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Vietnam’s software outsourcing market – the most attractive in the world

Vietnam’s software outsourcing market – the most attractive in the world

Saturday 24, 09 2022
Although India has long been known as a major outsourcing country, the Indian market is reaching a saturation point causing companies to look to other Southeast Asian countries like Vietnam.

Development of information technology industry in Vietnam

Vietnam’s information technology industry has made great strides in the past 20 years. According to statistics, in 2000, this industry only accounted for about 0.5% of the country's GDP, significantly inferior to agriculture, commerce, etc. However, within only 2 decades, there have been huge changes:

  • The revenue of this industry in 2019 reached USD 120 billion, which is 400 times higher than in 2000 and corresponding to an average increase of 37%/year during 19 years.
  • It contributes 14.3% to Vietnam's GDP, 28 times higher than in 2000 (only 0.5%).
  • Labor productivity of the information technology industry is 7.6 times higher than the national average.
  • The number of employees in the industry is 1,030,000 people, accounting for 1.88% of the workforce in Vietnam. Compared to 2000, this figure has increased 20 times.
  • Exports reached USD 89.2 billion, accounting for 33.7% of Vietnam's total export value. The export value of one worker in the industry is 18 times higher than the national average.
  • With certain technological achievements, Vietnam has become the investment destination for many technology corporations in the world such as IBM, Intel, Microsoft, Samsung, Toshiba, etc.
  • Vietnam’s software service industry is ranked 1st out of 6 most thriving countries in Southeast Asia.

technology industry

In general, the development rate of the information technology industry in Vietnam closely follows the changes in the world. Especially, with young (average age under 35 years old), creative and dynamic resources, Vietnam’s information technology industry will surely develop further in the future.

Software outsourcing industry in Vietnam

The digital transformation wave that exploded under the pressure of Covid-19 pandemic made the global software market increase by 6% in size in 2020, reaching USD 632.5 billion. MarketLine forecasts that in the next 4 years, the world software market will continue to grow at an average rate of 11.3% and is expected to reach USD 969 billion in 2024. In particular, demand will focus on solutions and applications related to business processes, data analysis, security, and information technology infrastructure.

On the other hand, according to IDC's forecast, by the end of 2022, 70% of organizations and businesses will accelerate digital transformation in order to transform current operating processes to enhance customer interactions, improve productivity and their resilience. By 2023, 75% of global organizations will have a comprehensive digital transformation roadmap, creating a digital revolution in many aspects of business and society.

Artificial intelligence

In general, this trend will be stronger when people are increasingly noticing the importance of digitalization after the pandemic. The need to apply information technology, digital conversion, artificial intelligence (AI) will continue to be high. In particular, the leading strategic technology trends in 2021 such as AI, Cloud, and Big Data will revolve around humans, operating space and flexible delivery.

Although India has long been known as a major outsourcing country, it is reaching a saturation point causing companies to look to other Southeast Asian countries like Vietnam. Vietnam is on its way to becoming “the next India”.

Below are 5 main reasons why software outsourcing industry in Vietnam is attractive:

1. Young population

The main advantage of outsourcing to Vietnam is the young population. About 70% of Vietnam's population is under the age of 35 and about 45% is between the ages of 15 and 35. This means that about half of the population is healthy enough to join the labor force. So the absolute number of people looking for a good job is quite high. Vietnam also has a literacy rate of 97%, which means that most of the population that is ready to work is also educated.

2. Academic level

In addition to the fact that Vietnam has a fairly high literacy rate, it also has about 280,000 university or college graduates every year. Of these 280,000 graduates, 30,000 to 40,000 are in the field of Information and Communication technology. They are top candidates for outsourcing companies looking for new talents.

3. Many IT training institutions

There are more than 250 colleges or universities offering courses in the field of technology and information. In addition, there are also 187 vocational schools providing courses related to technology and information.

4. Low cost

Low cost

The cost of hiring a developer in Vietnam is significantly lower compared to that in the US. As the main goal of software processing is to reduce costs and the most major software outsourcing service provider in the world has so far been India, the cost should also be compared to the cost of an Indian developer. A Vietnamese developer costs 30% lower than an Indian developer. Therefore, Vietnam not only has a better percentage of literate people than most other developing countries, but the cost of outsourcing here is also lower than those countries.

5. Stable politic environment

Vietnam has no political instability. It has had a stable political environment over the past 30 years with the same ruling party. It also has had a steady growing economy. About 90% of the population is Vietnamese and they do not follow any religion. This means that there is little reason for any ethnic or religious conflict in the country.

Source: MarketLine, IDC

Compiled by VietnamCredit

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