Looking for cost-effective and expert software development? Consider IT outsourcing in Vietnam, one of the fastest-growing IT destinations in the world. The IT outsourcing market here is projected to reach $590.40 million in 2023, with an annual growth rate of 16.77%. That is, Vietnam has a huge potential to provide high-quality and innovative software solutions for various industries and domains.
This guide will explore the benefits of IT outsourcing in this country and how you can leverage its potential to grow your business and gain a competitive edge. It will also share some tips and best practices for finding and working with the right IT outsourcing partner in Vietnam.
1. Why do companies outsource to Vietnam?
Vietnam has become a popular destination for outsourcing business and IT processes. Big companies from different countries and regions like South Korea, Japan, North America, Australia, and Europe, tend to choose Vietnamese companies to handle their outsourcing needs.
1.1 The latest technologies and a young population
Vietnam has a booming information technology and telecommunications market, which has grown rapidly in the past decade. The country boasts a young and internet-savvy population, with about 60% of them being under 35 years old and more than half of them using the internet. This makes Vietnam an ideal place for innovation and collaboration in the IT industry.
Especially, Vietnamese engineers and developers have the skills and knowledge to use the latest technologies like big data, artificial intelligence, and the Internet of Things (IoT) to deliver projects for companies worldwide. They can create innovative and customized solutions that meet the specific needs and challenges of different industries and domains. By leveraging the advantages of these technologies, they improve the quality, efficiency, and security of their software products.
Let us share with you some prominent data about the IT sector in Vietnam (according to the Vietnam IT Salary Guide 2023)
1.2. Dynamic workforce
Vietnam is a popular destination for outsourcing, especially in the IT sector, which is expected to grow by 13.47% in the next 4 years. The country offers low-cost and high-quality services, thanks to its abundant and skilled tech workforce. The country’s education system emphasizes STEM subjects, producing a steady stream of engineers, programmers, and other specialized workers. You’ll benefit from their expertise and experience, while they can benefit from your business opportunities.
Besides, English skills have improved when Vietnam ranked 60th in English proficiency in 2022, up six places from the previous year. In the IT sector, most Vietnamese developers can read and write in English, and senior or client-facing roles can speak it fluently. You won’t have much difficulty communicating your needs and ideas to them.
1.3. Budget-friendly outsourcing destination
One of the main advantages of IT outsourcing in Vietnam is its cost-effectiveness. You can save a lot of (not some) money by hiring Vietnamese outsourcing companies, without compromising on the quality of their services.
Compared to other popular outsourcing destinations such as China, India, and Ukraine, Vietnam has a lower cost of living and labor. For example, the minimum wage in Vietnam is 95% lower than in the US. The average salary in Vietnam is $284 per month, which is much lower than Ukraine ($398.627).
1.4. Cultural compatibility
IT outsourcing in Vietnam has become a trend partly thanks to its cultural compatibility. Vietnam has a strong affinity with Western culture, which makes communication and collaboration smooth and easy. You can avoid the cultural barriers and misunderstandings that often occur when outsourcing to countries with different values and norms.
For example, Vietnam shares some cultural traits with Singapore, Malaysia, Hong Kong, Taiwan, and the US, including:
Emphasis on teamwork and harmony
Adaptability and flexibility
Creativity and innovation
Entrepreneurship and ambition
These cultural similarities help you build trust and rapport with your Vietnamese outsourcing partners. You can also leverage their insights and perspectives to create better products and services for your target markets. Plus, outsourcing to Vietnam is great for enhancing your cultural diversity and competence.
1.5. Socioeconomic stability
This is one of the factors that can make or break your outsourcing success. Political turmoil can disrupt your outsourcing process, causing delays, extra costs, and poor results. For example, the Russian invasion of Ukraine in 2022 threatened the booming tech industry there, resulting in an 80% internet shutdown in a tech company, according to the Wall Street Journal.
In contrast, Vietnam is “one of the more stable countries in Southeast Asia”, as the UK government states. The country has a low level of domestic conflict and a high ranking of 44th in the Global Peace Index 2022, up from 50th in 2021.
Also, Vietnam is one of the fastest-growing economies in Southeast Asia, with a GDP growth rate of 13.67% in Q3/2022 compared with the same period last month. Despite the global food and energy crisis and inflation spike in 2022, the country has maintained a moderate inflation rate of 3% to 4%. This shows its ability to cope with economic uncertainty and volatility.
