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Vietnam is a top destination for investment beyond BRIC

In 2010, Vietnam has held its place for the third year running at the top of a list of emerging markets, outside of the BRICs, where UK firms should be looking to do business, according to global investors surveyed by UK Trade & Investment and the Economist Intelligence Unit.

In the next five years Asia's economy will grow by 50 per cent, and be comparable in size to the economies of the United States and Europe. By 2030 Asian GDP will exceed that of the G7 (June 2010 IMF report 'Asia Leading the way').

Vietnam is a top destination for investment as companies seek new sources of growth beyond the BRICs. Companies are now prioritising a range of second-tier countries alongside their well-established operations in the BRIC countries. In all, 71 per cent of respondents agreed that emerging markets beyond the BRIC countries collectively offer an opportunity too big to ignore. Asked to name their top three countries for investment over the next two years, Vietnam (selected by 19 per cent) was second only to China (20 per cent), edging out India in third place (18 per cent). This is the third consecutive year that Vietnam has been selected by executives as their number one investment target outside of the BRIC countries. Brazil was chosen by 14 per cent of respondents, putting it approximately in line with Indonesia (15 per cent) and South Africa (13 per cent). Russia, hard hit by the global recession, was chosen by just 8 per cent of respondents, making it less popular than Mexico (11 per cent), and roughly on a par with Turkey (9 per cent) and Nigeria (8 per cent).

Source: UKTI


Vietnam Gearing up to be Next Asian IT and Outsourcing Tiger, the website which is a prominent outsourcing industry organ has come out with a definitive research( report on Vietnam, spelling out in detail the opportunities available to the nation in the realm of outsourcing with particular emphasis on IT outsourcing. The report addresses the key issues of the factors responsible in driving this growth, the role of the government, and the key operating facts, costs and risks involved.

According to the report Vietnam has had one of the highest rates of growth in the world second only to China?s over the last ten years, and this trend is set to continue for the time to come and this generally augurs well for the economy. That apart Vietnam has followed a highly successful policy of creating niche export markets, which could not be serviced by China. It is well positioned to do the same with IT outsourcing.

The fact that IT is the fastest growing industry in Vietnam and between 1995 and 2008 it has attracted investment from 332 overseas IT firms bringing in a total investment of US$ 2 billion gives one an idea of the growth trajectory. The total investment is IT is slated to touch a figure of $ 3.5 billion by 2013.

At present revenue from the IT sector is a minuscule 5 % of the country?s GDP which if the present annual growth rate of 40% continues would reach a figure of 2.5% of the GDP at $ 6.2 billion by 2020. A good indicator of the way things might shape up is the case of Ho Chi Min city, which houses some 12000 IT businesses earning US$ 1.9 billion or 40% of the country?s total economic revenue.

The report shares some revealing insights into the dynamics of the emerging IT sector of the country. For one the IT outsourcing industry in Vietnam is highly fragmented and of the 10000 firms licensed to provide IT services only 3000 are operational. That notwithstanding a lot of global players are present in the country including FPT Software with 2700 employees, CMC and Global Cybersoft. In fact a slew of global companies such as Accenture, Alcatel-Lucent, Bayer, BMG, Cisco, Sony, Oracle and so on have outsourced IT related work either directly or through third parties to Vietnam.

There have also been a series of critical mergers and acquisition between global and local IT firms. Cases in point being the one between Cap Gemini and IACP Asia and between CPR International and the Sara group. The Vietnamese government too as extended whole hearted support to the industry by way of liberalizing the investment environment around technology start ups and setting up more than 186 industry and five software zones that offer tax incentives, value added tax rebates and services for processing tax and business applications and relaxed rules pertaining to the entry and exit of expatriates. The government also plans to invest US$ 58 million by 2012 to boost the country?s software and digital content industry.

In terms of the regulatory environment the country fares moderately with a 40% of the country?s GDP coming from state owned enterprises. But the government is doing what it can to promote privatization including a 30% reduction in corporate tax for small and medium sized businesses. In terms of intellectual property rights Vietnam is at 77th position out of the 115 countries surveyed and could do with some improvement there. In network readiness too Vietnam has made rapid progress being at no 70 against India?s 54 and China?s 46.

In so far as infrastructure is concerned, Vietnam with its long legacy of war performed creditably at number 70. The government has pledged to spend 11% of GDP on further ramping up architecture. In terms of Human Capital Vietnam has the advantage of possessing a highly educated and well trained work force which takes quite well to computer training. Add to that the lower salary costs (30% to 66 %below India and China?s) and you are looking at serious competition. Vietnam is also making every effort to have quality benchmarks in place.

What makes it particularly attractive is the perception that it is a moderate to low risk country with a stable polity. Corruption and susceptibility to natural disasters were the down sides to an otherwise fairly sanguine outlook. You can find more information about Vietnam outsource potential from is the most prominent site in providing reliable information about outsourcing. It’s main vision is to offer a platform for outsource professionals from all over the world to share their experience through blogs, articles, vendor analysis, and research reports. It provides honest and objective opinion on the globalization issues to its visitors and members. The website is the brainchild of Twin Cities,Minnesota based IT professional Mani Malarvannan who started the site in 2008 using the expertise he acquired by running his own IT consulting services firm Cybelink and very quickly made it the definitive voice of the BPO and outsourcing industry.


5 Tips for Offshore Outsourcing

Outsourcing product development (or parts of development) offshore sounds like a good idea at the time. After all, you can augment your dev group quickly and on the cheap. But it only seems to work under certain conditions; mileage does vary depending on the company. Longer-term enterprise development projects tend to be better suited for outsourcing than shorter-term consumer Internet projects for example (I learned this the hard way). It has to do with development cycles, level of skill required for tasks, time to market, and the ability to iterate.

