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Software Industry in Vietnam – still small but with a bright future

Although the software industry in Vietnam is a young sector whose turnover does not appear impressive, the software industry (SI) might make other industries in Vietnam envy them for the level of attention it receives from the government. For at least a decade, Vietnamese officials have expressed a strong belief in information technology as a key to successful economic development, and acted accordingly.

companies and workers in vietnam software industry

Source: IT Industry Department, Ministry of Posts and Telematics of Vietnam

According to many sources, particularly (Carmel – 2003) who provided a highly useful taxonomy for classifying and comparing exporting nations, India, Israel and Ireland are in the top tier for software outsourcing, while Vietnam is classified as being in the fourth tier. Tier One countries, have numerous firms – in the 100s or thousands in clusters- actively producing software for export with export valued over $1 billion and have been in this industry for 15 or more years. Tier four countries by comparison have been exporting for five years or less, have companies in the tens of companies and have export revenues of less than $25 million a year.
With a population of over 80 million, Vietnam has strong potential in both market supply and demand. Although the SI’s revenue in 2005 of $200 million was far from expectations, the steady growth rate in the last five years of 25%, which is forecasted to continue through 2010, certainly unveils the Vietnamese government’s ambition and aspiration for technology advance in this heavily government supported industry.
According to Vietnam Economics News Online (issued on November 09, 2005), SI is currently the most subsidized economic sector in Vietnam. It currently enjoys many incomparable privileges including tax and investment incentives, such as low corporate tax rates, exemption from value added tax, exemption on tariff for imported materials that are directly used for the production of software, etc
By way of example, businesses involved in software production and services, both local and foreign invested, are exempt from corporate income tax (28%) for four years from the date they generate their first taxable income. Software products will receive a 0% Value Added Tax (VAT) and be free from export tax. Further incentives have been recently offered to assist with training support for significant software projects.

Currently, most software companies in Vietnam are small-sized, with exception of a few mid-sized enterprises (see graphs). Despite this, Vietnam has been quite successful in attracting numerous major big corporate and government names to outsource software projects to Vietnam. Among the names that have done so are Anheuser Busch, Bayer, BMG, BP, Cisco, Critical Path, Daiwa, Fuji, IBM, Merrill Lynch, Nortel Networks, NTT, the State of Oklahoma and Sony. All have outsourced software projects to Vietnam either directly or through third-party subcontracts.

software and services industry

software and services industry

In order to advance and attract more foreign investors and customers, Vietnamese software companies have strived to earn international certifications such as the ISO-9000 and Capability Maturity Model (CMM) of all 5 levels. In addition, Vietnamese authorities and agencies have been building and operating software parks, which often house not only Vietnamese software companies and joint ventures, but 100% foreign-owned companies as well.

Currently, Vietnam has 8 dedicated operational software parks . Three of these are in HCMC and the rest are in Hanoi, Haiphong, Dan Nang, Hue and Can Tho. Saigon Software Park (SSP) was the first software park in Vietnam started in 2001 and with technical support from CISCO is one of the countries most advanced. Quang Trung Software City, which was first approved in 2004 but opened in the same year as SSP – 2005 – is the other main software park. Quang Trung Software Park occupies an area of over 430.000m2 with an additional 10 hectares available for expansion. The area includes lots of green spaces and an attractive environment. It is reachable from the Tan Son Nhat International Airport in 15 minutes and from the downtown area of the City in 30 minutes. With the exception of Quang Trung Software Park and SSP, the majority of the other dedicated software parks are running at way under capacity and generally not at the highest level of efficiency as none of them are located in areas that to date have attracted considerable offshore investment. To this point, Ho Chi Minh City and Hanoi continue to be the focus of most software development and advanced education for the country as a whole.

Saigon High Tech Industrial Park

Saigon High Tech Industrial Park 2

Saigon High Tech Industrial Park 2

According to Mr. Nguyen Trong Duong, Officer of the IT Industry Department, Ministry of Posts and Telematics, all universities and other institutions graduate about 3,000 to 4,000 IT students every year, which accumulated to about 40,000 IT graduates by the end of 2005. Of this number, about half are software programmers. Known for their skills and diligence, Vietnamese IT students underline the potential of the future SI in Vietnam.
As mentioned above, the large population and burgeoning SI in Vietnam also indicate an underdeveloped yet probable market. Moreover, low production costs (Vietnamese software professionals are about half the cost of Indian equivalent software professionals and have much higher retention rates), coupled with the government’s obvious support and favorable incentives make Vietnam one of the most competitive markets for IT investors. Nevertheless, the Vietnam Investment Review (issued on June 26, 2006) also points out that increasing transparency on the software companies’ part, and more effective policies on the government’s part will help boost Vietnamese investing environment’s rating from foreign investors’ perspective, and hence, enhance the development of the industry.

