The demand for IT outsourcing services in Vietnam from the European market is showing steady growth. Further below, we’ll cover the main reasons for it.
The European market for IT outsourcing is robust. According to The 2023/2024 European IT Sourcing Study, conducted by Whitelane Research, 31% of European organizations reported having plans to increase their outsourcing activities over the next two years. A majority of 39% plan to sustain their current outsourcing levels, while only 15% indicate they would be outsourcing less. Thus, the market growth is projected to persist throughout 2024.
The European market for IT outsourcing remains strong
2023/2024 European IT Sourcing Study
Source: The 2023/2024 European IT Sourcing Study, by Whitelane Research
What are the main outsourcing drivers in Europe?
As recently as a decade ago, organizations outsourced work mainly as a cost-saving strategy. Things have changed.
The same research revealed that, currently, the key reasons why Europe is increasingly turning to external partners are:
- Scarcity of Available Talent (cited by 55% of respondents)
In the last six years, more than half of organizations worldwide have encountered a skills deficit.
Share of organizations affected by staff shortages in selected countries
Source: Statista
The global IT talent shortage trend hasn’t bypassed Europe. There is a wide gap between the number of tech jobs and the number of available talent in the region.
For instance, the United Kingdom is facing a severe post-Brexit job market crisis. There are three times as many available job openings for one active tech professional.
Tekna, the Norwegian Society of Graduate Technical and Scientific Professionals, reports that 48% of Norwegian companies require a skilled tech workforce. Fast-growing software development firms in Norway find it challenging to hire enough technical personnel to fuel their growth.
Sweden also has a pressing need for IT workers. From transport to trade, manufacturing to marketing, Swedish employers are struggling to hire IT talent with the necessary tech expertise and human strengths to fulfill their present and future requirements. This talent scarcity has reached 77% of the total demand.
IT skill shortages faced by leaders worldwide 2021
In what area are you suffering a skills shortage?
Source: Statista
- Scalability to Business Needs ( 54%)
Scalability plays a crucial role in adjusting to changes and upsurges of demands caused by deal flow. If companies collaborate with an outsourced provider who can enhance teams and systems performance, then a business can operate at its full potential.
- Focus on Core Business (51%)
For many businesses today, leaving the work on an entire IT project or part of it to a third-party provider is no longer an optimization strategy but an urgent necessity.
Focusing your time and attention on doing what you’re good at – be it advertising, selling, advising, and coaching – is often the only sensible way to motivate staff, generate more profit, and ensure stable business growth and continuity.
- Cost Reduction
Along with access to resources, scalability to business needs, and focus on core business, low costs are undoubtedly another allure of outsourcing, particularly offshore outsourcing.
Despite no longer being among the top three outsourcing drivers in Europe, cost reduction maintains its top spot in France, Switzerland, and the United Kingdom.
The Problem of Oversaturation
As the European talent crunch among IT professionals continues to pose challenges, organizations regularly recruit talent from outside Europe. However, for many IT buyers traditional offshore outsourcing locations like India or China are no longer as attractive as they were some five years ago.
Though these markets for offshore IT services are really big and cheap in comparison to their Western rivals, they have become oversaturated.
This has led to salary inflation and high employee turnover, which are increasingly forcing European companies to deal with software outsourcing providers from alternative locations. One such popular alternative is Vietnam.
How Vietnamese IT Services Companies Help
While some may initially associate Vietnam with a distant, developing nation, today’s Vietnam is a rapidly evolving country with a growing middle class and vibrant modern cities.
Having transformed hundreds of rice fields into technology hubs, mainly due to foreign investment, the Vietnamese government has prepared fertile ground for digital innovations and entrepreneurial ventures.
Today, dozens – if not hundreds – of Vietnamese IT services and technology companies, including such notable names as Elinext, Orient Software, FPT Software, TMA Solutions, and CMC Global, are fully prepared to and do provide comprehensive support in addressing Europe’s most pressing business problems, namely:
Offer Access to a Wide Pool of Top-Notch Tech Talent
With over 400 higher education institutions offering cutting-edge software engineering programs, Vietnam is a prominent hub for IT jobs that are most in demand in Europe:
- Data scientists,
- AI engineers,
- Cybersecurity specialists,
- Cloud architects, and
- DevOps engineers.
Annually, the country produces over 57,000 IT graduates, known for their technical expertise and excellent communication skills.
There is solid evidence of their prowess – in 2022, The Pentalog Group, a global IT Service Platform, ranked Vietnam among its Top 10 countries with the best developers in the world.
Furthermore, Vietnamese students bag a gold medal at the prestigious International Olympiad in Informatics (IOI) 2023, another remarkable achievement, showcasing the high potential of the local tech workforce.
