As outsourcing fails to deliver the promised outcomes and onshoring remains an expensive option for building tech teams, firms are starting to try offshoring as their new preferred expansion strategy. However, given the significant required investment, choosing the best offshoring country is a must when it comes to expanding your overseas tech team.
Singapore’s Tech Talent Shortage In 2022
The Long Thirst For Tech Talent
While the shortage of tech talent is a global phenomenon, Singapore remains among those that are affected the most. The country is aiming to become the silicon valley of Asia but faces a severe lack of IT workforce as more foreign companies move in.
Big players like Amazon, Tencent, ByteDance, and Alibaba are reportedly planning to grow their operations in Singapore as the regional tech hub. This means local businesses will have to compete more aggressively for talent against the presence of those global giants. In fact, firms may have to pay an extra 30% on top of the average salary to secure tech talent when they switch jobs.
Additionally, Singapore also has a geographic and demographic limit that hinders the growth of its labor force. The country can only produce 2,800 ITC graduates annually while the expected demand is 60,000 tech talents over the next three years. Meaning 51,600 jobs across the IT sector will be vacant.
The COVID-19 Pandemic
COVID-19 is a wake-up call that going digital is not an option – it is a must! Businesses are now carrying over their digital transformation initiatives to keep up with customer expectations in this age of uncertainty.
Unsurprisingly, industries across the IT sector in Singapore are experiencing explosive growth thanks to the pandemic. Behavioral change in a time of global COVID-19 lockdowns has also created new demand for digital interaction where online meeting has become the norm for both business and personal relationships.
In other words, the pandemic has created a sudden spike in recruitment for staff that can build and support digital infrastructure. This exacerbated IT talent scarcity even further.
The Future of Changes
More than any organization, the Singapore government understands the importance of digital transformation to its growth as the regional tech hub. Thus, numerous initiatives which provide incentives and resources for SMEs to speed up their digital journey have also been carried out over the years.
Ironically, this ongoing push toward digitalization has also exposed the IT talent scarcity in Singapore even more, despite the Government’s plan to spend up to S$3.8 billion on information and communications technology (ICT) procurement this year.
It seems that when companies have better resources and government support to scale up their tech operations, their demand for tech talent will also increase sharply.
While the government did anticipate such a problem and already launched a newly announced work pass in hopes to help the country attract more talent overseas, it will take a long time until the campaign can have a noticeable effect.
In the meanwhile, businesses must rethink their strategy to find a better alternative.
Offshoring Is the “New Normal”
What Is An Offshore Tech Team?
Offshoring software development or building offshore tech teams is a process of employing IT talent abroad to work for the company, usually in a developing country such as Vietnam for lower operation costs and easier access to the workforce.
However, different from work pass, firms will have to open up their own branch or office overseas to serve as the base for their newly acquired tech team.
The ultimate goal here is to cut down on more expensive redundant headcounts through a more economically viable team to help support your operations. In fact, it is one of the most cost-effective strategies for businesses to improve their tech capabilities.
Popular Offshoring Destinations
Even though India and China have dominated the offshore market for a long time, they are not exactly cheap or consistent in quality anymore as emerging challengers across Southeast Asia have upped their games. Thus, startups and SMEs based in Singapore have been offshoring to other countries in the ASEAN region to further improve their product development capabilities without burning the budget.
Some of the common offshore destinations include Indonesia, Vietnam, Philippines, Cambodia, Myanmar, Thailand, and Malaysia. These countries are well known for inexpensive labor and living costs, and the rise in English-proficient IT workers has also added to the popularity.
According to our research, Vietnam is actually the best country to set up an offshore company when it comes to tech human resources compared to Thailand and Malaysia. Not only does this explain the country’s competitiveness among other offshoring destinations, but it also explains that Vietnam is a well-rounded country in terms of talent availability, financial stability, and general business environment.
To answer the question of why offshore companies choose Vietnam as its operating destination, let’s dig deeper into these three main advantages of the country when it comes to offshoring.
