Over the past two-plus decades, Vietnam has succeeded in attracting hundreds of global businesses looking to outsource abroad. Here in the article, we’ll highlight the game-changing advantages companies from developed nations, namely Japan, the UK, and Australia, can take if they decide to set a course for this popular software outsourcing destination.
Once hailed for its breathtaking landscapes and agricultural achievements, Vietnam has now morphed into a booming tech hub and a magnet for players from thriving economies intending to outsource their IT support.
Such a significant breakthrough is largely the result of deliberate policy-making and strong government backing. Initiatives such as the Information and Communication Infrastructure Master Plan (2021-2030), regulations and policies supporting startups, along with tax incentives and funding for digital businesses, have laid the foundation for a flourishing tech ecosystem.
Big fish like Elinext, Orient Software, FPT Software, TMA Solutions, CMC Global play a prominent role in this seething system, offering first-class software engineering services and promoting Vietnam’s progress in the global digital landscape.
Yet, to draw in tech-savvy businesses from the world’s leading innovation hubs like Great Britain, or Australia, there should be things that differ a country from its outsourcing rivals.
Apart from government support for the IT sector, there are some other key factors execs always consider when looking for the best country to outsource software development including English proficiency, political stability, time zone compatibility, etc.
To get a better idea of why Vietnamese engineering services are so appealing to firms from developed economies, let’s look at the nation from different angles.
6 Solid Reasons Why Developed Nations Choose Vietnam As Their Favorite Outsourcing Destination
Availability of Skilled Manpower
Vietnam thrives in the IT sector with a world-class workforce, as evidenced by its top-ranking developers and notable awards in international computer science competitions.
The tech scene in the country is booming, attributed to a government’s strong focus on STEM education and a continuous stream of IT graduates (more than 57.000 students each year) from prestigious, world-renowned universities such as Duy Tan, Ton Duc Thang, and Vietnam National University in Ho Chi Minh City.
What is more, Duy Tan and Ton Duc Thang universities are listed in the Top 500 Universities Internationally.
Cost Benefits
The main reason for hiring software engineering providers from different nations has always been cost reduction.
There is an essential difference in the wages paid for equivalent skills between Europe or Australia and emerging economies like Vietnam, India, and the Philippines.
Meanwhile, currently, Vietnam is the cheapest option for businesses outsourcing abroad, compared to other prominent outsourcing destinations.
As per Indeed’s data, in April 2024, the average salaries for software engineers in leading outsourcing nations are:
Vietnam — $589 per month
India — $612 per month
Philippines — $661 per month
Malaysia — $1,025 per month
China — $6,084 per month
A map showing the average salaries of software engineers worldwide (late 2022).
Source: CareerFoundry
Time Zone Advantage
Vietnam, with its unique geographical position, offers a strategic time zone advantage that fosters efficient interactions with most European countries, including the United Kingdom, Germany, and France.
The geography of the country allows small time differences with major Asian markets such as China, Japan, South Korea, and Singapore, as well as Australia and New Zealand, which simplifies business interactions.
Moreover, the country’s time zone also empowers North American businesses to implement a follow-the-sun approach when outsourcing in Vietnam. This strategy enables seamless continuity of work by coordinating shifts with global teams, ensuring uninterrupted progress and efficiency.
Robust Startup Ecosystem
Over a decade, Vietnam has nurtured a thriving startup ecosystem through encouraging policies and initiatives, resulting in a large cohort of successful tech firms.
MoMo, VNG, Buy2sell, Tiki, Topica, Sky Mavis, Axie Infinity, and Vinmec are just a few homegrown startups from an emerging Vietnamese market that are making the world sit up and take notice.
Total capital disbursed to Vietnamese startups (billion USD)
Source: ARC Group
English-Speaking Population
Language proficiency is critical in offshore service provider selection. Poor English leads to misunderstandings, frustration and dissatisfaction between teams, putting quality and performance at risk.
While Vietnamese is the official language of Vietnam, a recent survey shows English is the most popular foreign language studied in the country, as learned by 86 percent of the respondents.
Besides, Vietnam currently ranks within the top 10 regions in Asia for its English proficiency levels.
No less important point, in 2023, the country secured a commendable position, ranking 58th out of 113 countries assessed in an English proficiency survey conducted by Swiss firm EF Education First (EF).
Political Stability
Uncertainty in the political environment has far-reaching and long-lasting effects on business performance and is a direct link to serious delays in development and poor software quality.
Besides, political instability is often a cause of extreme inflation and volatile exchange rates, which makes it harder for business partners to maintain stable prices. Consequently, such instability causes budget overruns and outsourced project failure.
By choosing Vietnamese software development companies as a tech partner, companies can anticipate having uninterrupted and efficient development processes. In the last ten years, Vietnam has held a steady position in the top 50 among almost 200 countries on the Political Stability Index.
In the next three sections, we will detail how exactly Japan, the UK, and Australia can benefit if they entrust their IT projects to Vietnamese software engineering providers. There will be a dedicated section for each country.
Why Japanese Companies Should Outsource in Vietnam
- Mitigating IT Labor Shortages
While seeking to digitize its economy, Japan is grappling with a severe shortage of skilled tech professionals.
