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Business Process Outsourcing (BPO): Why Vietnam?

Business Process Outsourcing (BPO) Why Vietnam_2

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BPO is one of the fastest-growing industries, especially in India, China, Malaysia and the Philippines. Compared to these BPO giants, BPO sector in Vietnam is relatively young and smaller in both size and revenue. However, the competitive advantages and potentials for growth in Vietnam are strongly present, even tremendous.

Why Vietnam should definitely be at the top list of your BPO decision? Find out with us!

Business Process Outsourcing (BPO): One of the fastest-growing industries

The global Business Process Outsourcing (BPO) industry is showing positive growth, with a projected CAGR of 9.4% from 2023 to 2030, bringing an estimated market size value of USD 261.9 billion by 2022. As businesses increasingly look for cost-effective ways to streamline processes and optimize operations, this sector promises promising prospects in the future.

Business Process Outsourcing (BPO): Why Vietnam?
Source: Grand View Research

BPO is definitely not something new in the business solutions landscape. The benefits for clients are enormous, most remarkably including lower costs, higher efficiency, the ability to focus more on core business functions, and advantages for global expansion.

Businesses of all sizes are turning to BPO providers to handle a wide variety of tasks, from customer service and technical support to data entry and payroll processing.

The appeal of BPO is clear: It allows businesses to focus on their core competencies while outsourcing non-core or repetitive tasks to specialized providers. As the industry continues to grow, it is poised to provide new opportunities for businesses and workers around the world.

Demand across end-use industries: IT outsourcing, Accounting and Finance, Payroll, Human Resources and Customer Service

As the global economy evolves, demand for outsourced services has increased substantially, particularly in the IT outsourcing, Accounting and Finance, Payroll, Human Resources, and Customer Service sectors. In today’s fast-paced business climate, organizations often find it more cost-effective to contract the services of these specialized experts rather than maintaining a dedicated in-house team.

Outsourcing also provides access to the latest technology and processes, which drives efficiencies, reductions in overhead costs, and improved profitability. With these advantages in view, it’s no wonder that more and more companies are outsourcing to meet their needs across multiple end-use industries.

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Factors that drive the growth of the BPO market

The BPO industry continues to have an impressive growth trajectory. It is no surprise, given that several factors contribute to this upswing. One such factor is the rising competition among multinational companies, which drives the need for cost-saving measures. Outsourcing services allow businesses to cut costs and increase budget efficiency.

Additionally, technological advancements play a significant role in driving the growth of the BPO market. Businesses can now outsource more elaborate and technology-driven operations, which has expanded the scope of services provided by BPO companies.

Finally, the global pandemic has undoubtedly impacted the growth of the BPO market. Remote work arrangements have made outsourcing a critical necessity for businesses managing operations amid the pandemic’s restrictions and uncertainties. Despite the challenges brought by the pandemic, the BPO industry is still expected to thrive in the coming years.

Security and intellectual property rights in outsourcing concerns

Outsourcing has become a popular solution as companies continue to prioritize cost-saving measures and streamline their operations. However, a common concern regarding outsourcing is the security and protection of intellectual property rights. Companies outsource processes to third-party vendors. They entrust them with critical information that could harm their reputation and operations if leaked or misused.

As such, companies must establish protective measures and security protocols in their outsourcing agreements. Doing so ensures that sensitive information remains confidential and that intellectual property rights are safeguarded. By creating a secure outsourcing environment, companies can benefit from increased efficiency and cost savings without compromising security.

Vietnam in the Top 5 Outsourcing Locations in the World – A.T. Kearney Report 2019

Let’s take a look at the 2019 A.T. Kearney’s Global Services Location Index (GSLI) – an indicator of a country’s potential and fit to deliver business services to global companies.

Vietnam was ranked at Top 5 outsourcing locations in the world, in which our financial attractiveness scale was as high as India at 2.82 points, skills and availability are rated higher than Malaysia and Thailand, while the business environment is perceived as more attractive than India and Indonesia. This ranking further proves that Vietnam is one of the options worth considering.

