by Stephanie Overby

Why Vietnam is an attractive IT offshoring destination

News Analysis
Aug 19, 2016
OutsourcingTechnology Industry

Harvey Nash’s chief digital officer discusses the benefits and drawbacks of outsourcing IT work in Vietnam.

vietnam outsourcing ts
Credit: Thinkstock

Vietnam’s technical talent, retention rates and modern tech infrastructure has attracted the likes of IBM, Microsoft and Intel to set up operations there. While it will never be able to offer the scale of IT services hubs in India and China, Vietnam is increasingly an attractive alternative for IT organizations that are frustrated with high turnover and rising costs in the usual offshore locations.

[ Related: Is Vietnam a viable offshore outsourcing alternative? ] talked to Chief Digital Officer and Senior Vice President Anna Frazzetto at Harvey Nash, a 10-year veteran of outsourcing to Vietnam. She explains the growing appeal of the country to Western buyers of IT services, its loyal labor force, the specific challenges of sourcing IT work in Vietnam, and her advice for overcoming them.

vietnam outsourcing overby Harvey Nash

[ Related: 6 hot offshore IT outsourcing markets offer new options ] Vietnam has been a lesser player on the global IT services scene for some time. What driven increased interest in the region in recent years? 

[ Related: Vietnam outsourcing guide ]

Chief Digital Officer and Senior Vice President Anna Frazzetto: The turning point came when they joined the World Trade Organization (WTO). Vietnam’s involvement in this organization has been a key driver in its growing role.

There has always been a level of nervousness about working with a socialist country and exactly how western companies would work in that environment. But, in reality, we have encountered no issues. The Vietnamese have a very strong desire to work with other parts of the world because they value the positive flow of money and funding coming into their country. You’ve been involved in outsourcing to Vietnam for more than a decade. What’s changed during that time?

Frazzetto: Harvey Nash has been in Vietnam for 16 years, and much has changed. When I first joined the company 11 years ago and first mentioned Vietnam, the response was, ‘Really? outsourcing in Vietnam? How can that work?’ But now, outsourcing in Vietnam is fairly common. That’s a significant change. I think the evolution of the country itself, its involvement in the WTO, and its willingness to work with the western world all play a role.

Another factor is the flexibility provided by the government in allowing companies like Harvey Nash to come into the country and work directly with their universities to craft programs and tailor the kind of staff we need. Now, countries like Thailand and Cambodia are now also seeking outsourcing opportunities and are coming up with creative ways to attract companies to their countries. Last year, Gartner ranked Vietnam a top five location alongside India, China, the Philippines and Malaysia. How does Vietnam compare to those four hot spots?

Frazzetto: China and especially India have obviously been the mecca of outsourcing for the last two decades. These two countries have been-there-done-that and have gone through all the offshoring challenges. Today, the biggest challenge they have is retention of staff because it is culturally and socially acceptable to migrate to other countries to enhance your career.

But that is not necessarily the case for Vietnam. In Vietnam, you provide not only for your immediate family, but also your extended family. It is typical in the Vietnamese culture for folks to want to stay in their country, be involved in IT on a local basis, and provide for their families. This is a significant difference and an important advantage for the Vietnamese outsourcing environment.

Then there is the level of technical talent. Malaysia has technical competency, but does not seem to possess the same scalability as Vietnam. I often hear of organizations struggling to build out teams fast enough in Malaysia because of the quantity of staff needed to do an assignment. I believe that technical competency in Vietnam is superior to the Philippines. However, in the Philippines the English is better. This is why the Philippines are so proficient in call centers.

Vietnam does an outstanding job in education and has a high regard for math and science. Both Hanoi University and the University of Ho Chi Minh offer excellent talent. They even have something similar to the Olympics for mathematicians, and we are proud to have a few medalists who work for us. What types of companies are sourcing IT or technology work in Vietnam?

Frazzetto: We recently heard that Apple is talking about opening a R&D facility in Vietnam. Microsoft and IBM are there as well. All the big players are setting up their own facilities. If the companies that are the gold standard in technical competency are setting up house in Vietnam, that says a lot about the technical talent Vietnam is offering.

Vietnam also has a good appeal to small and midsized businesses. When a smaller business outsources to a company in India or China, they are like a guppy in the ocean. If you only need five or 10 people to do a project, you might not get the attention you need. Vietnam has the flexibility to meet the needs of SMBs. What’s the business and innovation environment like in Vietnam?

Frazzetto: In the U.S. there has been investment in things like fiber optics, running wire, and having that physical connection when it comes to bandwidth and communication. When you look at more newly developed countries like Vietnam, they are going to bypass more traditional kinds of infrastructure and focus their talent on becoming more advanced in mobile and wireless technologies. Vietnam’s capability in mobile technologies is an advantage for companies looking to outsource. What are the biggest drawbacks when sourcing IT work in Vietnam?

Frazetto: As mentioned, the language can be a challenge. Are there ways around it? Absolutely. At Harvey Nash, we have a team of technical staff onshore to help bridge the language gap. These resources are all trained in technical roles like developers, business analysts and architects, not customer service or account managers. These resources help support communication and are not paid for by the client. Another way we get around the language barrier is to always make sure at least some of our staff are competent in speaking English.

But, keep in mind that the challenges only relate to speaking skills. It does not impact writing and documentation. Written skills are superior because English is Vietnam’s official second language.

Then there is the time challenge. Some companies are still concerned about the time differences but this, of course, is not specific to Vietnam. What impact might the passage of the Trans-Pacific Partnership (TPP) have on U.S. businesses outsourcing work to Vietnam?

Frazzetto: I think it will hurt China because it is not part of the TPP. On the other hand, it may influence more companies to look at Vietnam (since they are part of the TPP supporters) as a great outsourcing option. I see a similar impact as when Vietnam entered the World Trade Agreement in terms of supporting and driving business in a more collaborative way. What advice would you offer companies considering outsourcing to Vietnam?

Frazetto: Vietnam is truly unique in its low turnover rates. This reinforces the need to be sensitive to helping them feel like a natural extension of your workplace environment.

I also advise on the need to be sensitive to how you bring a new person onboard and factor in the necessary time to make sure they comfortably fit into your environment. Harvey Nash’s philosophy is that our clients train us once and then it is up to us to maintain the training on [ongoing] basis for any additional resources a client may need. The only exception occurs when there is a technology change.