The IT industry Vietnam is on the rise, with an annual growth rate of about 8% from 2022 to 2026. This country has a thriving ecosystem of startups, enterprises, and talent. It’s been attracting increasing attention from foreign investors and partners, who see Vietnam as a strategic hub for outsourcing, innovation, and collaboration.
This guide will uncover the growth, opportunities, and challenges of the country’s IT industry, based on the latest data, trends, and insights. We’ll also share practical tips for foreign companies who want to enter or expand into this dynamic market. Ultimately, you’ll make more informed decisions for your business's success.
1. IT industry Vietnam: What you need to know?
1.1. Market size and growth
Expectedly, the technology sector will have revenues of $165 billion in 2023, accounting for 35.1% of the GDP. This would make Vietnam one of the most technology-intensive economies in Southeast Asia.
Hardware is the largest segment, which accounts for about 70% of the total revenues. Vietnam is a major exporter of electronic products like smartphones, computers, and components. Samsung, Intel, LG, Canon, and Panasonic are some of the leading global technology companies that have invested in the country.
Software is the second-largest segment. Vietnam has a favorable setting for creating a thriving software business, with a per capita income of $4,475.51 and a strong IT talent pool of 1.5 million professionals.
Other segments, for example, services, e-commerce, fintech, and digital content are growing rapidly. The increasing internet penetration, smartphone adoption, and digital transformation in Vietnam have driven this.
1.2. Leading companies and key players in Vietnam
The top 10 software services, solutions, and system integration providers in 2023 include:
FPT Software
FPT Information System Corporation (FPT IS)
Misa JSC
VNPT Technology
CMC Technology & Solution Company Limited
Elcom Technology Communications Corporation
FSI Technology Development and Trading Investment JSC
HPT Vietnam Corporation
Joint Stock Company for Telecom and Informatics
HIPT Group Joint Stock Company
Another indicator of the growth and potential of the software industry in the country is the emergence of tech unicorns (startups valued at over $1 billion) recognized worldwide. Vietnam is home to four tech unicorns:
VNG
Tiki
Momo
VNLIFE
These companies have successfully leveraged their innovative products and services to capture a large customer base and expand into other markets. For example, VNG is a dominant player in the gaming industry, with over 100 million users worldwide. It also offers diverse products and services in e-commerce, social media, and cloud computing. A leading e-commerce platform in Vietnam, Tiki boasts more than 500,000 products from over 6,500 prestigious brands. Momo provides online payment solutions for multiple industries like banking, telecommunications, and e-commerce. Speaking of VNLIFE, it caters to the need for digital products and services, such as mobile wallets, eKYC solutions, and digital banking platforms.
2. Vietnam as the land of opportunities for tech entrepreneurs
2.1. Tech-savvy population
Its large and young population is eager to adopt new technologies and digital services. The digital generation (born between 1992 and 2002) accounts for 21% of the population. Moreover, in 2022, the number of Internet users in Vietnam reached 72.1 million, ranking 13th globally.
Besides, Vietnam has a strong IT education system, which produces around 80,000 IT graduates each year, with many of them majoring in computer science, information technology, and related fields. As per Adamo Software, about 30% of the developers have more than 5 years of experience, while 52.5% have less than 3 years of experience.
These factors have created a large pool of tech talent and a tech-savvy consumer base, being essential for the development of the IT industry Vietnam.
2.2. Supportive policies
Vietnam is pursuing a plan to boost its national digital transformation. It covers the digital government, society and economy (accounting for up to 30% of the country’s GDP).
It’s important to mention that the Vietnam National Innovation Center (NIC) is dedicated to supporting the startup ecosystem, encouraging innovation, and improving the growth model based on scientific and technological progress. It has outlined several key factors for development, for instance:
Establishing a policy framework to foster innovation.
Enhancing human resources to speed up digital transformation and innovation.
Investing in innovative startups.
Learning from Japanese experts in the comprehensive innovation process.
