Software outsourcing: low cost not an advantage

The Hanoi Times - According to recent surveys, Vietnam is o­ne of the top countries for software outsourcing and for the cheapest software outsourcing costs. However, its IT competitiveness has not improved.

Is the software outsourcing industry reiterating the mistake of the garment industry when it sees “low cost” as an advantage, while the quality and economic value is low?

Listening and thinking

Vietnam has been familiar with evaluation and ratings, such as Vietnam’s young population, abundant labor force, Vietnamese laborers being hard-working and Vietnam’s low labor costs.

However, these things are correct for o­nly 50% because Vietnam’s labor force is young and abundant, but o­nly have strength and lack skills and knowledge. They are hard working but they lack creativeness.

After becoming o­ne of the most attractive destinations for software outsourcing, Vietnam is listed among the top ten Asian – Pacific countries that have cheap labor costs for software outsourcing by Gartner.

Experts said that the local software outsourcing industry should see these advantages as potential values because low costs cannot become high economic values without effectiveness and quality.

According to Gartner, a reputed market research firm, among criteria like language skills, the government’s assistance, human resources, infrastructure facilities, educational systems, and cost, Vietnam has o­nly o­ne advantage: low cost. It is average for the other criteria and poor for the four norms: language skills, the government assistance, infrastructure, security and protection of personal rights.

Gartner’s survey is similar to the Business Software Alliance (BSA) and The Brown-Wilson Group’s judgments that Vietnam is too weak in research and development, human resource training, security and intellectual property in software outsourcing.

Development strategy needs to be reviewed

Last year, the country’s software industry earned a growth rate of around 20% and a total revenue of more than $500 million, according to the Vietnam Software Association (Vinasa).

The figure is reduced by nearly half in comparison to 2007, and lowers than the yearly plan (growth rate of 25%). Moreover, it is much lower than the target (35-40%) set in the government-approved software industry development program to 2010.

Why? Vietnam has not had breakthrough improvement in human resources development for the IT industry. According to BSA, out of every 10 IT students, there is o­nly o­ne who meet employers’ requirement. This problem sources from the educational system. Even those who have good IT qualifications are poor at foreign languages and presentation skills.

BSA also pointed out that Vietnam is very weak at research and development activities. Vietnam has not had any patent in this field for many years.

The software industry needs to review its development strategy to avoid the mistake of the garment industry.