Phong Dinh, CaVi-Tech
Business Process Outsourcing (BPO) is one of five industries with the greatest growth potential and investment destination in Vietnam, as written by PwC in the article, Spotlight on Vietnam, on October 2017. The other four industries are solar and wind energy, luxury hotels, modern agribusiness and food, and retail banking).
This fast growing BPO of Vietnam is based on the following two factors. The first is its advanced IT infrastructure and the second is its large IT workforce with 40,000 new university graduates annually. With continued upgrades of digital connectivity and growing market demands, Vietnam’s BPO has plenty of room for development within these three main sectors: domestic/onshore outsourcing, nearshore outsourcing, and offshore outsourcing.
Other factors contributing to Vietnam’s BPO development are the geographic location, the young and abundant workforce, and the stable political society with a government committed to economic growth. With the recent increase of government investment in technology and education, Vietnam is gradually transitioning from a low-cost manufacturing location to an outsourcing destination for world.
Vietnam’s IT outsourcing growth potential
Vietnam’s BPO in the IT industry has been developing fast and steady. According to Vietnam’s Software and IT Services Association (VINASA), IT outsourcing has grown 20-35% annually over the past decade, with revenue in 2018 reaching 2.2 billion USD.
With a population of 92 million, 65% of which are under the age of 35, Vietnam is one of the fastest growing economies in Southeast Asia. Vietnam has geographic proximity and good access to the Japanese and Korean markets, whereas India and South America have greater difficulties due to inconvenient time differences and significant culture gaps. Overall, Vietnam is well-positioned as a favorable destination for software outsourcing development. The labor cost of Vietnam is approximately 50% lower than that of India, China and other Southeast Asian neighbors. With this, Vietnam benefits from much lower attrition rates amongst its labor force competitors. Several foreign-invested IT R&D centers have been founded in Vietnam, which in turn, helps to build a good ecosystem for the BPO industry.
Although Vietnam’s BPO is a new industry that is still in the early development, there are reasons for believing in its continued growth. According to A.T. Kearney’s Global Services Location Index in 2017, which analyses and tracks the contours of the offshoring landscape in 55 countries, Vietnam ranked sixth out of 20 emerging markets with the highest potential for BPO growth. It jumped five ranks compared to the previous year, surpassing the Philippines (seventh) for the first time. Vietnam has even outperformed China, becoming the second largest offshore software R&D partner for Japan in 2016. The fact that Vietnam’s BPO revenue accounts only 1% of the country’s GDP indicates the large growth potential of the BPO industry.
Vietnam does not have only the potential in IT BPO but also in large and educated workforce for other outsourcing services such as accounting, payroll management, customer service, among others. Leveraging “latecomer” advantages, Vietnam’s growth in high-end outsourcing will be much faster than those of others in the region. For instance, Vietnamese will develop fast in knowledge process outsourcing (KPO) like Fintech, Big Data, AI, Data Science, market research, fraud analytics, strategic planning, etc.