The Southeast Asian Growth tiger Vietnam is becoming a magnet for IT firms from the West. A unique combination of very low salaries – 30 % lower than in India – a stable regime and a well-educated population has made the country one of the new strong outsourcing destinations. However, with a total IT and software exports at 350 million dollars last year, Vietnam is still in the shadow of India, which exported 85 billion. Kroner in 2007.
According to TPI Advisory Services the communist country is interesting for other types of businesses than large multinational giants, which typically establishes itself in India – and has helped the Indian salaries to increase.
“Vietnam is not as interesting if we talk full IT service. The customer typically enters into a service contract and is supplied with a complete IT service. But it could be very interesting for smaller firms seeking to establish cooperation with a local partner on the project level. It will usually require that there would be some expatriate staff in the country, but the low wages means that you can afford a few more trips back and forth”, says Per Lund Pedersen, who is director of TPI in Denmark.
Advisory Services identifies a number of factors which make Vietnam attractive as an outsourcing destination. Besides the low wages and living costs there is a relatively high educational level, a strong economy in growth, protection of intellectual rights and a stable society without political or religious tensions. It has, among other things, attracted Intel, which is already building a large chip plant in Ho Chi Minh City.
“But there are also problems. The country’s internet connection to the rest of the world is slow and Internet speed compares poorly with the Danish broadband lines. However, it is a minor problem in typical software development work where there is no need for a constant and stable connection to the headquarters in Denmark”, said Per Lund Pedersen.
Once the code is finished, it means less if it takes 10 minutes or an hour before it is transferred – and if it goes badly wrong, it may be sent to Europe in a USB key.
Per Lund Pedersen nonetheless believe that IT outsourcing to Vietnam may be interesting for many Danish companies.
“It is a formidable idea, if you need resources quickly and cheaply. But we must always remember that it is far from home. Therefore, it is necessary to have some people on the ground who can keep an eye on the project” he says.