1.6. Supportive investment environment
Vietnam has made it easier and more attractive for foreign businesses and investors to operate in the country. The government has updated its regulations, signed new trade agreements, and lowered taxes to create a more open and transparent environment.
Some of the trade agreements that Vietnam is a part of are:
ASEAN and ASEAN Free Trade Area (AFTA)
World Trade Organization (WTO)
Bilateral Trade Agreement (BTA) with the US
EU-VN Free Trade Agreement (EVFTA)
These agreements can help you access new markets, reduce tariffs, and protect your intellectual property rights when outsourcing to Vietnam. Moreover, Vietnam has drawn foreign direct investment (FDI) from global enterprises such as LEGO, Apple, Canon, Microsoft, and Samsung. The country’s FDI increased from 1.61 billion USD in January to 19.68 billion USD in November 2022.
This shows that many leading companies have relied on IT outsourcing in Vietnam. You can join them and benefit from the favorable business environment here. Outsourcing Vietnamese talent at an affordable cost and with minimal legal hassle helps grow your business and gain a competitive edge.
1.7. Favorable time zone difference
Vietnam has a favorable time zone for working with clients in Singapore, Malaysia, Hong Kong, Taiwan, or the U.S. The country is only one hour behind Singapore, Malaysia, Hong Kong, and Taiwan. This means you can have more overlap hours for communication and collaboration.
Plus, Vietnam is 12 hours ahead of the US East Coast and 15 hours ahead of the US West Coast. This allows you to have a round-the-clock development cycle by leveraging the time difference.
2. How to hire and manage IT professionals in Vietnam successfully
2.1. Prepare your internal team for outsourcing
One of the first steps to IT outsourcing in Vietnam is to communicate your plans and expectations to your internal team. Outsourcing can involve some concerns or doubts among your in-house staff, who may wonder how it will affect their roles or responsibilities. To prevent this, you need to be clear and honest about why you’re outsourcing and how it’ll benefit your company and your employees.
You should also identify and support some advocates within your organization who can endorse and facilitate the outsourcing process. These are people who are willing and eager to work with the outsourcing partners and can help smooth the transition and integration process.
2.2. Strengthen your relationship with the outsourcing partner
The quality of your relationship with the outsourcing partner will determine the success of your outsourcing project. You need to establish trust and respect with the IT professionals in Vietnam and treat them as an integral part of your team. Here are some ways to do that:
Share knowledge and information:
Make sure you provide enough time and resources for knowledge transfer and relationship building between your internal and outsourcing teams. This will help the IT professionals in Vietnam understand your products, requirements, standards, and expectations better.
Update your documentation and processes:
Before you start working with the outsourcing partner, you should review and update your documentation and processes to make sure they are clear, accurate, and up-to-date. This will save time and avoid confusion for the Vietnamese IT professionals who may need to follow your guidelines or procedures.
Set up communication and collaboration tools:
Communication is key when working with remote teams. You should use effective communication and collaboration tools like video conferencing, instant messaging, and project management software to keep everyone on the same page and track progress. Also, have a regular onboarding process for new IT specialists in Vietnam to train them on your products, technologies, and processes.
Define the scope of work:
To avoid scope creep or misunderstandings later on, you want to clearly define the scope of work for each outsourcing partner or team. This includes the deliverables, timelines, milestones, quality standards, payment terms, etc. This is crucial if you are paying by the hour, as any changes or delays can increase your costs.
3. How to overcome the biggest challenges of IT outsourcing in Vietnam
3.1. Lack of trust
You may have concerns about the confidentiality, quality, and punctuality of your project. To overcome this challenge, you need to create an exhaustive plan. You should also sign a contract and a non-disclosure agreement with the outsourcing partner to protect your intellectual property and data.
Besides, regularly review your project’s progress. We recommend providing feedback and suggestions to the outsourcing partner and addressing any issues or concerns as soon as possible.
3.2. Language barriers
This can cause problems in outsourcing projects, such as misunderstandings, errors, or delays. Thus, you should choose a partner who has a good command of your language and can understand your requirements and expectations clearly.
Also, use simple and clear language. Avoid using jargon, slang, idioms, or acronyms that may confuse the outsourcing partner. You can use tools like translation software, dictionaries, or glossaries to help you communicate better.
