Keeping these factors in mind, here are some questions you need to ask the prospective 

outsourcing company: 

• Will you face a language barrier with the outsourced employee? If yes, how will you overcome it? 
• Do the developers have relevant knowledge, skill-sets, and industry experience? 
• Does the company offer expertise in the required technologies? 
• Do they offer compliance to quality assurance and testing protocols? 
• What are the development methodologies used by the company? 
• What is their pricing model, and does that fit your budget? 
• Does the company have a similar work culture to yours? 
• Does the company offer source code security and intellectual property protection?
• Have you done a reference check for the IT services the company claims to offer?

That said, you should ideally use a specialized vendor directory to source the right outsourcing or offshore outsourcing company in Vietnam rather than rely on a generic search engine query. 

You should also ensure that the outsourcing company is not suspiciously cheap as it can fail to provide high-quality solutions. 

Wrapping up 

While Vietnam offers substantial outsourcing advantages, selecting this country as your outsourcing destination ultimately boils down to your business needs and requirements. 

Overall, Vietnam is a good contender for software development outsourcing in Southeast Asia due to its cost-effectiveness, socio-economic stability, vast talent pool, favorable investment environment, and resilience to the recent pandemic. 

Some of the biggest tech names like Intel and Microsoft are already leveraging these benefits. 

If Vietnam is on your outsourcing destination list, use the information we covered here to understand all the nuances of outsourcing to this nation and then make an informed decision.