The country boasts a range of world-renowned universities:
- Duy Tan University,
- Ton Duc Thang University,
- Vietnam National University in Ho Chi Minh City,
- Vietnam National University in Hanoi, and
- Hanoi University of Science & Technology, to name a few.
Importantly, nine Vietnamese universities were featured in THE Impact Rankings 2023.
Help Companies Reduce Labor Costs
The ongoing scarcity of IT professionals in Europe is driving up the costs of the available talent, who are in high demand.
This is further complicated by the fact that onshore software development costs European firms a great deal of money – Denmark, Switzerland, Germany, and France are traditionally the top destinations to earn as a software engineer.
Add in the complexity, duration, and variability of most IT projects, and it becomes clear why European firms regularly recruit tech talent from outside the region.
To illustrate, a software engineer in Switzerland, who charges $67 per hour costs only $7 per hour in Vietnam.
Enhance Scalability in Business
Vietnamese software outsourcing vendors provide businesses the ability to quickly scale up when the need arises.
Partnership with Vietnamese IT service providers gives European firms access to a huge talent pool with valuable skills, so that they can choose the right people for their project, all without the laborious and expensive processes of recruiting, hiring, and onboarding new employees.
Depending on the complexity of the project and the needs of the business, it becomes possible for companies to set up a development team within a matter of days or weeks.
Conversely, when there’s no more need for external workers, scaling back down is equally easy.
Help Improve Focus On Core Competencies
Turning over a project to the capable hands of Vietnamese outsourced engineering providers enables businesses to focus their internal resources on activities that directly enhance their competitive edge.
Some leaders worry about the potential loss of oversight and control when entrusting their important projects to an offshore provider. However, transparent and frequent communication can ease these concerns and maintain a sense of control and visibility throughout the project.
At Elinext, for instance, we are happy to allocate meetings, accommodate on-site visits, and provide other transparency measures to keep clients well-informed and fully involved in the development process.
Some Other Reasons Why Europe is Choosing Vietnam for Outsourcing Their IT Requirements
English-speaking Population: One of the primary reasons why some European businesses hesitate to entrust an offshore vendor with their IT projects is the language barrier.
However, it’s not the case with Vietnam. While the de facto official language of Vietnam is Vietnamese, a recent survey indicates that English – the most spoken language in Europe – is the top foreign language being learned in the country, with 86 percent of the participants studying it.
In 2023, Vietnamese employees showcased their upper-intermediate level of English skills, ranking 58th out of 113 countries in the EF English Proficiency Index.
Additionally, so far, Vietnam is among the top 10 regions in Asia for its English proficiency levels.
Time Zone Advantage: Thanks to its unique geographical position, Vietnam enjoys a strategic time zone advantage that ensures real-time communication with most European nations including the United Kingdom, Germany, and France. Thus, the country’s IT service providers are highly accessible to European customers.
Mature Startup Ecosystem: According to data from the National Agency for Technology Entrepreneurship and Commercialization Development under the Ministry of Science and Technology, Vietnam is currently home to approximately 3,800 startups.
Currently, the nation holds the third spot in both the number of investment deals and total investment in startups in Southeast Asia.
Homegrown ventures like Buy2sell, Tiki, Topica, Sky Mavis, Axie Infinity, and Vinmec, along with such tech unicorns as VNG, VNLife, and MoMo highlight the vibrant entrepreneurial scene in the expanding Vietnamese market.
Government Support for Digitalization: Vietnam is rapidly transforming digitally, following a comprehensive plan outlined in Decision 36/QD-TTg. Efforts like Directive 16/CT-TTg, Decision No. 392/QD-TTg, and Decision No. 149/QD-TTg have fueled this journey.
The country saw a significant 48% increase in its national digital transformation index from 2020 to late 2023, demonstrating its swift progress. In the 2023 Global Innovation Index, Vietnam rose two spots to 46th place out of 132 economies, reflecting its advancements in innovation.
It’s no wonder a huge chunk of European and the U.S. tech giants like Bosch, Apple, Samsung Display, Nokia, Oracle, IBM, Panasonic, and General Electric have all chosen Vietnam as their manufacturing base and a hub for innovative developments.
Ranking of South and Southeast Asian countries by economic health driven by digitalization
Source: Robocash Financial Group’s research
Partnering with Elinext Is Where Success Begins
Elinext is a leading provider of customized software solutions to businesses around the globe.
Having a strong worldwide presence in Germany, France, the USA, Ireland, Singapore, and Hong Kong, and delivery centers in Vietnam, Poland, Georgia, Kazakhstan, and Uzbekistan, Elinext can help reimagine your business’s digital potential and build solutions that unlock new possibilities and drive meaningful impact.
With a legacy dating back nearly 30 years, we are trusted by clients of all stripes and across multiple industries.
Contact us today to find out how we can support your business.
