Vietnam has opportunities to attract, develop the offshoring market
Vietnam is an attractive choice for businesses who are looking for outsource solutions, given its affordable workforce, highly skilled human resources and the constantly developing infrastructure of information technology and the telecommunications industry, said real estate consultancy firm Knight Frank in its report Asia-Pacific Horizon: Harnessing the Potential of Offshoring.
The report studies the essential factors that define the region's appeal as the best location for offshore services and sheds light on the significant changes in the industry.
Amid a challenging business environment that saw a reduction in sentiment among corporate real estate leaders, the Asia-Pacific offshoring market is forecast to more than double to US$185.1 billion by 2032.
In the global context, the market is forecast to grow to US$544.8 billion in 2032, reflecting an 8.5% compound annual growth rate (CAGR). Although North America will continue to retain its dominant market share, Asia-Pacific is expected to record the highest CAGR globally at 10.2%.
According to the Knight Frank’s report, global companies increasingly seek cost-effective solutions to minimise expenses. A growing number are now looking towards offshoring functions as a strategic avenue. Within the Asian-Pacific region, four markets – India, the Philippines, Malaysia and Vietnam- offer the best offshoring locations around the world.
For Vietnam, the offshoring market revenue is expected to reach US$840 million with a 2024-2028, CARG of 8.78%, the report said, citing statistics of Statista. The country is ranked the 7th best global outsourcing location. The presence of major technology firms positions the country as a global digital hub.
Vietnam is a popular choice in Business Process Outsourcing (BPO), especially in the information technology industry, with skilled human resources just after India.
Vietnam also offers the highest value for business costs, specifically in terms of labour, together with a bright outlook for tenants when office rent, which can account for 10% to 15% of operating costs, is decreasing. It is expected that office rents in major cities in India will be higher than rents in Ho Chi Minh City in the next three years.
With abundant supply from new and upcoming office building projects in Thu Thiem new urban area in Thu Duc City, rents are expected to decrease by more than 20% by 2026.
Analysing the trends and main factors developing the outsourcing market, Knight Frank experts said that Vietnam's affordable labour force is the main factor to attract outsourcing activities. A notable trend in the offshore market in Vietnam is the shift toward high-value services such as software programming or research and development.
On the other hand, Vietnam has human resources with high skills and foreign language proficiency. Consulting firm A.T. Kearney ranks Vietnam seventh in the Global Service Location Index (GSLI) for top outsourcing destinations.
According to Knight Frank, another notable point is that Vietnam's information technology and telecommunications industry infrastructure is constantly developing. The Vietnamese government has been increasing investment to improve internet speed, build data centres and technology infrastructure, and ensure a high-speed, reliable communication network to serve offshore activities.
