BM opened a new technology center and announced two research pacts with universities in Vietnam on Friday, saying it sees promise in the developing nation.
IBM's first Innovation Center in the Vietnam aims to help local developers create new technologies for digital infrastructure projects in banking, telecommunications, energy and government, the company said in a statement. It will offer training workshops, consulting services and assistance to researchers working to bring new technologies to market.
There are incredible opportunities in information in Vietnam as the country embraces technology in its transformation from an agricultural to an industrial nation, IBM said.
Vietnam last week unveiled a US$8 billion government stimulus package, most of which is targeted at infrastructure and development projects.
The new innovation center is located in Ho Chi Minh City, formerly known as Saigon.
Technology multinationals often build such technology centers in developing countries to encourage local innovators to create software using their developer kits and attract business from governments and local companies.
IBM runs 43 Innovation centers worldwide.
IBM said it will also launch the first Vietnamese language version of IBM developerWorks, a part of its Web site that provides resources to software developers and other IT professionals.
The company signed two agreements to work with Vietnam National University in Ho Chi Minh City and Hanoi on separate technology projects. In Ho Chi Minh City, IBM will work with academics to establish a new university cloud computing center and cloud curriculum, while in Hanoi, IBM will help with the establishment of a new department aimed at improving various segments of the services industry called service science management and engineering.
The initiatives are partly a "response to accelerated IT growth in Vietnam," IBM said. Internet use is already widespread and continues to increase in Vietnam, IBM said, while the country's IT sector has grown at 20 percent annually in recent years.
There were nearly 21.2 million Internet users in Vietnam at the end of April, 2009, according to the Vietnam Internet Network Information Center.
Chu Tien Dung, chairman of the HCMC Computer Association, told the Daily that the job-hopping ratio in the software outsourcing sector has surged by nearly 20% as industry players are grabbing their rivals’ employees given a labor undersupply.
These companies prefer experienced people, Dung said. Certain firms have even committed an act of unhealthy competition. The bottom line is many companies put quick profits first but lack long-term investment in human resource development.
The demand for information technology (IT) specialists has far exceeded the supply. As a result, enterprises are facing constant job-hopping and sharp rises in wages.
The increasingly high specialization of software outsourcing and continuous personnel changes have sent the market shrinking as enterprises do not employ people who are trained from scratch but experienced ones.
Vuong Bao Long, human resource manager of LogiGear Vietnam, specializing in software testing, said LogiGear had been hurt in the fierce battle for staff. He stressed other software companies had sent emails to engineers of his company and offered attractive salaries.
“Many companies will, at all costs, hunt for experienced people when they have projects. But they will terminate their labor contracts when the projects are done. There are certain companies having proposed transferring their employees to other firms. This leaves an adverse impact on the labor market,” Long said.
Other software outsourcing companies like CSC, Global CyberSoft and TMA are also struggling with this pressing issue. They said the unhealthy competition was initiated by some foreign-invested and local newly-established companies, but they declined to reveal the names of those firms.
Under the pressure caused by the fight for human resources, multiple companies have offered their employees higher salaries, a better working environment and opportunities for promotion. In addition, software outsourcers have joined hands with the HCMC-based colleges to boost the number and the quality of IT students to create a more stable labor supply.
However, Long said these measures could only help remove the tip of the iceberg. He proposed the authorities should intervene to remedy this situation.
Hanoi, HCM City on the high rankings
According to the latest Tholons’ report on the 100 cities in the world most attractive in software outsourcing, HCM City ranks the 17th, while Hanoi at 21st.
If compared with the last year’s report, Hanoi remains at the same position, while HCM City has fallen by one grade. However, if compared with 2009, Hanoi has fallen sharply from the 10th to 21st and HCM City from the 5th to 17th.
However, Tholons still believes that in South East Asia, Vietnam remains one of the biggest ITO (information technology service outsourcing) providers which can replace India and China in the field.
The low labor cost, the improved business environment and qualified labor force all are the reasons that have made big companies such as Intel, IBM, Teleperformance and Siemens decide to set up their distribution centers in Vietnam.
