Vietnam IT firms told to target higher-value services

November 10, 2017 | 09:06 am GMT+7

Vietnamese IT firms now have great opportunities from large markets such as the US, Japan, Europe and Singapore. However, most of them are focusing on low- and mid-end products, which is the most vulnerable market segment in the new 4.0 revolution era.


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Digi-Texx, a German-invested company established in 2002 in Quang Trung Software Park, began his business with a data digitalization service. 

In 2006, the company had 200 workers and for the first time obtained revenue of $1 million. Now it has 1,500 workers and focuses on providing more specialized BPO (business process outsourcing) services in 30 languages to clients all over the globe. 

BPO is now a growing trend in the market. However, Frank Schellenberg, the founder of Digi-Texx, said that challenges are still ahead, while a cheap labor force will no longer be an advantage of Vietnam once clients set higher requirements.

A survey conducted by KPMG Vietnam on ITO firms’ labor cost showed that 61 percent of engineers have monthly pay of less than $800 and 36 percent receive $800-1,600, a low level compared with other markets. At least 69 percent of firms said the payroll increased by 15 percent per annum.

Analysts believe that the low labor cost will no longer be an advantage of Vietnam in three years, and if so, the 15-25 percent growth rate obtained by Vietnamese IT service exporters will be threatened.

President of LogiGear Nguyen Quoc Hung said Vietnamese firms are trying to ‘personalize’ the labor force to deal with the challenge. In the past, a project was implemented by a team of 20-30 engineers, but the team is now smaller.

The global demand remains strong, but competition is fiercer, thus requiring greater specialization. Enterprises have to innovate to keep up with market development with the teams of engineers equipped with advanced techniques and experience in the new fields such as artificial intelligence, cloud computing and IoT.

Le Huu Le, president of TMA Solutions, a software development firm with more than 2,000 engineers, commented that 20 years ago, Vietnamese firms hoped they would employ tens of thousands of engineers, but the plan is meeting difficulties due to the labor market scale.

Besides, the development of the market and technology have also affected the plan’s change. Twenty years ago, software firms mostly wrote codes and tested software. But now, they undertake more complicated jobs and implement R&D programs to provide higher added value services to clients.

AT Kearney ranked Vietnam sixth among the globe’s most attractive software outsourcing countries in 2017. Prior to that, Vietnam ranked the first in BPO in Cushman & Wakefield’s 2016 ranking.