According to Marketsinsider, Vietnam ranks 5th in the “Best Countries to Outsource to in the World in 2019”, and 2nd in the “Top 8 IT Outsourcing Countries” in 2022, according to Lotus-Qa.com, calling it “The Next Silicon Valley in Southeast Asia”.
IT outsourcing is becoming increasingly popular as an efficient, cost-effective, and expert solution for meeting the demands of software development, testing, maintenance, and operations. The majority of them are called offshore organizations and are often found in Vietnam, India, or other countries in Southeast Asia.
The trend around IT offshoring and outsourcing continues to grow. The reason is that IT outsourcing provides services at lower costs than clients could do the work in-house. The arrangement benefited both the service provider and the client.
Vietnam is rapidly emerging as a dynamic Asian destination for the development of low-cost, high-quality software. The country benefits from an extensive talent pool with the lowest labor costs compared to other IT outsourcing competitors, as well as a safe, stable government environment. The government has also incentivized the IT sector with several legal and financial packages.
A large pool of educated young talents
Vietnam boasts a youthful demographic profile, with approximately 53% of its nearly 100 million inhabitants under the age of 35, resulting in a median age of just 32.8 years. This youthful population forms a formidable talent pool that propels the country’s thriving IT industry. Moreover, Vieetjnam maintains one of the world’s lowest unemployment rates.
According to a report by TopDev, Vietnam annually produces around 400,000 IT engineers through its 153 recognized educational institutions. Furthermore, the Ministry of Information and Communications (MIC) reported that the total number of digital tech firms in Vietnam in 2022 reached 70,000, reflecting a 9.6% increase from the previous year. Impressively, 60% of these companies have transitioned from low-value to high-value manufacturing processes.
According to a survey conducted by Statista in June 2021 in Vietnam, English was learned by 86% of the respondents. Around 50% of the Vietnamese population can communicate in English, with a higher rate in the main cities like Ho Chi Minh City and Hanoi. The vast majority of Vietnam’s college graduates have high proficiency in English. The Vietnamese government is also particularly committed to expanding English language education to meet the requirements of skills-intensive jobs in high-tech employment sectors. As of today, Vietnam ranks #7 on the English Proficiency Index out of 24 Asian countries.
Governmental issues can challenge rapid economic liberalization; however, Vietnam is clearly moving to open markets and offer incentives, particularly in the IT sector. Some of these incentives include tax breaks, preferential treatment for IT companies in government procurement, and funding for research and development in the industry.
The government has also established several technology parks and special economic zones, such as the National Innovation Center (NIC) at Hoa Lac Hi-Tech Park and the Quang Trung Software City, to foster technological breakthroughs and empower transformative ideas from local entrepreneurs.
Finally, Vietnam has risen to 7 positions in the government AI readiness index 2023, ranking 6th among ASEAN nations and 55th globally.
Vietnam offers highly competitive pricing for IT outsourcing services. The average hourly rate for a software developer is around $25 (or in the $20–40 price range), which is significantly lower than the rates in other outsourcing destinations such as India or China. Vietnam’s offshore service pricing is therefore a tempting offer for companies trying to cut expenses without risking quality.
Vietnam is a natural offshore location, with a growing and youthful IT workforce, low costs, and high aspirations to develop its software services. It has all the ingredients to become the leading market choice in the coming years. However, the Vietnamese government needs to solve problems that challenge the IT sector to help make the country the most competitive IT outsourcing location in the world.
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