SGH Asia was one of the “first-movers” in Vietnam as we pioneered the off-shore software development and outsourcing model in Ho Chi Minh City, which has now become one of the largest software development teams in Vietnam. This team delivers our ISO Certified, award-winning, and cost-effective off-shore software development and outsourcing solutions, that power our worldwide Client’s digital transformations with the latest technology, design thinking, and agility, while also energizing their legacy systems to future-proof their businesses!
The trend of software outsourcing to off-shore locations has continued to grow dramatically over the past decade as companies from a myriad of industries and geographical locations, reap the many benefits including lower costs with improved performance, specialised technology and industry expertise, and the availability of highly educated resources, all resulting in an improved focus on their core business concerns. While India and the Philippines have been common destinations for IT outsourcing, we would like to share with you why Vietnam is the ideal location to start your digital transformation journey with software development and outsourcing solutions that keep you ahead of your competition in an increasingly aggressive global business environment!
Number 1: Access to a Large, Young, and Dynamic Population!
Vietnam’s development over the past 30 years has been nothing short of remarkable, experiencing rapid demographic and social change. In 2019, its population reached 96.5 million, a dramatic increase from the approximately 60 million in 1986 when Vietnam first began its economic reform by adopting the Doi Moi Policy (expanded upon later in this article). This 96.5 million population is expected to expand to over 120 million by 2050, while the present life expectancy of 76 years of age, is the highest among countries in the region with similar income levels. In addition, Vietnam’s population is young and vibrant with a median age of only 30 and 70% being under the age of 35. This means that the country’s 96.5 million people consist of a considerable market comprising of a tech-savvy and digitally active younger generation that is driving Vietnam’s exciting innovation ecosystem. With Vietnam representing a country of opportunity and growth, this young and dynamic population is on the move, quickly adapting and embracing changing trends as more people move to urbanised areas for employment and business opportunities.
Number 2: The Vibrant Pipeline of Highly-Educated Fresh Graduates!
Vietnam not only out-performs its neighbouring countries in the South-East Asia Region on education rankings, it also shines on the global stage with examination results contributing to its ranking of 48th in the World Bank Human Capital Index, which is the highest rating for any lower-middle income country. Vietnam spends the equivalent of 6% of its GDP on education, which once again, is a greater proportion than its neighbours and very high by global standards. The Vietnamese government has been pursuing educational reforms for over a decade, focusing on boosting private investment in higher education and improving vocational training, while reducing unnecessary student workloads. In addition to the government’s investment in educational institutions, observers of Vietnamese culture attribute strong test scores to a well-designed curriculum for maths and science, external tutoring programs, as well as cultural and historical factors, such as the work ethic prized under Confucianism and the desire to rebuild the country. With a total literacy rate of approximately 96% for adults aged between 15 to 35, universities and colleges are churning out over 300,000 fresh graduates every year, who are motivated to seek exciting career development opportunities. In fact, supply doesn’t meet the demand with the intense competition for university places, as the country undergoes a demographic boom.
Number 3: The High Level of Technical and Scientific Literacy!
With Vietnam being an uber-connected country, with significant mobile penetration in both urban and rural areas, this digital connectivity fuels an increased interest among students of emerging technological trends and advances. Vietnam now has nearly 500 universities, colleges, and vocational education institutions across the country, with curriculum’s dedicated specifically to information and communication technology (ICT) related expertise. In fact, nearly 80% of the country’s graduates achieve degrees in technical and sciences’ related programs, resulting in an exceptionally high technical and scientific literacy rate. With the Vietnam’s Government continued investment in education and training, especially in the areas of Industry 4.0 technologies, graduates are able to launch their careers in the ICT sector with strong theoretical and practical knowledge of software development languages and methodologies. This high level of technical and scientific literacy will continue to drive Vietnam’s rapid transition from low-tech manufacturing into a service-oriented economy, as the country’s ICT market increasingly gains traction and becomes the 8th largest provider of ICT solutions globally, providing stiff competition for both China and India.
Number 4: The Cost-Effective Development Rates!
It is no surprise that many global giants are outsourcing their software development requirements to Vietnam-based providers, when you perform a development cost comparison and cost-benefit analysis. Software development costs are 90% more effective compared to the US, which has attracted many large North American-based companies to outsource their software development functions to Vietnam. Even when you benchmark the Vietnam software outsourcing market against other popular Asian-based IT outsourcing destinations such as India or the Philippines, Vietnam still achieves a 50% cost-saving compared to India and a 30% cost-saving compared to the Philippines. Vietnam continues this development as an ideal destination in the software outsourcing market with even Western European-based companies identifying that development costs in Vietnam are 50% more effective than their traditional Eastern European-based providers. In addition, the Vietnamese government, understanding how important foreign investments are, maintains a competitive currency to facilitate its fast-growing economy, led by exchange rate-sensitive exports, which further results in cost-effective labour rates even compared to its South-East Asian neighbours. With the primary objective of software outsourcing being to reduce development costs, Vietnam is now gaining the upper-hand and living up to its reputation as a “small but mighty country” as it emerges as a global software outsourcing powerhouse.
Number 5: The Increasingly English-Friendly Business Environment!