Hanoi and HCM City are the two most potential cities in the region in terms of ITO. They alone make up 90 percent of the Vietnamese total software outsourcing turnover: Hanoi earned 5.59 billion dollars from software outsourcing in the first 9 months of 2010, increasing by 19.5 percent in comparison with the same period of 2009.
Especially, HCM City still can see its name in the list of the top 10 newly emerging destinations (the nations from the 11th to the 20th in the top 100 are considered the most redoubtable rivals to the nations in the top 10). Tholons reserved a whole page in its report to analyze the capability of HCM City.
Even though HCM City has fallen by one grade from last year, HCM City is still considered a destination with great potentials, which can be the alternative choice for foreign companies, once the software outsourcing costs in China have been increasing.
The pay to Vietnamese BPO (business processing outsourcing) workers is 75 percent lower than that in Beijing, Shanghai and Shenzhen on average, while the pay to ITO workers is 45 percent lower.
Especially, French language skill proves to be a big advantage of HCM City, which was a former French colony for a long time, from 1850 to 1950. Therefore, HCM City may catch the eyes of many French information technology groups such as ESI, Mega International, SYSUM or Worketer. The enterprises have recently carried out a market survey in Hanoi and HCM City to learn about the markets.
Hanoi’s 5.59 billion dollars worth of export turnover doubtful
Nguyen Thi Thu Giang from VINASA, a software and information technology service firm, said she was really surprised about the export turnover of 5.59 billion dollars released by Tholons.
Giang said that the total turnover from software exports of Hanoi alone in the whole year 2011 was 2.3 billion dollars only. Meanwhile, it is unreasonable to say that Hanoi could export 5.59 billion dollars worth of software products just in the first nine months of 2010 as reported by THolons.
VINASA has affirmed that software outsourcing has just been modest income. In 2003, Vietnam earned 100 million dollars and in 2007, it earned 498 million dollars.
Experts have also said that there seems to be no miracle that can help Vietnam raise its software outsource exports to 5 billion dollars just within 50 percent.
Fsoft, the firm which is considered the biggest software exporter, could earn 1349 billion dong in 2011, while Tinh Van got 5.5 billion dong.
Source: Buu Dien
HCM City slipped one position from 2011 to 17th while Hanoi kept its 21st place, Tholons says.
Tholons forecasts that Vietnam will emerge as one of the major providers of IT services outsourcing in Southeast Asia, and could replace China and India.
The global adviser says despite experiencing a stagnant growth rate, HCM City has a chance to boost its attractiveness of software outsourcing.
According to the Vietnam Software Association, HCM City and Hanoi accounted for 90 percent of the country's software outsourcing revenue in the last several years.
Low labour costs, improved business environment and a skilled workforce were the main factors attracting leading technology firms such as Intel, IBM and Siemens to set up distribution centres in Vietnam, the association says.
The salary for Business Processing Outsourcing personnel in Vietnam was about 75 percent lower than Chinese major cities such as Beijing, Shanghai and Dalien.
Meanwhile, thanks to a long period of French rule, Vietnam has an advantage in the French language, which can attract French firms such as ESI, Mega International, Sysun and Worketer. Some have already visited HCM City and Hanoi to find business opportunities.
Tholons says India is the top outsourcing nation with six cities among the top 10. They are Bangalore, Mumbai, Delhi, Chennai, Hyderabad and Pune.
After nearly five months of construction and a cost of approximately US$1.1 million, the new solar power station is expected to supply about 30 per cent of Intel’s total electricity consumption in a year for the next 20 consecutive years.
This new solar power station, comprising of 1,092 solar panels and 21 adapters, can directly provide the company with around 321,000KWh of electricity per year without using rechargeable batteries, equivalent to electricity consumed by 500 households in Vietnam.
This is the first and only solar power station built by Intel Corporation in Asia, many times bigger than the ones assembled by Intel in Israel and in Oregon, in the US.
In related news, on April 23, Nokia Corporation began construction of its mobile phone factory in the Vietnam-Singapore Industrial Park in the northern province of Bac Ninh.