Small U.S. and other software companies were the first to notice this potential and to actively reach out to Vietnam. Now major U.S. companies like Intel which has major operations in California, Hillsboro, Oregon and Arizona have also realized the potential and have chosen Ho Chi Minh City’s Saigon High Tech Park (SHTP - as the location for their chip first chip fabrication facility in Vietnam are also taking note. Vietnam has rightly realized that to get this sort of notice and to continue to build a dedicated core of IT professionals that more need to be done to support IT education in the Ho Chi Minh City region. As such, the National University of Ho Chi Minh City and Portland State University in Portland, Oregon ( are currently exploring collaboration in advanced IT training for National University Master and PhD students and also an innovative mixed education program leading to a joint degree or with substantial teaching instruction based on international education models.

The software industry in Vietnam is thus still in an early stage of development but the potential is already apparent. Further, government support for this sector and well thought out policies like the recent tie-up of the National University of Ho Chi Minh City in respect to improving IT education at the University and advanced degree level all bode well for the future. This industry is therefore one that bears continued attention and selective investment where conditions warrant.

From: Business In Asia


How Can A Company Benefit From Outsource Product Development?

The latest web application development has caught the attention of the entire business world. An enterprise prefers outsource development to boost the bottom line, save time and manage the cost effectively.
Web Application Development Get Lot of Attention
The latest web application development has caught the attention of the entire business world. An enterprise prefers outsource development to boost the bottom line, save time and manage the cost effectively. There are various reasons cited for the outsourcing the product, but one should know that when does it really make sense?
When does outsourcing make sense?
Outsourcing product development is needed when the company needs expertise and it doesn’t have full time involvement.
When the company doesn’t seem to have enough resource to complete the work.
When it’s difficult to manage the internal teams to do few or all projects.
When there is a desire of incorporating new approach in the product.
When the product development company want to find and evaluate the capability of the outsourcing firm.
When the company wants to know the methods and protocols of the outsourcing firm.
Reasons for outsourcing product development
To acquire expertise
The most likely reason for outsourcing to the product development services is to acquire expertise which is currently not available with the company. Expertise lacks because of any non-core activity or due to rapid rise in the demand which a company cannot fulfill. In both of the situation outsourcing is a wonderful way to plug the demand for expertise.
To build the additional resource
One of the clear reasons for outsourcing is to add the number of resource to the development team to end the project. When the internal team get pressurized and burdened they lead ineffectual product development thus additional resource are needed to support the project and the team.
To minimize the development costs
One of relevant reason for outsourcing is to minimize the overall development cost of the products. Outsourcing is a cost-effective measure and it cuts overall cost of employees such as taxes, benefits and salary, overall expenditure of desks, computers, hardware and software tools, supporting costs, risk costs etc.


The Benefits of Outsourcing Difficult Web Development Projects

he website development world has tremendously expanded over the past five years, and it doesn´t seem to be shrinking. If you´ve been in the web development field any length of time, you probably realize how much this field has grown and changed.

Simple HTML for many website developers is a thing of the past. Who would have thought that so many programming languages would be invented in such a short period? From simple HTML to PHP, XHTML, CSS, JAVA, FLASH, etc., etc., the list goes on and on!

Outsourcing, although not new to the business world, has quickly become a familiar term in the web development field for this very reason.

Your Niche Web Design Skills

Each website designer has an area of expertise that they´re very familiar with and have performed often. If you took website development in college, you probably focused on just a couple of aspects of development. No one college class teaches all the methods. Perhaps you are very savvy with flash and have created many websites using flash. Of course, there are plenty of potential web design customers in the Flash department, but what if you could expand to other areas of design that you know little about?

Expanding without Additional Training

Perhaps you´ve had the terrible experience of turning clients away simply because you didn´t have the skills necessary to complete their web project. If you´ve had to do this, don´t be too hard on yourself. Nobody has every skill in website development, but everyone in website development has at least one or a few skills!

You might ask, “How can I expand my business or extend services in areas where I´m not an expert?” As mentioned above, outsourcing has become a familiar term in the web development world for this very purpose. Outsourcing gives you an opportunity to expand your business without going to school for more training.

