The Vietnamese Government is looking to boost its rising economy by pushing itself into higher-technology and outsourcing businesses.

When one hears talk of the outsourcing sector, alongside destinations that flash to the mind, such as India, the Philippines, China and Africa, a new entrant that is increasingly making its presence felt is Việt Nam.

The Vietnamese Government is looking to boost its rising economy by pushing itself into higher-technology and outsourcing businesses.

When one hears talk of the outsourcing sector, alongside destinations that flash to the mind, such as India, the Philippines, China and Africa, a new entrant that is increasingly making its presence felt is Việt Nam.

For long, the country has been associated with the business of making bicycles, shoes and clothes cheaper than anybody else. That perception, however, is changing fast.

Việt Nam today is a top contender for outsourcing jobs. Factors such as low wages, improving English-language skills and technical proficiency are tilting the balance in its favor. In 2006, when Microsoft's Bill Gates visited Việt Nam, he said there was no reason why Việt Nam could not follow India into software development and other forms of outsourcing.

Intel Corporation's decision to build a $1-billion semiconductor factory near Hồ Chí Minh City in late 2006 was a turning point that started the course of IT investment.  This move sent positive signals to other major technology companies about the comfort level in investing in Việt Nam. No wonder that Taiwan's Hon Hai (maker of Apple's iPod) has invested close to $5 billion in Việt Nam.

Plus points aplenty

What's making Việt Nam an attractive outsourcing destination?

The closest competitor in terms of geography is China and investors find the land and infrastructure cheaper than China. Wages are about a third lower than in China's industrial coastal regions. And with a population of over 100 million people, half of whom are under 30 years old, Việt Nam's talent pool is deep and increasing. The Government has been attentive to companies wanting to invest in Việt Nam.

It's fairly common for the Prime Minister to meet with foreign companies evaluating Việt Nam as an investment destination. Proximity to China gives companies an edge in capturing business in that red-hot market.

Việt Nam also has a highly motivated and low-cost workforce with the US dollar trading at about VND 19,000 currently.

In a survey conducted by Global Services and Tholons in 2007, two Vietnamese cities feature in the Top 15 cities for outsourcing in the world. The cities were rated based on the infrastructure, business environment and available talent.

Promising beginning                    

California consultancy neoIT ranked Việt Nam's Hồ Chí Minh City as the top non-Indian city to be the most competitive location for outsourcing. The only other two non-Indian cities in the top 10 list are Shanghai and Manila.

While foreign companies are planning to set up their units in Việt Nam, at the same time the country's own home-grown high-tech units such as Glass Egg Digital Media and Alive Interactive Media Inc, in HCMC, which design parts of video games for companies such as Microsoft and Sony, are also making their presence felt. TMA Solutions is, again, a Vietnamese company that develops software for clients that include Nortel Networks Corp and Alcatel-Lucent.

Key challenges

The global outsourcing business relies largely on the quality of service that is provided, rather than the talent pool, and in this respect Việt Nam has still a long way to go. Industry analysts say the English spoken by the Vietnamese workforce does not flow as fluently as that spoken by Indians.

The availability of talent is another key challenge as most organizations usually send their own people to staff offices and the senior positions.

On the odd occasion, they may search for senior people outside of Việt Nam, and in these cases their preference is for returning Vietnamese and other Asian expats.

While corruption remains a matter of concern in Việt Nam, Government leaders say they are working to reduce red-tapism and bureaucratic processes. Most large companies that outsource to India and the Philippines, however, know how to handle this hurdle.

Việt Nam may still be some years away from gaining the prominence of an India, the Philippines or China but has definitely emerged as a serious player and one to watch out for.

 (Source: www.thehindubusinessline.com)