1. Overview of Asia outsourcing

The global market in outsourcing is booming, leveraging the economies of Asia countries. In the Asia outsourcing market, there are two most common types of outsourcing which are business process outsourcing (BPO) and information technology outsourcing (ITO).

• BPO is the practice of contracting with an external service provider to perform an essential business task to save money and increase growth including controlling labor and capital costs, increased efficiency, more agility, lower risk, and the ability to keep businesses focused strictly on their core business which can lead to greater success in the long run.
• Whilst, ITO is a practice where a company hires individuals outside their organization to perform its information technology operations such as mainframe hosting, desktop support, telecommunications installation, and maintenance, or maintenance and support of legacy systems. It is used in contrast to BPO.

ITO service providers analyze which type of technologies, storage, wireless, and support services are suitable in any organization, and fix essentials in minimum investment for maximum efficiency based on their expertise and knowledge. BPO, on the other hand, manages operational tasks like personnel management, customer service, and human resources tasks and financial functions such as bookkeeping and payroll processing.

With the overall regional growth, outsourcing in Asia is no longer just about cost-effective by sending business processes overseas. It has become a viable opportunity for multinational companies to quickly test these markets for the potential to set up remote operations there and to develop core-competency in different countries with a diversity of outsourcing services fields such as call-center, IT-solutions, consultancy, telemarketing, finance and accounting, HR-outsourcing, data-entry, ect.

Many Asian countries are continuously providing outsourcing support whether on-shoring, nearshoring, or offshoring like India and China which are well-known. Besides, there are also some countries recommended as the top IT outsourcing destinations in emerging and developing Asian countries such as Vietnam, Thailand, the Philippines.

The outsourcing industry in Vietnam has grown steadily for the past several years which is why outsourcing in Vietnam has become an attractive destination for businesses worldwide. After joining APEC in 1998 and WTO in 2007, Viet Nam has been performing its commitments to international economic integration with vigor. Vietnam opened the door to cross-border trade all over the world.

The 2017 A.T. Kearney Global Services Location Index ranked Vietnam in the top ten for outsourcing in the business environment, financial attractiveness, people skills, and availability of workforce.

2. Development of Vietnam’s Outsourcing

Vietnam’s Information and Communications Technology (ICT) sector has had an average yearly growth of 9.8% for the last five years with annual revenue of $110 billion in 2019, a 14% contribution to the country’s GDP. Thanks to its growing IT infrastructure, improving logistics and regulatory environment, and business-friendly economic reforms – it is now emerging as an outsourcing destination in the Asia-Pacific region.

Tholons-a leading full-service Strategic Advisory firm for Global Outsourcing and Investments. In the latest research report of Tholons Services Globalization IndexTM (TSGI) 2020, Vietnam IT Outsourcing ranked the ninth position in the top 50 digital nations.

The report of TSGI

Moreover, Ho Chi Minh City was considered as a Top Outsourcing City for 8 consecutive years (Tholons, 2009-2016) Vietnam is listed in:

• Top-ranked pioneering location and cost environment for BPO services in BPO and Shared Service Location Index (Cushman and Wakefield, 2016).
• The next BPO giant according to ‘Spotlight on Vietnam’ (PwC, 2017).
• Ranked 5th in Top 10 Global Locations for Offshore Services (Gartner, 2016).
• Ranked 5th in Global Services Location Index (A.T. Kerney, 2019).

The global technology community considers Vietnam as an ideal country to get quality software solutions at affordable prices. Being one of the best outsourcing destinations in Asia, Vietnam perfectly meets the expectations of a large number of international companies.

3. IT outsourcing services’ competitive edge in Vietnam

3.1 Young and highly-skill profuse workforce

• Vietnam has a young and populous country with 98 million people. 55 million are at working age and still growing. 60% of the Vietnamese population is under 30 years of age.
• Profuse IT proffesionals as a survey conducted in 2020, Vietnam has over 400.000 IT engineers working, 80.000 works in software technology. Ho Chi Minh City and Hanoi are two centers of developers where 90% are living.
• The vibrant pipeline of highly-educated fresh graduates with 50.000 IT students have graduated from universities and colleagues, 32% of whom work in software development and other outsourcing IT services in 2020.
• High level expertise are highly assessed in programming with the strength of Maths and Logics and professional working styles. The talent pool in Vietnam is continuously growing with more than 100,000 developers and 75,000 content specialists. The IT field is becoming increasingly attractive.
• As data from Topdev.com, around 7000 developers are offshoring among 21000 outsourcing. The number of outsourcing employees rose 3 times from 2018 to 2020 while offshoring rose 5 times.
• Low unemployment rate. The labor participation rate is at 77% and is considered one of the lowest unemployment rates worldwide. Vietnam is predicted to last until 2034: for every two or more employed persons, there is only one unemployed individual.
• Vietnamese Developers are good at English and communication. According to English Proficiency Index by Ef.com - world leader in international education, Vietnam is in the top 10 of Asia in using English in communication. The barrier of language is now narrower that boost the manpower development is stronger in the software outsourcing market in Vietnam.