Furthermore, the country has joined these agreements as of 2022:
AFTA
WTO
BTA with the US
EVFTA
When it comes to Corporate Income Tax (CIT) incentives, IT companies in Vietnam enjoy a CIT exemption for the first 4 years, followed by a 50% tax cut of the 10% rate for the next 9 years. After that, the companies will pay a 10% CIT for 2 years. Standard CIT of 20% is applied from the 16th year of operations.
Thanks to these policies, startups and investors have a favorable environment to operate and grow in Vietnam.
2.3. Emerging and innovative technologies
Vietnam is not only catching up with but also leading the region in terms of adopting cutting-edge technologies like artificial intelligence (AI), blockchain, cloud computing, the Internet of Things (IoT), big data analytics, etc. Its cloud computing market was worth more than $133 million, with 27 data centers and 270,000 servers dedicated to it. The country also ranked 6th in Southeast Asia for its government AI readiness, scoring 53.96 on OpenGov’s 2022 index, which was over 20% above the global average. Moreover, the AI sector attracted $23 million in venture capital in 2021 alone.
These technologies offer new possibilities and opportunities for startups to create innovative and disruptive solutions that solve various problems and challenges across sectors and industries. For example, you can use AI to improve healthcare, agriculture, transportation, etc. Blockchain should enhance transparency, security, and efficiency in various transactions and processes. Cloud computing helps reduce costs, increase scalability, and improve performance for tech companies.
2.4. Competitive costs to hire Vietnamese software developers
Salaries for professionals in the IT industry Vietnam are much lower than those in other regional markets such as Singapore and Malaysia. This has enabled tech companies to reduce their operational expenses and increase their profitability in the country.
2.5. IT outsourcing boom
Vietnam has become one of the two best outsourcing destinations in Southeast Asia, according to the 2022 Global Software Outsourcing and Rates Guide. Its IT human resources are of global standard quality. This creates possibilities for software outsourcing and technology value creation.
Vietnam ranked 29th worldwide in the developer skills charts of Skill Value’s Report 2019
Made the top 10 in Skill Value’s World Rank of Best Developers Survey after the U.S, U.K, and France
Ranked 2nd in Asia-Pacific for technical skills on the Global Skills Index (2020)
Many software development companies in Vietnam (e.g., FPT) have reached CMMI level 2 or higher. CMMI is a standardized certification that assesses the development maturity of an organization
Tech giants like Microsoft, IBM, LG, Samsung, and Sony let Vietnamese engineers help them create innovative things
3. Challenges in the IT industry Vietnam
3.1. Institutional frameworks: Tackling corruption and improving governance
One of the major challenges that Vietnam faces is corruption, which makes the laws weak, people lose faith and the economy suffers. Corruption is present in various sectors, especially in connection to infrastructure projects, customs procedures, and land rights. According to Transparency International’s 2020 Corruption Perceptions Index, Vietnam ranked 104th out of 180 countries, with a score of 36 out of 100. If you plan to operate in the country, you should be aware of the corruption risks and take preventive measures to avoid them.
That said, some initiatives launched have promoted business integrity and anti-corruption efforts in Vietnam. For instance, the United Nations Development Programme (UNDP), Vietnam Chamber of Commerce (VCCI), Government Inspectorate (GI), the British Embassy, and the Consulate General have collaborated to incorporate the private sector into Vietnam’s anti-corruption legislation and provide training on codes of conduct. They also aim to promote the development of international standards of business integrity within the country’s business community.
Another example is the UK-funded project “Promoting a fair business environment in ASEAN”, which supports Vietnam in implementing the ASEAN Integrity Community Blueprint 2025. The project aims to enhance transparency, accountability, and participation in public procurement, as well as to strengthen civil society’s role in monitoring corruption.
3.2. Human resource development: Attracting and retaining talent
Human resource development is crucial for advancing its technology sector and achieving its digital transformation goals. According to JDI Group, recruiting talented individuals in Vietnam is challenging as they’re in high demand. Not to mention the fact that hiring international talent is hard and time-consuming. It may take months to find and secure the right candidates for the job.
The screening process can be prolonged, causing weeks-long delays. The hiring process usually lasts at least a month or more and can take two or three times longer if you need to fill multiple positions.
