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Software outsourcing industry in Vietnam

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VietNamNet Bridge – After more than 10 years of doing the software outsourcing for Japanese, Vietnamese software firms believe they have accumulated enough experiences to handle more complicated with higher value contracts.

Nguyen Dang Phong, President of Fujinet, a software solution firm, said on Thoi bao Kinh te Saigon that in the past, Vietnamese firms could do the simple works, such as the low-value coding or testing projects. Meanwhile, they now can make the product designing and researching, which can bring higher value.

Also according to Phong, Vietnam gets ¼ of the total workload outsourced abroad by Japanese firms. Most of the contracts Vietnam gets nowadays have the values higher than in the past, since Vietnamese firms now can undertake more complicated works.

Analysts noted that Japanese tend to outsource to Vietnamese firms instead of Chinese, because the Chinese labor force has been on the rise. Especially, the regular changes in the labor force of Chinese software firms have badly affected the implementation of the projects ordered by Japanese. The escalating political tense has also prompted Japanese to work with Vietnamese.

However, they said Vietnamese firms need to prove that they can replace Chinese in implementing the orders placed by Japanese. In order to compete with Chinese, Vietnamese firms need to improve their qualifications and skills. The ones with internationally recognized certificates, such as CMMi, would have more advantages.

Agreeing with Phong, Chu Tien Dung, Chair of the HCM City Information Technology Association, who is also President of the Quang Trung Software Park, affirmed that more orders have come from Japan.

Some Japanese companies are considering setting up some research and development (R&D), IT services and software outsourcing centers in Vietnam.

Dung has noted that Vietnam is now completely capable to undertake the jobs which require high techniques, which helps improve its competitiveness in comparison with the rivals – China, India, the Philippines and Malaysia.

Though being optimistic about the Japanese market, analysts still have warned that Vietnam needs to beware of Myanmar, at least for some more years. This is a newly emerging market which may grab one piece of the cake from Japan.

In related news, the Ministry of Information and Communication (MIC) has released the White Book on Vietnam’s IT development.

The IT development index in 2012 increased by five grades to 81/16. Vietnam now ranks the fourth in South East Asia and 12/27 in Asia Pacific.

The report of A.T. Kearney in 2005 showed that Vietnam ranked “average” at 26/50 among the attractive software outsourcing countries. Meanwhile, it jumped to the fifth out of the 50 most attractive software outsourcing countries in 2011.

The report of Gartner has pointed out that over the last five years, Vietnam has been continuously listing itself among the world’s top 30 countries and among Asia Pacific’s top 10 countries, while it has been leading in the software outsourcing at low costs.

In the domestic market, the Vietnamese software industry has been facing big challenges due to the economic recession. Therefore, its turnover growth in 2012 was lower than the year before, at 3.1 percent, with the turnover of over $1.2 billion.

Vietnam’s total turnover from IT industry in 2012 was $25.5 billion, an increase of 86 percent over 2011.

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