Software firms told to look for niche markets

Vietnam is always mentioned as a market with a cheap IT labor force, but, according to Viet Ho, product director of Rusell Investment, that assertion is both true and false.

Comparing the labor cost in HCM City with first-class cities of India, the cost in HCMC is lower. However, comparing HCMC with second- and third-class Indian cities, the cost in HCMC is higher. 

Therefore, low cost should not be the competitive edge, because jobs may be outsourced to areas with lower costs in India. 

Viet Ho, who does business with foreign firms, commented that foreigners now know Vietnam software industry.

“Most foreign partners know about Vietnam through the war for independence, tourism and food. They also have heard about Vietnam software export industry but not much,” he said.

Vietnam just makes up US$200-300 million out of the US$200 billion worth of the world’s software export market.

He said that Vietnam software firms would catch attention from clients who like reform and try to work with new partners. Meanwhile, the clients who want stability and ensured quality would choose familiar partners in India and the Philippines.

Therefore, he believes that Vietnam should try to obtain clients who like stability, because there are more clients than those who take risks working with new partners.

Hung Q. Nguyen, CEO and president of LogiGear, agrees that Vietnam has become better known in the field of IT outsourcing (ITO), but it is still inferior to India, Ukraine and China. To compete with these countries, Vietnam should spend money on research & development (R&D) to find niche markets, which heighten competitiveness.

Hung commented that ITO has witnessed big changes in the last two years. In the past, the building and updating of one software product lasted several months, but now, it is updated hourly.

Because of this, as well as AI, IoT and cloud computing, IT firms need fewer but more qualified workers.

If Vietnam enterprises want to exist in the IT industry, they need to adapt to the new circumstances. Since companies now don’t need too many workers, Vietnam’s advantage of having cheap labor force will no longer work.

Vietnam companies now need to invest in creativity to generate value, set up research and development labs, and accelerate personnel training to meet the increasing demands of clients. 

He advised Vietnam firms to join the US market, even though it remains challenging.