To solve this problem, companies should engage employees, create mutual benefits, and invest in talent. Some good practices are providing training and mentoring, creating a positive work culture, and encouraging innovation and creativity.
3.3. Language barrier (but getting better)
English proficiency is a key factor for outsourcing success. Vietnam has been improving its English skills, ranking 60th on the Global English Proficiency Index in 2021, up from 66th in 2020. Also, the country is among the top 7 Asian countries with the best English proficiency.
Remember, English proficiency depends on the industry and sector. In the IT outsourcing industry, most developers can read English documents and talk to clients in English. Senior or client-facing roles like technical consultants and business development executives usually speak English fluently. That’s why you can convey your ideas and requirements to them without much difficulty.
4. How to succeed in the Vietnam IT market
4.1. Navigate regulations and policies
Stay updated on laws and regulations in the IT industry Vietnam
You should stay informed of the latest IT and software development laws in Vietnam by consulting local experts, attending industry events, and reading relevant publications. For example, be aware of the Law on Cybersecurity, which regulates online activities and data protection in Vietnam, and the Law on Intellectual Property, which protects the rights of IT creators and owners.
Collaborate with reputable local partners
Working with trustworthy local professionals, such as lawyers, accountants, and consultants, can help you effectively navigate regulations and avoid potential issues. They may help with registering a business entity, obtaining licenses and permits, filing taxes, complying with labor laws, etc.
Build relationships with local authorities
The entities can be the Ministry of Information and Communications and the Department of Information and Communications. With them, you’ll better understand local policies and resolve any issues that may arise. For instance, they can guide you on guidance on technical standards, data security, and market access.
Safeguard your intellectual property
To safeguard your rights and avoid violations in Vietnam’s expanding IT sector, remember to register your intellectual property, such as patents, trademarks, and copyrights. You can use the online portal of the National Office of Intellectual Property to register your intellectual property online.
Comply with data protection and privacy regulations
Having clear and effective policies and procedures can help you follow the rules. For example, you should obtain consent from data subjects, implement security measures to protect data, and notify authorities of any data breaches.
4.2. Make use of collaboration and knowledge sharing
Reward employees
Reward them for working well as a team and create opportunities for them to collaborate on projects. For instance, you can use game-like elements to encourage employees to cooperate, such as giving points, badges, or rewards for finishing tasks or reaching goals.
Use communication tools
They can be group chats and project management platforms that help make information sharing and collaboration easier. With tools like Slack and Microsoft Teams, you’ll easily talk with your team members, share files, and make channels for different topics or projects, among others.
Create cross-functional teams
Develop these teams with people who have different skills and backgrounds for more creativity and knowledge sharing. For instance, make teams that include developers, designers, testers, marketers, etc., who can work together to deliver a product or service that meets customer needs
Build a knowledge-sharing system
Create a wiki where employees can share their expertise and learn from others. You may use tools like Confluence or Google Docs to make and store documents with useful information or best practices for your team or company.
Provide training and development opportunities for employees
Doing so allows them to learn new skills and knowledge, which they can use in their work. We suggest offering online courses, webinars, workshops, or mentoring programs that cover topics such as new technologies, industry trends, soft skills, etc.
Recognize team achievements, learn from failures, and share insights with the wider team
You can celebrate successes by sending congratulatory messages or giving recognition awards. Do retrospectives to find out what went well and what can be improved. Also, share lessons learned or best practices with other teams or departments.
Value diversity and inclusion
This way, you foster collaboration and knowledge sharing among employees with diverse perspectives and experiences. Speaking from experience, we learn that hiring people from different backgrounds (e.g., gender, ethnicity, and age), creates a culture of respect and inclusion and gives equal opportunities for growth and development.
Work better with IT recruitment agencies in Vietnam.
Conclusion
You can work with the accredited tech-focused headhunt agency JT1 to fill positions such as software engineers, web developers, data analysts, and project managers. With a vast network, deep market knowledge, and proven success, it’ll make your business journey in the IT industry Vietnam easier and smoother.