The 2019 Kearney Global Services Location Index-01
Source: Kearney GSLI 2019

BPO

Other reports

  • Vietnam is an Asia Tier 1 emerging-market location and a top 5 location for outsourcing (Gartner’s Leading Global Locations for Offshore Services, 2016
  • Ho Chi Minh City in Top Outsourcing Cities in 8 consecutive years (Tholons, 2009-2016)
  • Vietnam is #3 in global offshoring hotspots and #1 in competitive cost (Tower Watson, Services Offshoring Ranking 2013)
  • Vietnam is ranked 1 in pioneering location and cost environment (Cushman & Wakefield business process outsourcing and shaped service location index, 2016-2017)
  • Vietnam is #6 in the 2017 Global Services Location Index (A.T. Kerney, 2017)
  • Vietnam is an offshoring destination most preferable by Japanese companies (Resorz Co., Ltd, 2016)
  • Gartner’s Leading Global Locations for Offshore Services, Viet Nam was top 6 for leading countries in offshore business services worldwide in 2021
  • Vietnam ranked among the Top 6 best locations for IT outsourcing, according to The Global Services Location Index (GSLI, 2021)
  • Vietnam is ranked #9th in TSGI Top 50 Digital Nations all over the world, which increased four ranks compared to 2019, according to Tholons Services Globalization Index 2020
  • 18th in the top 100 outsourcing destinations (According to Tholons Services Globalization Index 2019)

Outsourcing to Vietnam: Pros and Con

Top 5 Reasons for Outsourcing to Vietnam

Attractive Labor costs (Compared to that of the US)

With software development rates up to 40% lower than competitors, Vietnam is the ideal destination for businesses seeking cost-effective outsourcing services without compromising quality. The average hourly rate of $25 provides significant savings compared with India and China’s industry-standard prices.

Vietnam is quickly gaining recognition as a top choice for businesses looking to outsource in 2019 and beyond. Its IT capabilities have earned it the nickname “The next Silicon Valley in Southeast Asia” – with Marketsinsider ranking it 5th best country globally and Lotus-qa.com placing them 2nd on their Top 8 list of crucial outsourcing countries in 2022.

With up to 90% savings in software development costs compared with the USA and 50% cheaper than India, Vietnam is now firmly established as one of the most cost-effective outsourcing destinations globally—a savvy choice for organizations looking to maximize their value for money on quality software projects.

Large pool of well-educated, young talent

Thanks to its focus on STEM subjects, Vietnam is a wellspring of talent in the IT sector. This has led to an abundant supply of highly-skilled professionals with English fluency and a global business mindset.

With a large and highly educated population, Vietnam provides an impressive talent base to fuel the country’s booming IT industry. Boasting nearly 100 million inhabitants – 70% of whom are under 35 with a median age of just 32.5 – the Southeast Asian nation is capitalizing on its youth demographic to succeed economically, boasting one of the lowest unemployment rates worldwide testament.

Vietnam is a leader in technical education, with 153 institutions and 400K IT engineers graduating annually. With such a robust talent base, it’s no surprise that the country continues to be one of the world’s biggest hubs for technology development.

Vietnam came in an impressive 29th worldwide according to the 2018 Skill Value Report, besting countries such as France and demonstrating excellent growth potential.

Vietnam is setting the pace in Artificial Intelligence technology, ranking third on Hacker Rank’s 2021 Report for AI coding.

In 2022, Vietnamese Coders demonstrated their prowess by climbing to 11th place in the world rankings of Topcoder’s Developer Skills Charts.

High-Tech powerhouses Sony and Samsung have invested considerably in Vietnam’s IT sector. These efforts pay off as tech jobs remain steadily filled while R&D grows. BPO companies in Vietnam are also growing, offering healthy competition for you to choose from.

English Speaking Country

With its significant history as an English-speaking business destination, India should not be the only country to come to mind: Vietnam also offers a distinct advantage with its Latin alphabet. As one of the relatively few Asian countries using this system (alongside the Philippines and Malaysia), it is a unique choice for any trader or investor looking across borders.

Despite representing a relatively modest share of the population, English is Vietnam’s most popular foreign language. This is mainly due to efforts by the Vietnamese government to provide skills-intensive job opportunities in high-tech sectors; today, it ranks seventh out of 24 nations on an Asian English Proficiency Index. Thanks to these initiatives, college graduates from across this Southeast Asian nation enjoy impressive levels of fluency in their second language abilities.

Prime Location, Dynamic Business Environment

Strategically nested at the core of Southeast Asia, Vietnam serves as an invaluable bridge between ASEAN and China in this exciting era of economic dynamism.