The 17-hectare factory is expected to become fully operational by the beginning of next year. To be built at a total investment of $302 million, it will produce around 180,000 mobile phones per year and provide jobs for more than 10,000 workers with an average income of $300 per person per month.
Prime Minister Nguyen Tan Dung approved the Science and Technology Development Strategy for the 2010-20 period which targets boosting the value of high-tech and applied science products to about 45 per cent of GDP by 2020.
Under the strategy, the value of the science and technology (S&T) market will increase by an average of 15-17 per cent per year.
The development strategy also requires an increase in the ratio of scientific researchers and professional staff in information and communication technologies (ICT) to nine or ten people per ten thousand. Up to 5000 highly skilled engineers will be trained to manage and operate high tech production lines in Việt Nam's spear-headed fields by 2015.
Việt Nam aims to have 60 internationally qualified basic and applied science research centres by 2020 which are capable of tackling the country's vital S&T issues. The number of S&T organisations will eventually reach 6000.
During the 2010-2020 period, Việt Nam will prioritise S&T development in the areas of communication and information technology, bio-technology, material technology, automation, mechanic – machinery technology and environmental technology.
For managers wishing to appear dynamic and cost-conscious, outsourcing, near-shoring and off-shoring seem to provide the perfect solutions. All entail moving services or production to other countries which boast a charming combination of talented staff and lower labor costs, usually located in emerging markets such as Romania or Vietnam. Basically, outsourcing means having an external company do some activity instead of your own company. Near-shoring is when this is done by a country in proximity to the home country, such as Mexico is to the U.S. Off-shoring is when this is done by a country further away from the home country, like when a French manufacturer off-shores its IT work to India. The whole idea is to enable the home country to reduce costs, something which inevitably produces broad smiles on shareholders' faces. The point is to get results, cheaper. Sounds simple. So why does it often go wrong?
In reality, outsourcing projects are often badly planned and mismanaged, resulting in project delays, rising costs, soaring frustration levels and cross-cultural misunderstandings. In the end, cheap is expensive.
Why? Indians, Czechs, Poles and other nationalities that are considered outsourcing-friendly are usually extremely well-qualified and speak excellent English, albeit with an accent. This means that qualifications and language cannot account for the delays and misunderstandings so common in outsourced projects. The answer very often lies in the major but little appreciated aspect of cultural differences, and the different ways of "signaling" to business counterparts things such as importance, emotion and urgency.
Generally stated, international business cultures can be categorized into "task-oriented" (Scandinavians, German speakers, parts of the U.S. and the UK, for instance), and "relationship-oriented cultures" (India, Asia, Latin American, Southern and Eastern Europe, Africa, the Middle East, parts of the U.S. and the UK, for example). Crudely, task-oriented cultures tend to focus onthings -- contracts, facts, deadlines, etc -- rather than people. Relationship-oriented cultures consider people -- business dinners, small talk, sharing emotions -- of greater importance thanthings or even time itself.
Germany is a classic task-oriented culture. German managers often believe that their outsourced partners can be managed via email, with the occasional phone call thrown in to stress the urgency of some matter, followed up -- perhaps -- by an in-country visit once a year. All their home-based staff has to do is provide their Romanian or Indian counterparts with clearly stated data and milestones. Job done. For them, clearly defined parameters, deadlines and detailed contracts guarantee project success. How do business partners build trust? Through reliable, measurable behavior -- a deadline is universally understandable, right? Who needs to go to dinner? Besides, that would simply increase business expenses and result in nothing tangible.
But most of the world's seven billion people -- from Asia to the Middle East, Latin America to Southern Europe and beyond -- live in relationship-oriented cultures. Here, a handshake is of equal or greater importance than a contract, dinner with your business partner of more significance than some milestone. For relationship-oriented cultures, people are more important than things. "If a deadline is missed, come over, we'll talk about it and work things out. But tell me, how is your cousin doing..?"