Best Offshoring Country Must Have A Large Workforce With Affordable But High-Quality Tech Talent
Access To Wider Tech Talent Pool
One of the biggest perks of offshoring software development is the ability to tap into the market that has a rich tech talent pool ready to be hired. Their search radius is often landed at ASIAN region to take full advantage of the nearby talent pool such as Vietnam. The country is considered as one of the best offshoring destinations with 50,000 newly IT talent joining the market annually.
Moreover, the vast tech talents from overseas also mean an easier time to search for niche developers with the appropriate skill set to handle complex projects. From AI, IoT, blockchain, etc.., firms can easily develop their advanced projects with the help of experts that normally are hard to find in Singapore.
Coupled with the fact that it often takes around 2 months or longer to successfully secure hires of software developers, the ability to not be restricted by the local market enables firms to speed up their recruitment process substantially.
Affordable But Skilled Tech Talent
The primary reason why many organizations prefer offshore tech teams over local hires is its cost-effectiveness. For a developed country like Singapore, hiring a full-time local software developer with 5 years of experience can be extremely expensive with an average cost of $3,220.
On the other hand, a Vietnamese developer with the same experience and skill set only costs $2,300 monthly or 40% lower. Meaning firms can easily double the headcount with the same budget by building their own offshore tech team.
Another advantage of hiring tech talent overseas is being able to secure high-caliber developers with years of experience, industry and language proficiency under their belt. So even if firms are only planning to scale up their tech operation with one or two extra headcounts, it is still worth investing in offshore talent to get the top-tier team player rather than settle with the average Joe.
Best Offshoring Country Needs Stable Economy Environment
When it comes to the economy, many Asian countries are plagued by instability due to various reasons such as Coup d’état in Thailand or political turmoil in Malaysia. Fortunately, Vietnam is one of the rare exceptions. In fact, it is one of the most stable countries with a strong economic growth rate, as a result of the government’s unconditional support for entrepreneurship.
Furthermore, the absence of ethnic and religious conflict also helps Vietnam become a much more preferable destination from the investor perspective. With 90% of the population, ethnicity is “Kinh” and over 80% is atheism, Vietnam found itself a near-perfect neutral ground to build up its economic foundation and attract foreign investment.
On the other hand, the government also focuses on building healthy relationships to guide the young population into the startup ecosystem, enabling the market to flourish even further. In fact, startups and SMEs contribute up to 50% of employment across the country. Vietnam also gives out supporting policies, tax incentives, and favorable laws, creating an ideal environment for offshoring.
A prime example is a partnership between Enterprise Singapore and the Vietnamese government-backed agency Saigon Innovation Hub, which has initiated a two-way exchange of startups and tech talents.
This joint program allows Singapore to connect with potential investors and customers, in hopes of helping startups and businesses expand their operations into the booming Vietnamese market.
Geographic Advantages To Become The Best Offshoring Country In ASEAN
Last but not least, one thing that many people worry about is the occurrence of natural disasters in Southeast Asia. However, this is not a primary concern in Vietnam as the country suffers less relative to other tropical countries in the region. Although heavy rain and storms do come by occasionally, Vietnam is less exposed to severe conditions such as typhoons, which tend to occur a lot in the Philippines.
Moreover, in the southern parts of the country, the weather tends to be warm throughout the year, with the average summer temperatures ranging from 25 to 30 degrees Celsius. This is why offshore companies find Vietnam much more comfortable than other ASEAN countries such as Cambodia, where their average summer temperatures reach 35 degrees with highly intense humidity.
Grasp Your Opportunity!
When looking at how Vietnam “stacks up”, it becomes clear that the country is an outstanding offshoring destination that is worthy of strong consideration.
In case you are planning to tap into Vietnam’s tech talent pool, do not miss out on our Vietnamese Developer Salary Report that we recently released. This report will equip you with everything you need to know about Vietnam’s IT landscape and salary rates in 2023 with the latest insights and data.
If you are interested in expanding your business and tapping into the market of top tech talents in Vietnam, our team at Tech JDI is here to help you build up a presence! Contact us today to get started.
Vietnam Developer Salary Report 2024 Q3
Discover IT Hiring Trends, Tech Talent Insights, and Developer Salary Rates In Vietnam!
