NEWSINEER
Another Choice in Software Outsourcing Apart From India and China

Another Choice in Software Outsourcing Apart From India and China

Vietnam has strong potential because of the population of nearly 90 million people. Despite the fact that revenue of this sector in 2005 just reached $200 million, the constant growth rate of 25%, which is forecasted to be kept through 2010, certainly shows ambition and aspiration for technology development of this country’s government.

Currently, the software industry is one of the most subsidized sectors in Vietnam. It is eligible to enjoy privileges including tax and investment incentives, an exemption from VAT and tariff for imported materials which are directly used for the software production, etc. To illustrate, businesses involved in software production and services are exempt from income tax for 4 years no matter they are local or foreign invested ones. Software products are free from VAT (0%) and export tax.

Almost every Vietnamese software companies are small-sized, just few of them are mid-sized. However, these companies have been successful in attracting a lot of big corporate and government units to outsource their software projects to Vietnam. Some of them are Anheuser Busch, Bayer, BMG, BP, Cisco, Critical Path, Daiwa, Fuji, IBM, Merrill Lynch, Nortel Networks, NTT, the State of Oklahoma and Sony. All have outsourced software project. Etc. They all have outsourced to Vietnam directly or by 3rd parties.

There are 8 dedicated operational software parks in Vietnam. Three of them are located in HCM city and the others are in Hanoi, Haiphong, Da Nang, Hue and Can Tho. The first software park in Vietnam, Saigon Software Park, which was started in 2001 and technically supported by CISCO, is one of the most advanced one. Another prominent name should be mentioned is Quang Trung Software City with an area of over 430,000 square meters and 10 additional hectares available for extension.

According to a recent report by Ministry of Science and Technology, Vietnam has about 3,000 to 4,000 new IT students every year, of which half are software developers. Known for their skills and diligence, Vietnamese IT students emphasize the potential of the future software industry in Vietnam.

As mentioned, Vietnam’s large population shows a developing and potential market. Besides, cheap production costs (Software developers in Vietnam are half the cost of Indian software professionals and have higher retention rates), combined with the government’s support have been making Vietnam the most outstanding competitor in terms of price.

The first ones who recognize this potential and started outsourcing to Vietnam were small and medium sized software companies in the US. Furthermore, Intel has selected Saigon High Tech Park which is located in Ho Chi Minh city as location for their chip production. Vietnam realized that to receive such attention and to build a dedicated core of IT experts, there has been many things to be done to support IT education in Saigon, Hanoi and other cities with potential in IT development. Specifically, the National University of Ho Chi Minh City is currently cooperating with Portland State University in Portland, Oregon in advanced IT training for Master and PhD students, which is an innovative mixed education program based on international education models. Moreover, other famous universities in Hanoi (Hanoi University of Technology, Vietnam National University Hanoi, Post & Telecommunications Institute if Technology) are also having educational collaboration with well-known universities all over the world.

Vietnamese software companies are still in an early development stage but their potential is already obvious. Furthermore, with the support from government and the advantage of low production costs, Vietnam will soon become a competitor to India and China in terms of software outsourcing, which is a very good news to software investors and software companies in developed countries.

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Manish Srivastava