Behind an unmarked door on the second floor of a new commercial park
located just a few blocks north of the border from Ha Dong province is
the Hanoi branch of VietGest, one of a thousand companies in Vietnam’s
burgeoning software development industry. The small four-room office
houses a young team of 15, average age 25. The software developers
enjoy air conditioning on full blast in their room. The support staff
and junior software engineers make do with fans to stave off Hanoi’s
sweltering heat.
VietGest developers in an air conditioned room in Hanoi.
VietGest is part of the rapidly growing USD $2.3 billion dollar software and digital content industry in Vietnam. According to Vietnam’s Ministry of Information and Communication, the industry has grown an average of 20-25% year over year since 2001. As India grows wealthier, global companies have begun looking elsewhere for low-cost technology outsourcing opportunities. NeoIT cites IT labor costs are 40% less expensive in Vietnam than in China and India. A.T. Kearney’s Global Services Location Index and KMPG Advisory predict Vietnam will be one of the next outsourcing hubs for software development.
The Vietnamese telecom giant FPT
also dominates the global outsourcing provider market in Vietnam. Its
outsourcing team of 3,800 brought in $62.5 million last year. Nguyen Thi
Dan Phuong of FPT said, “Our market share is roughly 21% of Vietnamese
outsourcing to global market.”
While FPT may cast a long shadow, a myriad of software companies of
different sizes, histories, and target markets characterize the vibrancy
of Vietnam’s growing technology industry.
VietGest represents a startup. Hoang Viet Tung, 30 years old, and Vu
Minh Tuan, 28 years old, founded the company in 2010, when the pair
returned home after studying abroad in Switzerland.
VietGest specializes in serving French-speaking companies. Tuan runs
the Hanoi office while Tung manages a team of 50 in Ho Chi Minh City.
After FPT, the second largest software outsourcing company based in Hanoi is VietSoftware International (VSII), which started as a subsidiary of VietSoftware, Inc. and spun off as its own company in 2006. VSII is IBM’s biggest Offshore Delivery Center
(ODC) in Vietnam. The core team has been in outsourcing since 2000 and
it has grown to 200 engineers. Like most other providers of global
outsourcing, VSII executive leaders
trained abroad. CEO Le Xuan Hai, who co-founded VietSoftware, studied
in Australia and worked in Germany while Director of Global Business
Development Tran Luong Son earned his PhD in Russia and his Master’s in
the US.
In terms of high tech development, Ho Chi Minh City (HCMC) is to
Hanoi what Silicon Valley is to Seattle. One of the industry’s pioneers
is TMA, a
privately held company based in HCMC with 1,200 engineers. TMA is among
the small number of Vietnamese software companies with more than 1000
employees. Bui Ngoc Anh, a rare female in a male dominated world,
started TMA in her living room with six engineers in 1997. Today, her
husband, Nguyen Huu Le, runs the company. Le is a Vietnamese Australian
with an Australian doctorate and 22 years of experience at Nortel. Le
said TMA pulled in $22 million in 2012.
All three companies share a sense of national pride to prove through
providing outsourcing to global clients that Vietnamese software
engineers are among the best in the world.
Le said, “The vision of the founder was ‘To Be One of the Top
Offshore Developers and help put Vietnam on the World Map of Offshore
Development by Exemplary Quality and Customer Focus’.”
Regardless of company size, Vietnamese software companies that
provide outsourcing face similar challenges. “First, competition with
peers from other emerging countries, notably India,” said Tran Tai, a RMIT
Vietnam Lecturer. “Second, difficulty in recruiting enough IT talent to
satisfy larger projects. Third, considering shrinking margin, some
firms are looking at developing its own IT products. However, sales and
marketing is a key issue.”
Although English is widely studied, Vietnam lags far behind India in this area.
Le said, “Even though the level of verbal English communication of
Vietnamese ICT engineers has improved significantly, there’s still a gap
with the need of international business.”
Then there is learning the language of Western business management.
When TMA started in 1997, there were just a few Vietnamese software
companies that specialized in outsourcing. Le said one of TMA’s biggest
challenges was “To build a company with Western management style in
order to compete in the world market. Vietnam’s software industry at
that time lacked experience in modern management practices and
international business.”
Embracing Western leadership styles himself and in true Silicon Valley fashion, Le is dubbed “Chief Mentor” at TMA.
