Vietnam is fast becoming a centre for information technology (IT) companies to set-up their offshore operations.
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| Executive director of Simple Solutions Lui Khang (third from left) with his IT staff in Ho Chi Minh City, Vietnam. PHOTO COURTESY OF MOBILE TAIPAN |
Taking advantage of low costs and quality IT graduates, Simple Solutions, the research and development arm of homegrown mobile solutions company Mobile Taipan, is one such company which has established offshore operations for its software engineering work in Ho Chi Minh City.
Offshoring activities differ from outsourcing as the former is an extension of a company's business function overseas, while outsourcing involves a company which hives off a segment of its operations to a third party.
Lui Khang, executive director of Mobile Taipan, chose Vietnam over India as its offshore centre because he finds that operating costs in the country is low due to the developing nature of the Vietnamese IT industry.
Availability of skilled workforce at minimal cost compared to other countries is a major pull-factor for IT companies to set up operations in Vietnam, said Mr Lui.
Vietnam has become an outsourcing and offshoring destination over the last three to five years.
"The potential for IT is very great. I think a lot of people are looking at Vietnam the same way they looked at India before," said Mr Lui.
"If I had an equivalent operation in Vietnam, I would be paying only 20 per cent of the cost of my Singaporean operations."
Fresh IT graduates start from about $400 to $500 a month, compared to Singapore where they command $1500 to $2000.
As for India, a software engineer with two to three years' experience typically earns about $3,000 to $4,000 monthly, much more than their Vietnamese counterparts who earn about $700 to $900.
Simple Solutions first ventured to Ho Chi Minh City when it was working on a prototyping project three-and-a-half years ago and they have not looked back since then. Now the company has established a fully-operational and completely Vietnamese team there.
But executing such a plan was not without its challenges.
Despite Vietnamese IT graduates possessing a similar level of competency to Singaporean ones, the differences in work ethic, corporate governance, quality standards and language were major difficulties for Mr Lui.
Seniority by age is taken very seriously in the Vietnamese corporate culture, which posed a significant obstacle.
"In Vietnam there is a tendency that respect goes with age," he said. "For example if there is a 25-year-old in charge of a person who is 27 or 28 years old, that person will have a lot of difficulty,"
But Mr Lui recommends that Singapore IT companies consider Vietnam as an option for offshoring their IT capabilities, while being open to adapting to a new culture.
"You have to go and evolve at a pace that they are willing to go at," said Mr Lui of his Vietnamese IT team.
"Our philosophy was for them to be a 100-per-cent Vietnamese company, but with us importing management skills and methodologies and adapting them for the Vietnamese environment."