How Outsourcing Works

Outsourcing simply means that you are hiring a person who´s not a direct employee (and often lives out of the country) to complete a web design project for you. Instead of simply referring your client to a new company or individual, you´re actually becoming the middle man between your client and the skilled designer. You still make a profit, the person hired gets paid for their work, the client gets a completed project – and
you get to keep your client!

Even though you´re not skilled in an area of design, you can outsource the work to someone who is skilled in that area.

Outsourcing Your Difficult Projects

Every web developer understands that clients can be easily swayed when working on a project. Your client may hire you to begin designing in simple HTML, which is your area of expertise, but suddenly at midstream, the client has been convinced by an outside influence that PHP is the “way to go” with their website.

If this happens (and it does happen), you have three choices:

1. Tell the client that you´re going to have to continue in HTML, or you won´t be able to complete the project. You lose both the client and the remainder of your pay.

2. Try to convince the client that PHP is NOT the way to go – good luck!

3. Confidently discuss with your client the time frame, any additional costs, and what types of changes will need to be made to redesign the site in PHP. Once you reach an agreement on a PHP direction, you can outsource the work.

Obviously option number three would be best for you and the client. The client won´t have to start over with a new website developer. You´re already familiar with the client´s website needs, goals and business.

You´ll benefit because you get to keep your client and build a good reputation of being a problem solver. You don´t have to tell your client all the details of your outsourcing plans. You can, however, explain that you have a helper who is experienced in PHP, so the client will understand that you´re not working alone on his/her project.

Outsourcing Your Overflow

Another way to use outsourcing to your advantage is when you are so busy that you must turn clients away. If you´re turning clients away, it might be better to keep the clients and outsource the projects instead. You may feel that you don´t need the extra business, however, remember that there are always slow times in any business. The more faithful clients you have, the better! Also, you may offer additional services which can build a monthly income such as web hosting, site updates, etc.


VN enters top ten nations for software outsourcing attractiveness

VietNamNet Bridge – Vietnam, for the first time, ranks in the top 10 in attractiveness for software outsourcing in the world, announced the US-based AT Kearney consulting group.

According to AT Kearney’s research, Vietnam made the greatest leap in the rankings in Asia in attractiveness of software outsourcing, up nine grades compared to 2007.

AT Kearney’s ranking list was made based on consideration of the following criteria in 50 countries: services and IT support, customer service and IT application support. The three major standards were financial attractiveness, skills and human resources and business environment.

According to AT Kearney, Vietnam’s software outsourcing industry is growing robustly, particularly IT services. Japanese companies have chosen Vietnam as their partner for years and they give priority to Vietnamese service providers.

Vietnam is praised for its low labour cost; however, the quality and availability of human resources is inferior to some neighbouring countries.

Of the top ten countries, seven are from Asia, namely India, China, Malaysia, Thailand, Indonesia and the Philippines. Vietnam, Egypt and Jordan are present on the list for the first time.

In this year’s ranking, many Eastern and Central European countries like the Czech Republic, Slovakia, Hungary and Poland have fallen: Slovakia fell 28 grades and the Czech Republic 16.

Notably, Singapore tumbles by 35 grades, from 11th to 36th, due to the rise of inputs and the revaluation of the Singaporean dollar against the currencies of some countries in the region.

According to AT Kearney, the five countries of the fifty considered the least attractive in software outsourcing are New Zealand, Israel, Australia, Ireland and Turkey.