While historically Chinese and Russian languages were taught as compulsory subjects in Vietnam schools, now English is the most popular foreign language with the majority of Vietnam’s university and college graduates achieving high proficiency in English communication skills. Unlike many Asian languages, Vietnamese utilizes the Latin alphabet, just as English does, which often enables Vietnamese students to acquire verbal and written English language skills quicker than many of their South-East Asian counterparts. As Vietnam’s business and political relationships with Western nations has dramatically increased over recent years, English has become more popular as a second language, becoming a mandatory subject in most schools and considered a vital criteria for achieving exciting employment opportunities. As part of the country’s educational reform, officials have adopted the Common European Framework of Reference (CEFR) to measure language competency with students expected to reach the level of B1 by the time they graduate. Furthermore, the EF English Proficiency Index (EF EPI) which ranks countries by the average level of English language skills amongst those adults who took the examination, place Vietnam 34th out of 80 countries worldwide and 7th out of 20 in Asia with a score of 53.43, which is considered a moderate proficiency. These rankings and scores will continue to rise dramatically as Vietnam embraces it’s burgeoning reputation as an international business destination and off-shore software development hub.
Number 6: The Burgeoning Start-Up Ecosystem!
The combination of a young and digitally-savvy workforce combined with the government’s initiatives to transform the country into a technology powerhouse, is not only positioning Vietnam as one of South-East Asia’s strongest-performing economies, but also as a “hot hub” for start-ups in the region. With the number of start-ups booming from 400 in 2012 to over 5,000 in 2019, Vietnam now has the third-largest start-up ecosystem in South-East Asia. With several tech giants establishing their software development hubs in Vietnam together with a fast-growing economy, a rising middle class, and world-class founders; the start-up ecosystem is attracting many seed and early-stage investors from around the world. From this dynamic start-up ecosystem, Fintech has emerged as one of the hottest opportunities raising as much as USD117 million out of 2018’s total start-up investment of USD899 million, with a focus on digital wallet and payment technologies, as well as insurance and investment, personal and SME credit, and wealth management. The biggest potential for Vietnamese start-ups lies in developing technology solutions that solve emerging-market problems, which the local software talent is perfectly positioned to fulfil. Vietnam is one of those unique countries where software talent has grown-up in an emerging-markets context making them familiar with the challenges faced by people in rural and less economically developed areas, compared with talent based in many Western countries. With this start-up and entrepreneurial ecosystem rapidly maturing, Vietnam continues to uncover and develop the next wave of software talent.
Number 7: The Strong Economic Growth & Stability!
In the 70’s and early 80’s, Vietnam faced an economic crisis which resulted in inflation rates increasing by as much as 700%. At the time, the staunchly Communist Government, was not only recovering from conflicts with both the United States and Cambodia, but was also experiencing difficulty carrying-out trade due to international embargoes. However, this all started to change in 1986 when Vietnam implemented the first of many dramatic economic reforms, by adopting the Doi Moi policy which established a socialist-oriented market economy. Doi Moi and subsequent reforms encouraged privately owned enterprises, overturned policies on collective farming, and recognized private land usage rights. Now, 35 years later, the spirit of Doi Moi lives on, as Vietnam is recognized as one of the world’s fastest growing economies by the World Bank’s Global Economic Prospects Report, regularly achieving year-on-year GDP growth of more than 6%. Not resting on its laurels, the Vietnam Government is further opening up its economy by reducing corporate income tax rates; easing business rules and regulations; boosting infrastructure projects in the areas of manufacturing, maritime, and multi-modal transportation services; and joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which the World Bank has estimated will increase its GDP by a further 3.5 percent annually. Even in the face of the Covid-19 pandemic, Vietnam’s resilience has been remarkable as new enterprise establishment, foreign direct investment (FDI), and GDP continues to record growth in its increasingly liberal economic system.
Number 8: Dynamic Foreign Investment Fueling a Technology Epicenter!
Despite the wide-reaching turmoil and economic challenges wrought by the Covid-19 pandemic, which have stymied the world, Vietnam bucked the trend in 2020 as its GDP grew at 2.91% and recorded positive growth in key areas of industrial activity. The key component of this economic growth has been the role of foreign capital, as efficiency gains, consumer demand, an expanding digital economy, and participation in multiple regional and global trade agreements, fueled Vietnam’s foreign direct investment (FDI). In fact, FDI project value in the first 11 months of the year was estimated at US$17 billion, bringing the total accumulated FDI stock value to US$382 billion across 32,915 projects. This upward trend has continued in 2021, with Vietnam receiving $4.1 billion in FDI in the first quarter, which was an increase of 6.5% from the previous year. With the country’s successful economic growth trajectory driven by FDI attractiveness, Vietnam is now rated as the world’s 8th leading provider of IT products and services, as the country continues to serve as a valued off-shore software outsourcing destination for global tech giants such as Apple, Microsoft, and Google. While the dual economic and health crises pummeling much of the world and crippling other nearby offshoring centres such as India and the Philippines, the Vietnam IT outsourcing industry remains a steady force of productivity and resilience. As the world seeks to learn from communities and cultures that have effectively managed the pandemic, protecting both lives and livelihoods, Vietnam is emerging as a shining example of social resilience and tech fortitude. Remaining stable, operationally efficient, and digitally-formidable, despite wide-reaching turmoil, Vietnam has been elevated as a global technology epicenter, continuing to provide support, services, and innovation to a world in crisis.
Stay tuned and follow us for more insights, as we present the “Top 10 Reasons To Choose Vietnam for Software Outsourcing!”