Vietnam is beginning to rival India as a centre for programming
following a government decree to train thousands of people in IT.
Computer Weekly examines the merits of outsourcing out East
Outsourcing and software development are not the first things that
come to mind when you read about Vietnam. But then things are
changing fast in this dynamic nation. It is 26 years since the
country was unified under communist rule, but in the commercial
heartland around Ho Chi Minh City, you would be hard pushed to tell
just who is in charge.
The government abandoned socialist planning years ago, mindful that
the forces of globalisation might condemn Vietnam to poverty unless
it found a niche beyond the advantage of cheap factory
labour.
Of course, the country still has its fair share of sweatshops
hidden away in export-processing zones but, like the rest of South
East Asia, Vietnam has high hopes of building a knowledge-based
economy. Encouraging the growth of information technology,
particularly software development, is regarded as central to this
aim.
Last year, the communist elite took the unprecedented step of
issuing a decree to train 50,000 IT workers by 2005. Whether or not
the country is on track to hit this target is debatable, but there
is no questioning the commitment to the cause. The country's most
modern software park was opened in March and numerous IT training
centres are being established, some with assistance from Japanese
and Indian firms.
Moreover, IT will soon be on the national curriculum while
tomorrow's programmers are already chatting with remote peers in
the burgeoning number of Internet shops in Ho Chi Minh City, Hanoi
and beyond.
Of the pioneers, about 30 software development houses are operating
in Vietnam. Most are foreign-owned with the top three or four
employing more than 100 programmers. In terms of clients, the likes
of Nortel, IBM, Bayer, Sony, Cisco and Anheuser Bush are already
contracting out to Vietnam - either directly or through onshore IT
firms diverting project work from India. Even UK food manufacturer
Tate & Lyle has used Vietnamese software developers, albeit
through global intermediary Accenture.
A number of Indian software houses are also setting up in Vietnam
to circumvent perennial attrition problems and spiralling
technology costs back home. And in May, the first Indian to take up
an executive IT post in Vietnam was appointed managing director of
US-owned Paragon Solutions Vietnam (PSV), which with 215 employees
is the largest foreign-owned software house in the country. He left
behind a lucrative career as a senior executive of DSQ, one of
India's top 15 software companies.
Of course, it is going to be some time before Vietnam and the rest
of South East Asia rivals India's $6bn (£4.2bn) software industry.
By 2005, Vietnam's fledgling software industry is only expected to
contribute $500m per annum to the gross domestic product.
Part of the reason why Vietnam is being seen as a contender in the
offshore programming market is its eager and dynamic workforce.
Average per capita income may be just $300 a year, but Vietnam has
one of the highest literacy rates in the world at more than 90%.
More importantly, three-quarters of the population are under 35
years old.
"These are excellent conditions for an emerging software industry,"
says Simon Buehring, a British expatriate working as a technical
director for Tuong Minh Project Management (TMA), the largest
privately-owned software house in Vietnam.
"I've never been to a place where people have such an absolute
thirst to learn. If you come back to the office at 8pm, people are
at their desks doing self-study or using the Internet to research
the latest trends in the industry."
This was a key factor that persuaded Nortel Networks to start
outsourcing to TMA as long ago as 1997. According to Hung Truong, a
software specialist with Nortel, the combination of professionalism
and dynamism was too compelling to resist.
"TMA has great vision backed by the ability to manage people and
produce results. This, coupled with the talent and eagerness of
young workers, shows you just how much intellectual capital there
is in Vietnam to build on," says Truong.
The Vietnamese work ethic is a frequent topic of discussion among
expat workers in Ho Chi Minh City. Jonathan Wright, originally from
Lancashire and now a senior project manager for PSV, explains, "I
have a team of 28 programmers working for me and the only
management problems we encounter stem from workers trying to take
on too much work because they want the experience and don't like to
say no."
Wright says that PSV uses an industry-standard Rational Unified
Process (Rup) to ensure all client work is monitored and is of the
highest standard. "I find Vietnamese programmers are only too happy
to adhere to procedure, which makes my life a lot easier. We run a
very inclusive operation at PSV which means everyone is consulted
when the Rup is updated - nothing is arbitrarily imposed. The ethos
is very different to what I remember of working in London," he
says.
One of the key advantages for clients deciding to outsource to
Vietnam is the lack of attrition among the best developers. Top IT
firms in Vietnam can keep project teams together for months at a
time. This ensures clients benefit from the continuity and
familiarisation that grows up between them and the
contractor.
"Attrition is not yet a problem in Vietnam," says Buehring. "We go
to great pains to recruit the best candidates and make sure we hang
on to them. This means we can offer clients a flexible labour force
and increase teams as and when the client demands. Offering this
24/7 service as standard is something most Indian firms struggle
with, let alone developers in Europe and the US.
"There may be a global shortage of skilled IT workers, but we have
top-notch Java and software engineers with object oriented skills,"
Buehring adds. This is because software houses in Vietnam, unlike
in the US and Europe, can afford to hire more staff than they need.
Labour is comparatively cheap. Estimates vary, but industry
observers claim the cost of developing software in Vietnam is 90%
cheaper than the US and between a third and a seventh of the fees
paid in India. For example, a talented young Vietnamese programmer
may take home $600 per month - a small fortune locally, but hardly
a drain on the human resources budget.