TMA has its own special training programs (photo provided by TMA).
To better serve their foreign clients, Vietnamese software
outsourcing providers strive to understand what their clients value and
how they work and think.
In Asia, the belief “leaders are born” prevails while in the West,
many assume “leaders can be made.” To simulate some aspects of the work
environment of their foreign clients, all three companies employ “soft
skills” training. While “hard skills” means technical expertise, “soft skills”
requires having Emotional Intelligence and knowing how to interact and
build relationships with others. The concept of “soft skills” is still
so foreign in the Vietnamese work place that no Vietnamese name exists
for it; the original English must be invoked.
Those with strong soft skills will be able to bring out the best thinking, creativity, and innovation in others.
Tuan said, “We are influenced by our Asian culture. We’re more
careful, risk-averse. We’re not as flexible.” Acknowledging their
cultural tendencies, VietGest takes extra conscientious efforts to train
their staff.
On Saturdays, the VietGest employees participate in additional soft
skills or non-technical training researched and organized by alternating
team members. This way, more team members get opportunities to lead and
VietGest does not need to hire outside resources.
VietGest has a unique policy of encouraging anyone who wants to be
team lead to try it for a month and if the candidate and the team feel
it’s a good fit, the candidate may remain in that role. Although several
have tried, Tuan said, “No one has wanted to stay. But after the month,
the person has greater empathy and appreciation for what it takes to
manage a team.”
While the number of students choosing to study information computer
technology has increased by 70% since 2006, the talent pool is still
very limited. Companies must make cost-effective decisions in their
recruiting strategy to remain competitive.
VietGest works with local universities to find interns from whom they
will hire. Tuan said he prefers “fresh” engineers that he can train.
At VSII, Hai and Son said they like to hire engineers with at least a
few years of experience who share their long term vision of the
company. VSII is competing for talent not just with local companies but
with foreign giants in Vietnam.
“Many of our engineers studied or worked abroad or worked for foreign
companies here before coming to VSII. They are the future of the
company,” said Son.
TMA has the most robust system for recruiting and training. Aside
from hiring from interns, they have their own training center, from
which they recruit the best students to work for TMA
Vietnamese companies that specialize in outsourcing have the added
challenge of trying to get their employees to approach work like their
foreign clients while incentivizing and managing the team in ways that
make sense to the Vietnamese.
Vietnamese culture puts a high value on community and family. VSII
sponsors family trips and rents a two story room inside a multi-company
office complex to serve as a cafeteria exclusively reserved for VSII
employees.
“Renting a separate cafeteria is a great expense but it makes our
employees feel special, valued, and respected,” said Hai. The room is
decorated in bright citrus tones with plastic ivy hanging from the
ceiling and a sign in English that reads “Have a Good Lunch.”
VSII cafeteria reserved for VSII employees
There are even gifts for the children of VSII employees. Whenever a
VSII employee gives birth, she is presented with a silver spoon. In the
Vietnamese context, the spoon is used for cạo gió
or “spooning”, a form of Vietnamese folk medicine where repeated
pressured strokes are applied with the smooth edge of a spoon or coin
over skin lubricated with a medicinal oil.
When Vietnam first began outsourcing software development services,
companies faced challenges building trust and brand recognition
globally.
“Improvements to Vietnam’s legal system in recent times mean foreign
software developers can have greater level of confidence outsourcing to
local developers provided they follow good business practices and ensure
they localize their contracts suitably,” said Giles Cooper, a partner at the law firm Duane Morris Vietnam.
Le believes the biggest challenge that remains is still in winning
new clients through marketing and sales. “Few companies have an overseas
presence so sale and marketing activities mostly come from Vietnam,
which is not very effective in attracting foreign clients,” he said. TMA
has five overseas offices along with its six domestic sites.
Smaller companies are following suit. VietGest is about to expand its
sales force in France to more than 20 people and they plan to open an
office in the US in the future. They expect their company will grow by
120% next year.
Amid predictions Vietnam’s economic bubble will burst, companies in
the outsourcing sector are confident they will not be hurt because “they
rely on revenue from foreign clients and reinvestment, not heavy
capital inflow,” said Tai.
If the promises for Vietnam’s outsourcing potential holds true, VietGest may find itself needing more office space soon.