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US paper: Vietnam emerges as Asia’s newest IT tiger
While Vietnam has clearly emerged as an alternative to China for manufacturing work, the country is also increasingly showing up on the radar screen of companies seeking an alternative destination for outsourced IT work and outsourcing in general, reported a US newspaper.
“In fact, Vietnam is well poised to position itself as an alternative to China for both IT and outsourcing work and as a cost effective alternative to India for certain niche areas such as programming. Hence, look for Vietnam to emerge as Asia’s newest and next IT and outsourcing tiger,” the paper said.
Although Vietnam has felt the pinch from the global economic crisis and the slowdown in American demand for imports, the country’s economic fundamentals and the potential for its IT services and outsourcing industry remain strong.
IT is considered to be one of the fastest growing industries in Vietnam. From 1995 until the end of 2008, the country had attracted 332 foreign-invested IT projects worth 2 billion USD. Moreover, IT spending is predicted to grow at a compounded annual growth rate of 10.5 percent between 2008 and 2013 and reach 3.51 billion USD in 2013, according to the Outsource Portfolio.
While IT services often account for a significant part in the total revenue turnover of IT industries in other countries, they remain insignificant in Vietnam. In 2008, one media source estimated that IT services reached a turnover of only 2 billion USD while a second media source quoted 648 million USD or 0.5 percent of GDP for the entire software and IT services industry.
Multinational firms such as Accenture, Alcatel-Lucent, Anheuser Busch, Bayer, BMG, BP, Cisco, Critical Path, Daiwa, Flextronics, Fuji, Harvey Nash, Hitachi, IBM, Intel, Juniper Networks, Merrill Lynch, Microsoft, NEC, Nortel Networks, NTT, Oracle, Sony, Spacebel, Toshiba and Unisys have all reportedly outsourced IT related work either directly or via third parties to Vietnam.
However, the paper said as in many emerging markets, the general IT and outsourcing industry in Vietnam is highly fragmented. The country currently has around 10,000 firms licensed to provide IT services but only about one-third of these firms are actually operating. And finding and retaining qualified staff can be difficult in the country.
The paper concluded that while Vietnam is more known for exporting basic commodities and as a manufacturing alternative to China, its large and well educated population combined with a low cost environment makes the country an attractive destination for foreign IT and outsourcing firms.
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