VIETNAM AS ASIA’S NEXT SILICON VALLEY?

While India continues to top the charts as the world's software development outsourcing destination, Vietnam's market share is growing rapidly.

According to IT research and advisory provider Gartner,  Bangladesh, Indonesia and Vietnam are continuing to gain regional traction for offshore service delivery, while more mature countries, such as Malaysia and the Philippines, are refocusing on their core capabilities of higher-end IT infrastructure, help desk, application and business process services.

Vietnam's software development industry has experienced a spectacular growth over the past years. While in 2000 Vietnam had a total of merely 25 software companies, Vietnam's News Agency mentioned last year that the number stood at almost 4000, providing over 55,000 jobs. At the same time foreign multinationals like Fujitsu, Harvey Nash and Intel have flocked to HCMC and other parts of Vietnam serving their customers globally. Likewise the number and size of home grown IT companies, such as FPT, VietSoftware International (VSII), Tinh Van Technologies and TMA Solutions, is expanding rapidly.

Dutch IT companies in Vietnam

The number of Dutch IT companies active in Vietnam - whether it be for outsourcing or own production - seems still limited today though. One Dutch IT company which settled in Vietnam is Sioux. Headquartered in Eindhoven and employing more than 450 engineers worldwide, it has set up an office in Danang a few years ago, serving as a back office for other Sioux companies in Europe and as a development center for its own clients in Asia, the U.S. and Australia.

Another example is the Hanoi based Dutchman Abraham de Kock and his partner in the Netherlands (Prismata Consultancy, Assen), who have teamed up with ICTS, a Vietnamese IT startup. In 2013 they launched the Matching Airlines Seats (MAS) app, allowing social networking among air travellers who may decide to travel together. More recently, Music Lovers Travel (MLT) - Vietnam,  a dynamic website was started, featuring a rolling agenda of popular music events in East Asia and Australia by world-class artists.  "Unfortunately, Vietnam is regularly by-passed when famous bands are touring Asia. At the same time, a growing number of Vietnamese music lovers are more ready and able to travel in order to enjoy live music events of their idols," according to Abraham. Judging from the fast growing number of followers of the MLT Facebook Page, almost 15.000 to date, the new website seems to have hit just the right note.

Vietnam's challenges

While there are attractive cost advantages to benefit from, Vietnam's IT market also presents challenges. Apart from issues relating to IPR, infrastructure, diverging management practices and language barriers, there is fierce competition between companies to recruit the best IT talents from Vietnamese universities. The country's education system is simply not able to produce enough, well-trained graduates to meet market demand. In addition, external demand for software engineers in countries like Japan and Singapore is siphoning off skilled IT technicians from the local labour market. In an attempt to reduce staff shortages, several companies are now providing scholarships and have initiated programs at high schools aiming to increase enrolment numbers at Vietnam's IT educational centers.

But despite these challenges, Vietnam's potential for software development is certainly not to be overlooked. If you are interested in learning more about the opportunities in this sector, do not hesitate to contact the Dutch Embassy in Hanoi or the Consulate General in HCMC.