Outsourcing To Vietnam

Rising labor costs and tensions with China have have sent companies looking for labor in Vietnam, but Hanoi has its own set of serious problems.
Vietnam is viewed as a viable alternative to China for foreign (particularly U.S.) companies seeking to establish or increase their lower-cost manufacturing capacity.
This is due to the increasing costs of labor in China; rising Chinese taxes on foreign enterprises; difficulties with the business environment in China; and the perception among some U.S. firms that the political risk of doing business in China may increase due to rising U.S.-Chinese trade tensions.
However, over the long term, foreign firms seeking to expand their operations in Vietnam may discover that the Vietnamese workforce lacks crucial skills, due to problems with its education system.
Working-Age Population Surge
The workforce in Vietnam (defined as adults aged 23 to 65) is expected to jump by 23 million over the next 20 years, to 65 million. This should help make the country a viable alternative to China as a manufacturing center–if Hanoi can reduce the corruption and incompetence that plague its primary and secondary schools. Tertiary education in Vietnam also has problems, particularly in the quality of its science and engineering instruction.
Skills Shortage
A recent employer survey by Vietnam’s Ministry of Labour, Invalids and Social Affairs found that just 40% of the workforce had training of any sort. The majority of respondents experienced difficulty in finding workers with skills to match their needs. Among workers in their early twenties, nearly 80% had no formal job training before joining the workforce.
Education System Shortcomings
Approximately 40% of Vietnam’s population is of school age or younger (under 23). Yet the school system’s problems are acute:
Inadequate class time. An recent analysis by U.K. research group Young Lives, An International Study of Childhood Poverty, highlighted the fact that the Vietnamese school year is just 33 weeks and only 20% of children receive the international norm of at least five to six hours of class time per day. These figures are both significantly worse in rural areas, where children must help their families with agricultural work.
Out-of-pocket cost. In 1991 Vietnam made primary school education compulsory and free. However, its cost recovery policy initiated in 1992 shifted the cost burden from the government to the consumer for subsequent education: junior secondary school, senior secondary school and technical/vocational training school. The emergence of a middle class in Vietnam with sufficient means to fund rising education costs is hiding structural deficiencies in the system. Children of families with lesser means are sometimes forced to forgo secondary education entirely. Again, the problem is particularly severe in rural areas.
Low teacher pay. Low teacher pay has led to situations where educators have pressured students to participate in additional study activities in order to augment their meager official salaries. The practice was so pervasive that National Decree 242, approved in 1993, included regulations limiting “extra classes.” Only authorized teachers are now allowed to provide such classes, and primary school students may undertake no more than two extra lessons totaling four hours per week.
The education system’s shortcomings have created significant challenges for foreign investors seeking to recruit and retain prospective Vietnamese employees.
Not only should they expect to incur significant costs for training and development programs, they will also likely need to adopt creative methods to retain these employees once they are skilled and competent.
Also, as witnessed in India during that country’s services outsourcing boom, local labor markets will heat up as the economy grows. This will increase demand for the relatively limited pool of skilled workers, and boost employee turnover as employers engage in a bidding war for staff.


IT expert predicts VN industry will grow 30%

Patrick McGovern, chairman of International Data Group, which has provided communications and technology products and services for 120 million customers in 95 countries, paid an annual visit to Viet Nam to attend an IT exhibition. Viet Nam News reporter Vu Hoa talked with him about the group’s plans.
What is your assessment of Viet Nam’s IT development?
We often have studies and assessments on IT market growth rates. The world’s average rate is around 20 per cent and Viet Nam achieved that.
Over 16 years of operation in the country, we have found that Viet Nam has made an obvious advance in ICT development as well as e-commerce.
However, the most impressive development is in the communications sector.
Its number of mobile phone subscribers is five times higher than fixed ones. New technologies including third generation (3G) and upcoming fourth generation (4G) have made positive strides.
The group forecasts Viet Nam will be in a list of countries which have leading ICT developments.
What are Viet Nam’s strengths to attract foreign ICT businesses?
It is notable that there is a wave of big ICT enterprises looking for new and more suitable business environments. Mainland China is a market with several ICT production activities with high growth rates, resulting in a rapid wage increase of 25-40 per cent a year.
The increase rate in India was three times higher, at 25-30 per cent. Wage levels in the country are also three times higher than those in Viet Nam. This affects profits for investors and producers. They move their factories out of countries and find new markets.
The world’s leading IT company, Intel, poured US$1 billion into the country.
Viet Nam is one of the most attractive investment destinations with a favourable environment and policies as well as hard-working human resources. They are young and well-educated, with skills, determination and enthusiasm. Moreover, training fees for Vietnamese people are lower than other countries. I think Viet Nam’s ICT future growth rate would be 20 to 30 per cent.
How does your group plan to accelerate investment here?
Viet Nam is among countries which we give priority to in ICT investment. We carried out studies and the group achieved a yearly growth rate in Viet Nam of 35 per cent.
Advisors provided positive forecasts of Viet Nam’s ICT market. We believe its ICT development rate will be measured by the rate of new products.
IDG Viet Nam has expanded into IDG Indochina Group. We organised 17 conferences and seminars annually. We planned to expand to Indonesia and Singapore.
We always encourage and support the establishment of new companies to shorten the time of bringing products from laboratories to markets.
IDG Venture Viet Nam Fund, established in 2004 with a total capital of $100 million, invested in four such Vietnamese companies. Asset growth rate of the fund was 38 per cent a year. This has been the first venture fund in ICT Viet Nam.
Next year, we will establish the second fund with a total investment of $150 million. It is expected that by 2012, we will establish a $250 million development fund to support companies in their first two years of operation to expand their production. Total investment from IDG in the market will be $400 million.
In addition, the development fund will give support to businesses in the healthcare and retail sectors. We also plan to bring more ICT publications into the market, including special ones for CEOs and CIOs.
What is the criteria for the group to choose companies eligible for support from the funds?
We normally choose companies based on market demand for products, capital return capacity and time. In addition, we also consider their long-term development capacity and their human resources as well as existing assets.
The Vietnamese Government is building a project to turn Viet Nam into a powerful ICT country by 2020. So what direction should the country follow?
A study showed that as much as 40 per cent of a country’s GDP growth rate is due to education and training activities. I think Viet Nam should focus on ICT training and education to help the younger generation use and create complicated and sophisticated ICT products and services. It will also promote ICT domestic consumption. — VNS