The latest study conducted by Morgan McKinley for its 2024 Salary Guide, unveiled that 76% of technology hiring managers in Japan perceived recruitment as ‘very’ or ‘quite’ competitive in 2023, with a shortage of skilled candidates being the prime reason.
The report also suggests increasing the recruitment of foreign workers, as 31% of tech hiring managers identified the lack of the right candidates as their significant challenge.
With over 400 higher education institutions offering cutting-edge programs in computer science and an impressive number of engineers graduating annually, Vietnam is fully prepared to help address Japan’s growing shortage of technologists.
In fact, Vietnam was always ready to support Japan with its high-quality IT talent. The partnership in information technology between countries commenced in the early 2000s when the domestic software and information technology service industry started to develop.
Currently, Vietnam holds the position as Japan’s second-largest partner in software and information technology services. In 2022, Vietnamese IT firms generated revenue exceeding $2 billion from foreign markets, with Japan accounting for 60% of the total earnings.
- Cheaper Labor
The long-held belief by some in business is that cheap labor is often linked to poor quality of services and products developed. Yet, more than 40 years of IT outsourcing shows that for the majority of industry leaders, it became something they no longer doubt and actually want to do.
Leaving projects in capable hands of ISO-certified Vietnamese firms like Elinext, S3CORP or Orient Software businesses from Japan can be sure their software is compliant with all relevant global, regional, and industry-specific standards.
Also, to give you a deeper insight into how much cheaper it will be for Japanese companies to build and maintain systems if they opt for Vietnamese software development providers, we’ve compared the average salaries for programmers in Japan and Vietnam.
So, in 2024:
– Japanese software developers earn an average yearly salary of approx $49 000
– In Vietnam, engineers are paid a humble annual salary of approx $8,300
- Overlapping Business Hours
With overlapping working hours (time difference of only 2 hours) teams can engage in virtual meetings, negotiations, and project collaborations with minimal disruption.
- Cultural Affinity
Vietnam and Japan share a deep cultural affinity that has been nurtured over centuries. The countries have common values such as a strong work ethic, respect for elders, and a deep sense of community.
Such cultural affinity fosters greater understanding and cooperation in business relationships.
How Businesses in the UK Can Benefit From Outsourcing to Vietnam
- Lower Cost Talent
The UK is one of the most digitally-savvy nations in the world and, frankly, when it comes to creating innovative solutions, has many valuable lessons to offer.
On the flip side, UK developers are among the highest paid globally — approx. £47.000 per year, or $59.300 per year, which makes onshore software development and maintenance expensive.
So, one of the primary reasons behind the growing trend of outsourcing among British companies is cost cutting.
Through partnering with Vietnamese software development providers, where engineers earn seven times less than their counterparts in the UK, British companies can tap into a broad pool of skilled technicians and make substantial savings in their budgets.
- Maximizing Business Growth
In addition to money-saving, by outsourcing non-core IT functions to Vietnam, British organizations can free up internal resources, improve productivity, and drive operational excellence.
This strategic alignment enables companies to stay ahead of the curve, adapt to industry trends, and deliver value to customers more efficiently.
Why Australian Businesses Should Consider Outsourcing in Vietnam
Real-Time Communication
Despite being separated by the vast expanse of the South China Sea, Australia and Vietnam are relatively close neighbors within the Asia-Pacific region.
The convenient 3-hour time zone difference allows for smoother collaboration and faster decision-making processes, leading to increased efficiency in business operations.
Addressing Ongoing IT Talent Deficit
A recent series of reports highlights one alarming trend: The skills shortage in the Australian IT sector is deepening.
The latest AIIA Digital State of the Nation 2023 report, for instance, states that skill shortages are identified as the top obstacle to business growth in Australia, reaching a significant 44%.
Notably, half of Australian companies are currently outsourcing IT positions internationally due to a lack of local experts. The most commonly outsourced skills are cyber security (40%) and AI (56%).
Skills unavailable in Australia
Source: AIIA Survey-Digital State of the Nation 2023
Much like how Vietnam supports Japanese partners with its constantly expanding cohort of data scientists, cybersecurity experts, and AI engineers, the country can help Australia address the shortage of skilled technical workers, and harness the full potential of advanced technologies.
- Cost Optimization
Software Engineering is among the highest-paying engineering fields in Australia, with an average salary of $102,581 per annum. Compare it with the above-mentioned $8,000 that developers make in Vietnam and come up with your own conclusions.
Partner with Elinext — Leading Software Outsourcing Company Based in Ho Chi Minh City, Vietnam
Whether your business operates in Australia, the United Kingdom, Japan or anywhere else in the world, Elinext is delighted to craft a solution around your business problem.
Backed up by nearly three decades of industry experience, Elinext provides fully managed end-to-end products for start-ups, growing companies, and enterprises globally.
Years of work have armed us with valuable insights into how work needs to be done. The words from our satisfied clients are the best evidence of that.
With our global presence in the USA, Germany, France, Ireland, Singapore, and Hong Kong, complemented by delivery centers in Vietnam, Poland, Georgia, Kazakhstan, and Uzbekistan, Elinext is fully prepared to become your rock-solid business partner bolstering you with cutting-edge technology stack and flawless execution.
Look at a few of the 1000+ projects completed by our dedicated professionals and feel free to contact us directly should you still have questions.