A central hub of business activity, Vietnam offers unparalleled access to the regional markets within minutes. With Singapore, Thailand (Bangkok), Malaysia (Kuala Lumpur), and Hong Kong all located a stone’s throw away by plane – just two hours or less- entrepreneurs in Southeast Asia can benefit from easy transportation options that increase global opportunities for growth and collaboration.

Vietnam is rapidly expanding its transportation options, including the planned construction of international airports. This will significantly increase flight routes from countries worldwide and make it easier than ever to access Vietnamese destinations.

Social – Economical – Political Stability

Vietnam stands out as a beacon of stability amongst its geographically close neighbors, with an adequate legal framework and resilient economy. Its success makes it stand head and shoulders above countries such as India, Thailand, Myanmar, and the Philippines which can be exposed to turmoil due to political instability or social unrest.

Vietnam stands as a shining example of strength and resilience in the world. From its robust growth beginning in the 1990s to managing over three percent GDP gains despite the global COVID crisis, it is one of few nations that not only weathered but thrived during 2020-21. With expectations for further expansion nearing 6 – 6.5%, this success story looks to continue into 2023 and beyond.

In global uncertainty, Vietnam stands firm as a beacon of stability. This ensures that projects and deadlines are secured with unparalleled reliability.

Key challenges of Vietnam Outsourcing

Lack of Unified Data protection law

Vietnam’s need for a national data protection law proves to be an obstacle for foreign companies considering investments. Instead, they must rely on multiple decrees and regulations that may need to provide more security for intellectual property rights.

Time difference

Companies operating in the US and Vietnam can take advantage of the 11-hour time difference to provide 24/7 customer service. This increases efficiency and maximizes customer satisfaction by providing support even after hours.

Real-time collaboration with your outsourced team is essential regarding software development outsourcing, such as DevOps and agile development. However, the time zone differences between groups can be a challenge that inhibits effective communication.

Outsourcing to Vietnam: BPO services as an emerging outsourcing sector

Indeed, Vietnam is backed by a young population and a skillful workforce that can meet diverse market demands for different types of services. While average costs of compensation and infrastructure, as well as regulatory tax burden, remain attractive, the country has been paying greater attention to education and drawing vast investments in Information and Communication Technology (ICT).

According to the statistics, in 2019, there are 55 mil people of the working-age among a total population of 96 mils. Specifically, in Q4 2019, it is an increase of 502 thousand people compared to the same period last year.

Out of the total number of people participating in the workforce in 2019, about 13 million people have been trained with Diplomas and Certificates.

Employed workers continued to increase by 20% among all economic sectors. Labor structure shifted rapidly; however, jobs requiring skills are limited. With these changes in the economic system, the BPO sector for office service jobs like IT, Customer Services, and Accounting will be an edge in Vietnam.

With all the promising talents and incomparable cost advantages on top of the young, dynamic, open, and creative business environments, it is fair to say that Vietnam is one of the world’s most desired providers of BPO services.

IT/ Software Outsourcing to Vietnam

Fast-growing ICT Industry with several IT-specialized institutions

Vietnam quickly recognizes the power of digitization to bolster economic prosperity and societal well-being. This surge in the digital economy has piqued the curiosity of both government and business actors, motivating them to invest in delivering on stakeholders’ expectations.

Vietnam’s ICT industry achieved remarkable growth in 2021, surpassing three times the national GDP rate with a nearly 8% expansion. Data shows that IT services and related digital content made up an impressive $20 billion of total income last year, suggesting massive potential for future exports within this sector. The pre-pandemic trend was also noteworthy – growing at 15.2 % annually before Covid-19 struck – making it one of the fastest-expanding business sectors today.

High-qualified, enthusiastic, and hard-working developers in the IT/ Software outsourcing labor force

Vietnam is an emerging economy with a vibrant, youthful workforce. An impressive 74 million individuals comprise the country’s personnel – 50% between 15 and 39 years old – setting it apart from neighboring countries as one of Asia’s fastest-growing nations.

The Vietnamese government and higher education system have realized the importance of equipping students with essential skills for today’s job market, resulting in a talented labor force proficient in engineering and other sciences.

With an impressive advantage to businesses looking to outsource software services: approximately 280,000 college-educated individuals entering its workforce each year, Vietnam is quickly becoming one of the most desired destinations for outsourcing operations worldwide.