In managing outsourced projects, task-oriented managers often prefer to use email, because it is quick, efficient and cheap. Often they believe that words such as URGENT!!! in the subject line -- bright red, of course -- means "please do now." A relationship-oriented counterpart, however, located in California or Mumbai often simply ignores or deletes this message. For them, "urgent" indicates factory on fire, boss kidnapped, war has broken out -- thus if it's urgent, don't email me -- burst into my office. Email, they reason, is cold, impersonal and thus unemotional; if something were truly "urgent" my counterpart would call, or better yet Skype or, best of all, fly out to talk to me -- or fly me to his headquarters.
Furthermore, task and relationship oriented cultures often possess different ideas of what "ASAP" signifies. My German clients believe it's synonymous with "immediately"; my British partner, in contrast, tells me it means "as soon as it is possible for me." Thus, it could take up to a week for him to do an "ASAP" task. In other words, for relationship-oriented cultures, the more important something is, the greater the need to have a face-face-meeting; if it is of lesser importance, email is fine. Just don't expect a reply.
In the end, the intangible costs of these subtle yet crucial cultural interpretations and "signaling" often offset the initial financial gains of outsourcing. Which type should defer to the other? Well, just looking at population figures, relationship-oriented cultures, including 1.1 billion Chinese, 350 million Arabs and 1.2 billion Indians, far outnumber, say, five million Finns. To ensure deadline commitment and on-time, in-budget, smoothly running international projects, the basic rule is: spend quality time with your relationship-oriented partner. Eat with him. Ask about his family. And remember: relationships get results.
Under the draft decree on Internet and information content service management, foreign institutions which provide public information services across the border, attracting many users in Vietnamese territory, have to set up representative offices in Vietnam.
Once the draft decree gets approval and takes effects, the “big guys” in the field of digital content, such as Google and Facebook, would be officially present in Vietnam.
Representative offices not only help collect tax
The fact that Google and Facebook can make big money in Vietnam but do not pay tax has become a hot topic in discussions. Competent agencies have been many times urged to set stricter control over the big guys and force them to pay tax on the earnings in Vietnam.
However, experts have pointed out that if the draft regulation is applied, Vietnam would get many more benefits from the presence of the big guys rather than the tax collection.
Vo Do Thang, Director of Athena, a center for network management and security training, said that the presence of Google and Facebook in Vietnam would help popularize Vietnam’s image in the world’s information technology market.
“Their presence would also help attract their partners to Vietnam, thus creating more opportunities to Vietnamese software outsourcing companies,” Thang said.
Also according to Thang, some big guys not only simply provide digital content services, but also have jumped into other business fields. Google, for example, also manufactures tablets and smart phones, i.e. it has jumped into the hardware sector. As such, this may lead to a new wave of investment and new technology import to Vietnam, the thing that happened in Intel’s case.
Under the current regulations, with representative offices in Vietnam, the big guys would not be allowed to do business, while they can only act as consultants and technical supporters. Some manufacturers would try to orient the market through training and investments. If so, according to Thang, the domestic infrastructure and labor force would benefit from the programs.
“Besides, when entering Vietnam, foreign groups would bring with themselves professional management procedures, which are very useful for the sectors with hot development, including digital content,” Thang said.
Vu Thai Ha, Director of EXA, the company specializing in providing online backup services, said cloud computing remains an unfamiliar concept for domestic computer users, therefore, if Google sets up representative offices in Vietnam, this would be a good signal, showing that Vietnam is market with great potentials.
Ngo Dac Thuan, Managing Director of Hat Giong So, a mobile app service provider, said the presence of Google in Vietnam would support the developers of Android-based mobile apps
The cooperation and competition
It’s clear that if Google or Facebook set up representative offices in Vietnam would bring benefits to partners and the domestic users, but would be the hindrances to the enterprises in the same sectors. The foreign giants would become even stronger, once they have technical support staff right in Vietnam.
However, domestic firms keep optimistic about the presence of the world’s giants in Vietnam. Andy Dang, Creative Director of Phan Viet Media Company, said that he can see the opportunities for cooperation for mutual development.
Meanwhile, Phan Anh Tuan, Director of go.vn network, said in the digital world, there is no geographical distance. Therefore, the competition has always existed, even if Google or Facebook do not set up representative offices in Vietnam. Tuan stressed that Vietnamese businesses always have to struggle with the two big guys and other rivals to survive already.