While US and Indian software developers have been quick to spot
Vietnam's potential, their European counterparts have yet to test
the waters. Part of the reason for the US progress is that
companies have forged channel partners with the help of Viet Kieu
(Vietnamese living overseas) who settled in the US after 1975 -
often within sight of what soon became Silicon Valley.
Commenting on the lack of European interest, Buehring says, "I
think European clients are missing a trick by failing to assess the
potential in Vietnam. I can understand why many are reticent.
Vietnam still calls itself a socialist country and few people know
much about the country today. That's why expat workers are
important to build up client confidence."
In short, the future of software development in Vietnam, not to
mention the rest of South East Asia, will depend on the willingness
of clients to think beyond India.
However, technical changes to the way the industry works look to
benefit newcomers. The fact that corporate clients now dish out
project work in component-style modules means that developers can
work on a master project any time. Small high-end innovative
projects are already the norm in Vietnam, as opposed to the grunt
work and Y2K testing that propelled India to greatness in the
1990s.
TMA, for example, is working on Nortel's award-winning Shasta line,
developing high-speed switches for digital data networks. For this
reason, many IT executives in Vietnam are optimistic that the
future of outsourcing will be kinder to new entrants than to
staples such as India.
Nguyen Huu Le, chief executive of Paragon Solutions Asia, says, "It
took India 15 years to build a world-class software industry; it
will not take anything like that for Vietnam and the rest of Asia
to catch up. Times have changed and we have the Indian lesson to
learn from. You no longer need expensive mainframes to start up -
just seasoned management and talented enthusiastic
programmers."
Of course, Vietnam is not without its drawbacks, adds Le.
"Infrastructure is not great and there is an undoubted shortage of
senior management and human resources professionals. But these are
areas where expatriate workers can build the foundations. I think
it's time to start telling people that Vietnam has a software
development industry, which although small, can compete with the
very best."
A day in the life of an expat in
Vietnam
Lancashire-born Simon Buehring had already clocked
up quite a few air miles before starting work as a technical
director at TMA in Vietnam. The 40-year-old computer contractor
previously worked in New Zealand for the government and for IBM
after leaving London with a Masters degree in IT in 1998. But it
was only after a three-month holiday in South East Asia that
Buehring decided he wanted to stay on and work in the region.
"I placed my CV with an online recruitment site and TMA was the
first to get back in touch with me. Since joining the company in
September 2000, I haven't looked back. Like most contractors in the
UK, I was looking for a new challenge and a chance to get more
managerial experience. I might have waited years to get that
opportunity in the UK, but in Vietnam I was entrusted with that
responsibility immediately and given the opportunity to prove
myself.
"TMA has fostered an excellent working environment. Everyone is so
young (except for me) and eager to learn. Our project managers and
developers speak a high standard of English, but my secretary gives
me the occasional lesson in Vietnamese.
"A typical day starts at 7.30am when I'm briefed by my assistant
and brought an iced coffee. There's a steady flow of e-mail to be
dealt with and, as a company, we respond as quickly as possible.
Each morning, I'll also meet with the network manager to discuss
server upgrades before sitting down with senior colleagues to
discuss customer proposals. The rest of the day is usually taken up
with monitoring the performance of project teams working for
clients and seeing that deadlines are met and resources are
adequate.
"Each project manager knows that I'm available in case of problems
or difficulties but there's seldom anything that teams cannot solve
by themselves with some encouragement.
"Outside work, there's plenty to stop you getting bored. Ho Chi
Minh City is a bustling metropolis but it takes some getting used
to - especially the traffic. It's all motorcycles out here and road
safety remains an alien concept. I think I'm one of the 12 people
in Ho Chi Minh City who bothers to wear a crash helmet.
"I wouldn't say Vietnam will suit everyone. You need a sense of
humour and patience from time to time. When it all gets too much, I
leave for the peace and quiet of the stunning Mekong Delta a few
hours away."
Working with Vietnamese developers
One of TMA's clients
is Cogita Solutions, a software development company in Silicon
Valley that currently provides software solutions and consulting
services. Cogita uses TMA's engineering resources to provide
software solutions to several biotechnology companies, including
Genentech, a San Francisco-based biotechnology company using human
genetic information to develop, manufacture and market
pharmaceuticals. In January 2001, TMA began work developing a
Web-based software solution using the latest Java J2EE technology.
Cogita briefs its designated project manager at TMA on a weekly
basis with a detailed rundown about the week's build. The entire
liaison process is conducted in English - both oral and written. It
is company policy at TMA, as it is at other Vietnamese developers,
to conduct all internal communications in English and regularly
send staff to intensive language classes.
Once Cogita has submitted the brief, the workload is divided up
among the project team and schedules devised to meet the weekly
deadline. At the end of the week, a fully tested prototype is sent
to the client for them to plug straight into their system. Working
on distributed Web applications means TMA completes each module on
a use-case basis.
If the project team encounters difficulty, the technical director
may be drafted in and, if necessary, the client contacted. A close
dialogue is kept with the client at all times.
Commenting on outsourcing to Vietnam, Genentech's Steven Lam says,
"Vietnam has good engineer resources and it's extremely cost
effective. The engineers are well adapted, can be trained to use
new technology and are motivated to do a good job. They can be used
to form a virtual software project team."