Top 3 Reasons For Offshoring Software Development To Vietnam

There are many reasons for offshoring but the ultimate goals are to access talents and save costs. In fact, it is one of the most cost-effective business strategies for startups in order to survive through tough times such as the COVID-19 pandemic. 

Let us dive deeper into how offshoring to Vietnam can help your business minimize its costs without having to cut down a part of your operations.

Using Offshoring As A Strategy To Fight Back COVID-19

Without question, COVID-19 is a black swan event that has shaken the business landscape across the globe. It has caused billions of dollars to leak away as startups desperately try to get through the day while maintaining their service and products for customers. So why do firms outsource and offshore IT teams? In short, it is all about accessing talents and saving costs.

Unfortunately, many startups have to make their own sacrifices by shutting down parts of operations and laying off staff members. These actions might sound logical at first, however, once they are executed, it will expose companies to high risks of losing existing customers for failing to deliver the promised results. 

So the bottom line is finding the appropriate strategy to let tech startups save costs while still maintaining peak performance. In other words, cutting down on more expensive redundant headcounts and having a more economically viable offshore team to help support your operations.

Hiring Offshore developers instead outsourcing software development can help businesses save up to 81% of the tech operation cost without having to sacrifice the quality. This is specially valuable for startups with limited budget to scale up and growth.

But why Vietnam? Does it have any cost advantages compared to other popular offshore destinations? And how will offshoring to Vietnam help you save more money than onshoring in Singapore? 

The answer lies within the 3 fundamentals that enable Vietnam to surpass others when it comes to saving costs.

Reasons For Offshoring To Vietnam: Quick Economy Recovery With Booming Talent

Did you know that Vietnam is one of the 30 countries that have zero cases of COVID-19 death? They are also among the first nations in ASEAN to reopen, allowing businesses to resume. Simply put, Vietnam has done well to fight back the outbreak compared to its peers and other developed nations.

This means the country is already starting to recover ahead of others, especially for offshoring which already gets people back to work. In the landscape where everyone has to cut down their operation due to the distancing practices while still trying to meet the customer’s demand, having the capability to keep going without being disrupted is valuable.

Additionally, the country’s GDP growth record is brimming with an average six percent rate, which is fastest compared to other famous offshoring destinations in ASEAN such as Indonesia, Thailand, Malaysia, and more. As a result, the Vietnamese market also holds much more potential in the near future.

On the other hand, Vietnam is also well known for its breeding ground of technical talent where young engineers, software developers, and entrepreneurs arise. Eddie Thai, a general partner at 500 Startups Vietnam, expected Vietnam to be ranked in the top three countries with the highest number of engineers by 2024. As a result, Vietnam provides lots of leeway for offshore tech startups to find and hire the right talent.

From the standpoint of recruitment, one of the reasons for offshoring software development to Vietnam is the access to a wide talent pool, which will save time (and therefore costs) of scaling operations. 

Recruitment efforts allow businesses to access more candidates and have a higher chance of getting suitable talents for the roles they are hiring for, in a shorter period of time, hence, decreasing the overall time/cost of setting up offshore IT team significantly. 

With better recruitment efficiency, tech startups can better focus on other core business activities.

Reasons For Offshoring To Vietnam: Affordable And Reliable Workforce 

One of the key reasons for offshoring to Vietnam is their affordable but experienced tech workforce. Salaries are the biggest expenses for offshore operations, and many tech startups choose to focus on the Southeast regions to leverage the inexpensive labor market. 

The Vietnamese government understands how important foreign investments are to its economy grew more than anyone. Thus, the country has put a lot of work into keeping its currency competitive to allow a fast-growing economy led by exchange rate-sensitive exports. The “fortunate” side effect is that Vietnamese labor costs are approximately 15% to 50% lower than its neighbors such as Thailand, Malaysia, and Singapore:

As shown in the table above, the low labor costs in Vietnam indicate that it is the better offshoring destination for tech companies and startups to save costs. Even when comparing with its neighboring countries, Vietnam still presents a noticeable difference in the cost range.

There has always been a positive relationship between the two countries, where investors are encouraged to venture into various sectors such as startups, software development, Industry 4.0, manufacturing, and offshoring. Therefore, building an offshore IT team and accessing the labor market in Vietnam is much easier for Singapore companies and startups. By observing a significant growth in the IT sector with a relatively lower turnover rate and higher stability compared to Thailand or Malaysia, offshoring software development to Vietnam seems like a given.  

Low Cost Of Living

Listed as one of the most expensive cities in the world, Singapore’s cost of living can be crazy expensive. As a result, office rents, utility bills, and other miscellaneous expenses will burn through your budget if left unchecked. In order to prevent this, it is incredibly important to choose the appropriate country for your offshore IT team and/or IT outsourcing.

Surprisingly, some of the “low-cost” offshore destinations such as Malaysia and Thailand are not that cheap anymore with the average living cost being $400 USD to $1000 USD/person/month in urban areas. On the other hand, one can live a comfortable lifestyle with less than $400 USD in Vietnam, thanks to the government’s efforts on keeping its currency competitive. 

Other reasons for offshoring software development to Vietnam include the affordable wireless Internet. In fact, it is considered one of the cheapest in ASEAN, even lower than Thailand and Malaysia. An average internet package (60 Mbps or More, Unlimited Data, Cable/ADSL) will cost about $11.43 USD/month in Vietnam but can range anywhere from $22 USD to $50 USD/month in the mentioned neighboring countries above.  

The Time for Offshoring Is Now!

Now, rather than asking yourself, “Why do firms outsource/offshore?” try questioning this: “Why do firms outsource/offshore to Vietnam?” While our list of reasons for offshoring software development to Vietnam will help businesses understand the opportunity presented by the market, it is recommended for you to take action immediately. However, instead of venturing into it blindly by yourself, it is recommended to consult a trusted offshoring service provider for detailed legal information and market insight.

This is where JDI comes in. our team is specialized in helping businesses to expand their offshore operations to Vietnam. In fact, there are more than 80 startups already succeeded in building their tech team with our support. 

Contact us today to receive free consultancy on creating a successful strategy for your business presence in Vietnam. Remember: modern problems require modern solutions!