Arguably, you shouldn’t ever completely outsource your product development. Some things are just too strategic to lose control over. If you do decide to outsource some parts, here are some tips.

1. Hire one of them

Hire someone locally who was originally from the country you’re outsourcing to. Oftentimes different languages or dialects exist in other countries, so be sure your guy speaks the lingo. Also be tuned into other cultural nuances (for example, make sure there aren’t centuries-old bad blood between your guy and the people at the firm you use).

2. Nurture them

You’ll want to take the time and make the investment in having an occasional call or even a visit to the offshore location. Offering a face and voice from the top helps gain buy-in, support and motivation for the project. Obviously if you have to do too much of this, it’s not worth it.

3. Package the tasks

Be mindful not to overwhelm them with a complex project with multiple touch points and dependencies. Have a baked, signed off spec completed and committed to and assign straightforward pieces of it. When you assign something, ask for a time/cost estimate which you can measure back to later. Once the work has been verified and tested you’ll be able to establish a baseline level of quality and performance; from there you’ll be able to give them more rope.

4. Top grade

Offshore dev shops tend to assign you a mixed team of some good folks, some ok folks, and some green folks. These proportions are simply part of their business model. Just don’t let it get the best of your development cycle and product quality. Ask for resumes and interviews of the people they’re assigning to your team.

5. Communicate with one voice

Use the guy from #1 to funnel all communications between your team and theirs. Besides language and time zone issues, there are project management and accountability requirements. The more chiefs you have, the more fingers you have pointing. You can’t afford the he said/she said.


Six Key Factors in the Right Outsourcing Decision

Since my background includes software development, I often get the question about when to build a solution in-house, versus outsourcing it to a local company, near-shore service, or off-shore organization in China, India, or Eastern Europe. In the USA, “near-shore” is a euphemism for connected countries, like Mexico and Canada.

There is no simple answer to that question for all cases, but there certainly are some key considerations which will help you select the optimal solution for your case. In fact, the considerations are not unique to software development – they apply almost as well to any product or service you have:

  1. Control of core competency. Don’t outsource your core competency. If your software is your solution and “secret sauce,” don’t entrust it to outsiders of any kind. It’s like giving up control of your company. If the software is ancillary to your mission, proceed through the rest of these considerations.
  2. Intellectual property content. Some country cultures have little appreciation for software as intellectual property. For example, 90% of the software used in China and Vietnam today is pirated. Near-shore and local outsourcing alternatives are manageable with contracts and non-disclosure agreements. Protect your intellectual property.
  3. Technology level. If you expect your solution to incorporate the absolute latest in software technologies, scalable to millions of users, with multi-system failover and recovery, don’t count on out-sourcing. On the other hand, if it is maintenance and testing on non-core software, use the lowest cost solution.
  4. Cost factors. Companies in Asia and Eastern Europe can still provide direct cost reductions of up to 75%. In these calculations, be sure to include indirect costs of remote work, such as more project management, more travel, and less efficient communication. The net may be less cost reduction than you thought.
  5. Product or services. Once product software is written, it doesn’t take much effort to deliver it to customers. Software services, on the other hand, involve the creation of software customized for a specific situation, with a relatively low level of leverage and reuse. Outsourcing for services needs to be carefully managed, and almost never works.
  6. Creative or operational. Creative products, like chip design programs, architectural rendering, or consumer games are not easily outsourced. Operational products, like process automation or reservation systems, may be large but mundane, and more easily outsourced. In all outsourcing cases, a detailed specification is required.

The typical software startup these days is a one or two person operation, founder and co-founder, who do the work themselves on the first product with no salary. With today’s tools, they can do the work of a six or eight-person team 10 years ago, so software outsourcing is not appropriate.

On the other hand, if your startup is not software oriented, but you need some work done (not central to your product and core competency), it is usually better to outsource, either locally or remotely, than to hire employees, manage them, pay benefits, and maybe have to lay them off later.

If you do decide to outsource, build the relationship first, and manage the project carefully. Watch for evidence of inadequate staff and training, high turnover, poor or inadequate process, and lack of vendor project management. On your side, the killers are poor specifications, no acceptance criteria, and scope creep.

Overall, I believe that the demise of software entrepreneurs has been greatly exaggerated. Whether you are outsourcing software development, manufacturing, or accounting, the considerations are the same. Outsourcing is a tool, not the problem or the solution.


HP hires 1000 software engineers in Vietnam

HP has been granted a license to operate in Quang Trung Software City (QTSC) with US$10 million investment. The center will undertake the research and testing of HP's software products and global services. In the first two years of operation, HP will need more than 3000 square meters of office space right at QTSC. After 2012, the QTSC will provide to HP 10,000 square meters of office space at the new office building.

The HP's R&D Center plans to increase the number of engineers from 50 to 200 by the end of the year. Every quarter, the center may need 30-50 engineers on average. If everything goes smoothly, the center will have 500 engineers by 2012 and more than 1000 engineers in the next few years.

Experts have pointed out that the HP's investment project in Vietnam will help lure other foreign investors, because HP's satellite enterprises may follow the steps of HP to come to Vietnam.


Nokia opens factory in Vietnam

The world's leading mobile phone maker Nokia plans to open a handset factory in Vietnam next year in order to take advantage of growing markets in Asia.

Nokia said it planned an initial investment of around 200 million euros ($275 million) "with further sizeable investments thereafter". The factory in Vietnam is part of its effort to reach the billions of people who do not own a mobile device or have access to the internet.

Nokia factory in Vietnam

Source: Channel News Asia