From: Vietnam Business Aisa


IBM To Furnish Cloud Computing To Ho Chi Minh City

IBM has already established cloud computing centers in the Chinese cities of Dongying and Wuxi. In the former, the cloud will serve as a "smarter city" platform for development of services. In Wuxi, it will serve as a collective platform for software development. Now it's on to Ho Chi Minh City.

IBM has been selected by the software company, Quang Trung Software City, to build a cloud platform on which to base a "Smarter Government" in Ho Chi Minh City. That's the former capital of South Vietnam, Saigon, and still the largest city in Vietnam, with nine million people.

IBM is clearly testing its ideas on how to proceed with the cloud model on large and eager Asian customers. IBM will work with the city government to consolidate email systems and Web sites to a Quang Trung data center to promote more electronic government services.

IBM will work with the Ho Chi Minh People's Committee to establish a more citizen-centric government. It will seek ways to encourage collaboration and information sharing across agencies and government borders. It will seek information sharing forums on problems in the community. More government data and information will be made available through the shared resources of the cloud.

IBM didn't specify what hardware it would use to build the Ho Chi Minh City cloud, but in the Yellow River Delta Cloud Computing Center in Dongying, it used its HS22 blade appliance announced in June and built with Intel's Xeon 5500 processors, formerly known as Nehalem chips, with eight cores. Last year IBM built a cloud computing center in Vietnam with facilities in both Hanoi and Ho Chi Minh City.

Achieve energy reductions with virtualization, server consolidation, and other technologies

Energy-Efficient Government Data Centers
With 200 researchers dedicated to the cloud computing model and a $100 million investment, IBM continues to stage its largest, publicly announced cloud implementations in Asia. It clearly wishes to be competitive there and appears to be doing so.

Does that mean it doesn't have enough cloud know-how to compete with Amazon Web Services EC2, Google AppEngine, Rackspace and Microsoft's Azure at this point in North America? I think the answer is that it is tinkering with the economies of scale represented by the cloud data centers. Those economies may be challenging to a company that has always positioned itself as offering the high end of computing. The Amazon, Microsoft and Google data centers appear to be the largest ever built and at the same time they're designed to run at a low cost per server. Perhaps IBM is about to unveil some new version of x86-based data center that matches their designs.

But I'm not sure of that. In reflecting on the inadequacy of "cloud" as a name, IBM CEO Sam Palmisano suggested referring to cloud computing as "highly virtualized infrastructure."

That it is, but it is also built to realize extreme economies of scale, resulting in low hourly charge rates. "Highly virtualized infrastructure" by itself doesn’t achieve the 12 and 12.5 cent hourly rates for a Windows Server offered by Amazon and Microsoft, respectively.

Low cost energy, highly automated operations, ease of server replacement and route-around-failures governing software all play a part. And I'm curious whether IBM will bring its own solutions to these issues to market here or continue tinkering just out of sight.


Vietnam among top ten software outsourcing countries

Vietnam ranks ninth among the top 10 nations for outsourcing in the world, according to a recent survey by the Tholons - Global Services Group.

vietnam top software outsourcing countries

vietnam top software outsourcing countries

HCM City continues to be selected by Tholons - Global Services as one of the world’s six leading cities in application development and management as well as game and cartoon development.

This is also the second consecutive year HCM City has entered the top 50 emerging outsourcing cities. In 2006, the city was named in the list for low labour costs and high standards in the IT sector.

Tholons/Global Services rankings are based on six criteria, including the proportion and quality of human resources, labour costs, trade promotion activities, infrastructure, risk levels and living standards.

The Vietnam Software Association has announced that the local software industry is developing with an annual growth rate of 30-40 percent. The country is home to more than 720 outsourcing companies and nearly 9,000 IT engineers who have been trained at universities and colleges.

From: VietNamNet