With its hard-working and highly motivated youth making up a proportion of the population, Vietnam has become an invaluable economic asset in today’s globalized world. The country is renowned for its innovative ideas, resourceful solutions, and dedicated workforce, all traits that help drive it toward success as part of international competition.

Competitive IT Outsourcing rates

With Vietnam’s competitive prices, it is no wonder why so many businesses are turning to this country for software outsourcing. Beyond price-friendly offerings, the skilled tech workforce and advanced infrastructure make Vietnam an attractive option for making cost-effective investments in software development projects.

Vietnam can be an ideal destination for outsourcing software development. Not only does it offer highly competitive rates, ranging from $20-$40 per hour depending on the seniority of your team, but its high standards guarantee that you receive quality work at a fraction of what is expected in US markets.

Vietnam is an attractive option for software outsourcing, with salaries for developers and engineers coming in significantly below the American average of $20,000 per year. This makes Vietnam a prime contender in terms of cost-competitiveness without compromising quality.

Modern business hubs

Vietnam’s highly skilled workforce is concentrated in just a few cities, enabling businesses and organizations to access quality talent more efficiently than ever.

For those seeking to outsource software development, three premier cities in Vietnam offer unique advantages:

  • Ho Chi Minh City provides the economic hub of the country.
  • Hanoi is a political center with abundant fresh graduates for new hires.
  • Da Nang has experienced workers at every level.

With such diversity, it’s no wonder why software outsourcing within Vietnam is on a steady path upwards.

Innovature BPO provides an ideal workspace for our Ho Chi Minh City team, boasting a modern and comfortable office facility in a rapidly growing business district. Our well-lit premises are furnished with the latest equipment to keep pace with technological developments and ensure our client’s sensitive information remains secure.

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Choosing a good BPO Service Provider in Vietnam

Before bringing on a third-party vendor to help with your business processes, you must consider three key factors:

  1. The software development goals for success
  2. The performance criteria necessary to evaluate progress and proficiency
  3. Overall growth aspirations that need addressing

Here are some questions you need to ask the future outsourcing company:

  • Will you face a language fence with the outsourced employee? If yes, how will you overwhelm it?
  • Do the IT developers have practical knowledge, skill sets, and industry experience?
  • Does the business offer expertise in the required technologies?
  • Do they offer compliance with quality security and testing protocols?
  • What are the development methods used by the company?
  • What is their pricing model, and does that match your budget?
  • Does the company have an equivalent work culture to yours?
  • Does the company offer source code security and intellectual property protection?
  • Have you done a reference check for the IT services the company declares to offer?

It would help to use a specialized vendor directory to source the perfect outsourcing partner in Vietnam for optimal results. An inexpensive choice may appear attractive at first glance but fail to deliver high-quality services and solutions; due diligence must be conducted before selection.

FAQs

Is Vietnam good for outsourcing?

Vietnam has emerged as a promising destination for outsourcing in recent years. Its low cost of living and labor has attracted businesses from all around the world to invest here. With the availability of a skilled and educated labor force, Vietnam has an advantage in the outsourcing industry.

However, what sets it apart is the hardworking and dynamic personality of the people. Vietnamese workers are dedicated to delivering quality work within deadlines, making the country one of the most preferred outsourcing destinations. With its growing economy and government incentives, Vietnam is on a path toward becoming a significant player in the outsourcing industry.

Which companies outsource to Vietnam?

As outsourcing grows in popularity, companies seek new and efficient ways to cut costs and deliver high-quality services. Thanks to its skilled labor force, competitive prices, and favorable business climate, Vietnam has emerged as a top destination for outsourcing.

While many global companies have set up shop in the country, a few key players stand out for their commitment to Vietnam as a long-term partner. These companies include tech giants IBM and Intel and manufacturing heavyweights Samsung and LG.

With Vietnam’s proven track record of successful outsourcing ventures, it’s no surprise that these companies have trusted the country’s capable workforce. As Vietnam’s economy thrives, we’re sure to see more and more companies follow in their footsteps.

Like what our Founder and CEO – Ms. Thuy Doan has seen, believed, and pursued throughout these years since 2015 when establishing Innovature Consulting:

“I strongly believe Vietnam, a country with smart and talented young professionals, can compete with BPO giants like India and Philippines in outsourcing services that offer a higher level of customization, accuracy, timeliness and creativity.”

With all the above reasons, will you choose Vietnam as your next BPO partner?

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