3.3. Poor communication
You may face difficulties in communicating with the outsourcing partner due to different assumptions and expectations. This can result in poor efficiency, quality, or satisfaction in your project. To handle this challenge, you should maintain transparency and control. Communicate your goals, expectations, and feedback clearly and frequently with the outsourcing partner. You should also establish roles and responsibilities for each team member and set up communication and collaboration protocols for your project.
Above all, respect and appreciate diversity. It’ll be great if you learn about their customs, values, and preferences and adapt your communication style accordingly. You can use tools such as cultural guides, etiquette tips, or online courses to understand their culture better.
3.4. Lack of skills and expertise
You may encounter low-quality or inexperienced outsourcing partners who offer low prices but deliver poor results. This can affect your project’s quality, functionality, or security. That’s why you should do thorough research and screening before choosing an outsourcing partner for your project. Look for a partner that has relevant skills, experience, and credentials for your project. You can check their portfolio, testimonials, references, or ratings to verify their quality and reputation.
Moreover, provide training and support to help them improve their skills and expertise for your project. You may offer them online courses, webinars, workshops, or mentoring programs.
3.5. Project management
Project management is the process of planning, executing, monitoring, and controlling your project. It is crucial to ensure that your project meets its objectives on time and within budget. However, managing an outsourced project can be challenging due to the complexity and uncertainty involved.
In this regard, you need to hire a competent project manager. They’re the key person who oversees and coordinates your project with the outsourcing partner. They must be able to communicate effectively with both parties, understand the project’s goals and objectives, and identify and resolve any issues or risks that arise during the project. You may consider effective project management tools like Trello and Asana. With them, you can create schedules, assign tasks, track progress, manage resources, report results, and more.
4. How to estimate the cost of software development outsourcing
4.1. In-demand skills
One of the factors that can influence the cost of IT outsourcing in Vietnam is the level of skills and expertise required for your project. Some skills are more in demand than others, which means they will command higher rates. For example, skills such as DevOps, artificial intelligence, and data science are more sought-after and complex than basic web development skills.
To reduce the cost of outsourcing in-demand skills, you need to:
Define your project requirements clearly
Compare different providers
Negotiate a fair price
4.2. English proficiency
Importantly, you choose outsourcing firms that have many English speakers who can communicate well, from the managers to the developers.
To reduce the cost in this sense, you may:
Test their English skills
Use simple and clear language
Provide feedback and support
Certain expertise becomes more sought-after and expensive in cities that are known for it.
To reduce the cost in this regard, you need to:
Consider your project needs
Research the market rates
Negotiate a reasonable price
The rates of experienced professionals are higher, but they’re worth it. They have more knowledge, skills, and confidence in their work and can deliver better results in less time.
To save the cost, you need to:
Define your project complexity
Compare different providers and levels
Negotiate a fair price
4.5. Length of engagement
Outsourcing firms set their rates based on how long your project will last. Longer engagements get better prices than short-term ones. You should let them know beforehand if you plan to run the project for a few years, as they may offer you some discounts.
To minimize the cost, you need to:
Plan your project duration
Compare different pricing models
Negotiate a good deal
Why choose JT1 as your IT outsourcing partner in Vietnam
If you’re looking for a reliable and professional IT outsourcing partner in Vietnam, you should consider JT1, the No.1 IT recruitment agency in Vietnam. JT1 has many benefits that can help you achieve your business goals and overcome the challenges of IT outsourcing in Vietnam.
Have over 60,000 software engineer profiles in our database, covering skills like frontend development, backend development, DevOps, system administration, testing, project management, technical leadership, design, and digital marketing
Have a team of experienced and dedicated IT recruitment consultants who can understand your requirements and expectations and deliver the best candidates for your project.
Offer flexible and competitive pricing packages with guarantee options that suit your budget and needs.
Have a proven track record of success and satisfaction among its clients and partners. JT1 has been awarded as one of the best tech recruitment agencies and top business service providers in Vietnam by Clutch, a B2B ratings and reviews platform.
Our vision is to become the No.1 tech recruitment agency in Southeast Asia and to support tech companies in building the next Silicon Valley in the region. Don't hesitate to contact us. Your business needs are our priority. That’s why we offer support around the clock.