Outsourcing to Vietnam Seen as a Bargain

Date: Tuesday, May 14, 2002 8:55 AM

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A company called Pacific Ventures is acting on behalf of the State of
Oklahoma to outsource jobs to Vietnam. Their reason: IT labor costs are
50%
less. Read the next article and you will see that the labor cost 50%
less
than India, not the U.S. That's because Vietnamese programmers charge
less
than half of what their Indian competitors make.

My research shows that the average Indian programmer makes about $300 a
month. No wonder so many companies are dumping American workers.

Notice that corporations now consider computer programming a "labor
intensive" job like assembly line work. Forrester research predicts that
the
number of U.S. companies seeking to outsource this computer/IT code
writing
to cheaper locales will grow by 50 percent in the next two years.

http://www.vnunet.com/News/1130523

IT giants turn to Vietnam
By James Middleton [28-03-2002]
Emerging industry wins US government outsourcing deal
The US government last week signed its first deal to outsource software
development to Vietnam.
Under the terms of the six-month deal, the US state of Oklahoma will
outsource the development of a trade website to Vietnam-based technology
company Silkroad Systems.

A report published last week by Research Vietnam revealed that big name
North American companies are outsourcing to the country, along with
European
and Japanese players.

Nortel, Cisco, IBM, Hewlett Packard, British Aerospace, BP and Sony are
just
some of the names investing in Vietnam.

"We did not have any reservations about working with Vietnam-based
developers since the country has a vast pool of intellectual resources
that
is largely untapped," said Hung Truong of Nortel.

Dan Stern, director of Research Vietnam, which produced the IT Vietnam
2002:
Outsourcing to an Emerging Market report, said: "The fact that Vietnam
is
starting to attract public sector work from the US demonstrates that the
country's emerging IT industry is finally getting global recognition."

According to the report, IBM is setting up its own outsourcing centre in
Vietnam after successfully outsourcing projects to third-party
providers.

Le Quang Tri, IBM software solutions manager in Vietnam, stated: "We are
looking closely at Vietnam this year and may consider opening a
development
centre in the near future.

"Work is going on and talks have already started between IBM and the
Vietnamese government."

William Baker, a director at Pacific Ventures, which will act on behalf
of
the State of Oklahoma during the six-month deal, explained: "If you can
acquire the same or better technology and IT solutions at 50 per cent of
normal cost, the bottom line becomes a reality.

"The combination of high quality work and lower costs makes Vietnam a
very
attractive place for IT outsourcing right now."

http://www.chron.com/cs/CDA/story.hts/headline/tech/1407713

May 12, 2002, 3:47PM

Vietnam's IT industry eyes huge foreign contracts
Associated Press

HANOI, Vietnam -- Quantic Software's managing director Bui Quoc Hung and
his
crew of 60 programmers have been busy this past year juggling a stream
of
projects from overseas giants such as Nortel Networks, Japan's NTT and
Cisco
Systems.

"Vietnam is not yet known for its software, but Vietnamese programmers
have
good skills. And we are cheaper than India and China," Hung said.

Based in Ho Chi Minh City, the software company had little money to
promote
itself abroad. But, like many other tech companies in Vietnam, Hung used
another means to get the inside track on some of his high-powered deals

contacts with fellow Vietnamese overseas already working in the
industry.

With cheap, educated and plentiful labor, Vietnam's emerging information
technology sector has mushroomed from a handful of software companies
two
years ago to more than 250 domestic and foreign-owned companies, said
Truong
Gia Binh, chief executive of Vietnam's largest Internet company, FPT.

It's only a matter of time before the Communist country becomes a
full-fledged regional IT player, he said.

"IBM, HP, NTT -- they already accept the quality of Vietnamese
programmers.
Young Vietnamese IT people are very eager to take on the challenge of
showing they can do more," he said.

The country's Communist leadership only allowed the Internet into
Vietnam in
1997 and restricts access through filtering software.

But that hasn't stopped information technology from blossoming into a
$290
million market that could more than double by next year, according to
the
research firm IDG Vietnam. The country is starting to carve a niche for
itself as a software development base for clients from North America,
Europe
and Japan, a new study suggests.

The report, released by Andersen Vietnam Ltd., finds some of the
industry's
leading names -- IBM, Cisco, Nortel, Hewlett-Packard, Sony and Fuji --
already outsourcing work to Vietnam -- although the overall value of
contracts remains well below $10 million annually.

"If you want fast turnaround, go somewhere established like India. But
if
you're looking for a long-term, cost-effective partner, Vietnam has the
potential to be that," said Marc Lopatin, director of Research Vietnam,
the
independent analyst who conducted the study.

The number of U.S. companies seeking to outsource the labor-intensive
writing of code to cheaper locales will grow by 50 percent in the next
two
years, Forrester Research predicts.

Vietnamese programmers charge less than half what their counterparts in
India make. Including overhead charges, corporate customers pay about
$20,000 per person per year in Vietnam, compared to $30,000 in Russia or
Romania and $40,000 in India, Research Vietnam says.

"With Vietnam, you do get quality. Its education system, which
emphasizes
rote learning, mathematics and logic, creates good programmers. But the
bottom line is cost," Lopatin said.

But Vietnam's IT ambitions face some serious obstacles.
Telecommunications
charges are among the most expensive in Asia and then there are the
restrictions on Internet access.

Though there are five licensed Internet service providers, the state
monopoly, Vietnam Posts and Telecommunications, controls the country's
one
international gateway.

That allows the government to create filters to block politically or
culturally sensitive information, which end up slowing data
transmission.

"Infrastructure remains Vietnam's single biggest problem," said Don Lam,
a
deputy director for PriceWaterhouseCoopers. "Communication costs are
starting to drop but the fundamental issue has not been fixed."

The country also faces a shortage of programming talent.

It produces about 2,500 university graduates a year, about 10 percent
short
of the country's demand, according to the Ministry of Education and
Training. That gap is expected to widen to 15 percent over the next
three
years.

But Vietnam's leaders -- keen for an industry that requires relatively
little capital but yields huge revenues-- appear to be taking some of
the
right steps.

They have enacted a slew of favorable policies since 2000, and plan to
grant
domestic competitors additional licenses to access the Internet gateway.
Foreign Internet service providers will be allowed to compete by the end
of
2003.

Telecom charges are set to be seriously trimmed this year, to fall in
line
with regional rates, while software companies are being offered
incentives
like tax breaks and fast-track licensing.

Vietnam is also scrambling to build up its tech labor pool. Vocational
centers set up by Oracle, Microsoft, Cisco, and India's Aptech are
supplementing university computer science programs.

On the outskirts of Ho Chi Minh City, the 100-acre campus of Quang Trung
Software City fosters the Politburo's dream of incubating dot-com
entrepreneurs.

Named after an 18th century king who encouraged an "open door" policy of
trade and cultural exchange, the year-old software park features
manicured
flower beds and a gurgling fountain, but remains a work in progress.

Its biggest incentive -- a separate, filter-free connection to the
internet -- has yet to come on line.

"Things pick up slowly here. But the priorities are still basic and
sound,"
said Jean Paul Tschumi, chief representative for the Swiss-based IT
company
ELCA, which has a staff of 30 in its Quang Trung office. "Nothing will
change overnight but we are here for the long term."

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