3.2 Fast Economic Growth

• Vietnam has made many achievements, including quick economic growth and improved labor competence. The average GDP growth rate from 2010 to 2019 is 6.5%, 2020 is 2.91%.
• The growth in the economy increases the growth of the IT outsourcing industry. Vietnam has been more open to regional and global economies and attracts much more foreign investments. With low labor costs and tax incentives updated, Vietnam is a strong competitor in cost reduction to foreign business advantage.
• The country has enormous market opportunities for all types of business investments including outsourcing. It is forecasted to be among the Top 20 Economies in the World by 2050.
• Vietnam’s 2019 economic growth has shown fundamental strength and resilience despite the global slowdown and is considered as one of the fastest-growing economies in Asia – supported by export-oriented manufacturing and processing industry, robust domestic demand, rising FDI (foreign direct investment) flow, and high fintech investments.
• Top biggest technology enterprises such as Samsung, Apple, Google, Microsoft, Dell… set back-office outsourcing and run businesses in Viet nam. Many other foreign organizations are establishing a new enterprise, acquiring or investing in an existing local enterprise, companies, or setting up a branch or representative office or using contractual arrangements.
• Fast-growing economy facilitates growth of IT outsourcing market and business process automation. It helps outsourcing businesses earn profit, create more jobs, and provide operational efficiency. Outsourcing providers have more opportunities to cooperate with big global clients and achieve business objectives.

3.3 Competitive Labor Cost

• Vietnam’s low labor cost has continually made it a very attractive outsourcing destination for foreign investors and importers. Despite a yearly increase in its minimum wage rates – the new salary ranges this year is between $132 and $190 – it is considered more competitive compared to other countries in the region. The outsourcing rate working is $10 - $25 per hour which is the most competitive price in Asia while it costs $90 - $100 per hour in the US.
• Vietnamese Developers have a respectful attitude to work, are hardworking and always try to learn. The cost of living is cheap. Compared to the US or EURO, the living expenses in Vietnam are 5-time cheaper. That feature helps employers save a lot of money on salary. Salary of Vietnam Developer is around $1300 - $2000.

3.4 Stability and strategic location

• The country of a stable society and a rapidly growing economy. Vietnam is a peaceful and happy country which is one of the competitive advantages. Successful control of Covid-19 helped the Vietnam Economy keep growing. This stability allows foreign organizations to invest in IT outsourcing companies in the long term with the lowest risks and legal process outsourcing.
• Possesses a convenient geographical location that can be proven to remain an attractive investment destination in the region to create favorable conditions for foreign enterprises. Vietnam is now one of the top IT outsourcing countries with an important geopolitical location as well as an attractive outsourcing destination in Asia.
• The time zone is flexible to adapt to many time zones in different continents that helps increase the outsourcing jobs. Even Canada and America choose Vietnam for outsourcing. While they are sleeping, the work is completed overnight. It is also easy to travel from Vietnam to major city centers.
• The Vietnamese government has improved business regulations by strengthening its legal and institutional framework to free-up the economy, increase procurement rate, profitability, provide an efficient, transparent, and business-friendly environment for investors and business enterprises, currently ranking 70th among 190 economies for Ease of Doing Business 2020.

Conclusion

Vietnam has become the silicon valley in Asia. According to a report from Gartner - the world's leading research and advisory company in 2016, Vietnam is in the top 5 destinations for outsourcing due to the low labor cost, IT talents and high quality service.

There are numerous of the best IT outsourcing companies and startups in Vietnam which achieve a lot of success in providing outsourcing services in BPO and ITO including Mobytelab Solution with cost-savings and efficiencies.

Read more: Top 20 Software Outsourcing Companies in Viet Nam

We are striving to provide seemlessly many clients with hundreds of scalable end-to-end solutions and outsourcing software in numerous outsourcing activities including onshore, nearshore, or offshore outsourcing globally. The outsourcing development process is to be streamlined based on consistent methodology such as Agile methodology or Waterfall methodology. It helps to increase business value, achieve business goals. Vietnam is the ideal location to start your digital transformation journey with software development and outsourcing lifecycle solutions that keep you ahead of your competition in an increasingly aggressive global business environment.