Outsourcing firms face challenges

Hanoi Times - Viet Nam’s software outsourcing industry has grown exponentially in the last five years, but the world economic downturn and entry of more countries into the market pose great challenges, according to IT experts.They were speaking at the Outsourcing Viet Nam Seminar 2008 organised in the city o­n Friday by the Viet Nam Software Association (VINASA), and the Viet Nam Game and Digital Content Business Club (VGB). The seminar was sponsored by Harvey Nash Viet Nam, a London-based software company with 600 employees in its Viet Nam branch.According to the Viet Nam National Institute of Software and Digital Content Industry, outsourcing revenues had increased from about US$20 million in 2002 to $180 million in 2007.The institute’s report shows that Viet Nam has about 150 companies engaged in outsourced software projects, employing an average of 100-150 software programmers.Some companies have as many as 1,000 software programmers, like FPT software, FPT Information Systems, TMA and CSC.Nguyen Duc Quynh, deputy director of FPT Software HCM City, said that local companies were also trying to diversify the software outsourcing market to include other countries besides traditional markets like Japan and America.Marc Voss, managing director of Harvey Nash Viet Nam, also remarked that Viet Nam still had much potential for growth in the software outsourcing industry.The software services that could be provided were also diversified, like BPO (Business Processing Outsourcing), Data Center, ERP (Enterprise Resource Planning) Services, Quynh said.According to the HCM City Computer Association (HCA), the city’s revenue from software outsourcing is VND990 billion ($60 million), accounting for o­ne third of the national revenue.The main outsourcing markets currently are Japan, North America and the European Union, according to the report.ChallengesQuynh said that the US-led economic downturn could limit growth in IT spending.Besides China and India, other ASEAN, East European and South American countries are also becoming major destinations for outsourced software work because of the low cost resource pool.Quynh felt that these two factors were the most important challenges facing the Vietnamese software outsourcing industry.Phi Anh Tuan, director of the HCM City Branch of the CMC group, said the high salary paid to programmers was o­ne of the difficulties which companies were facing.Pham Thien Nghe, general secretary of HCM City Computer Association (HCA), calculated that a software engineer could generate a turnover of about VND20 million ($625) a month while the company would pay him VND10 ($313) million a month. If taxes and other expenses were included, the company would make no gain, Nghe claimed.Tuan noted that most local software outsourcing companies were small, hiring less than 500 employees. This made it difficult to win big contracts from large companies like Boeing or Microsoft.La Manh Cuong, managing director of Luxsoft Viet Nam, a Russian software company, said that procedures for establishing a business in Viet Nam were complicated and time-consuming. It took his company forty-five days to start its operations in Viet Nam.A shortage of IT resources required for the fast-growing service also affected development of the outsourcing industry, Quynh said.Earlier in the morning, VINASA and VGB also organised a seminar o­n the Real Situation and Solutions to Boost the Viet Nam Digital Content Industry.