Why is it always the Americans at the head of the queue when it comes to IT outsourcing abroad? And why do the US companies choosing the outsourcing route more and more rely on IT services companies from emerging Vietnam? Keep reading to discover the answers.
Until thirty years ago, there were nearly no economic links between Washington and Hanoi.
Today, Vietnam stands as the eighth-largest trading partner for America globally and the largest one in Southeast Asia.
Based on data from the General Statistics, in 2023, Vietnam and the US traded a combined total of US$ 111 billion in exports. This marks the third year in a row that their bilateral trade has exceeded the 100 billion threshold.
US-Vietnam trade balance (2012-2022)
Source: The US Census Bureau
Note: All figures are in millions of US dollars on a nominal basis, not seasonally adjusted.
American companies like Google, Apple, General Electric, Oracle, and IBM, to name a few, have all made significant investments in Vietnam, setting up offices, research and development centers, and manufacturing facilities across the country.
The Vietnam-US cooperation in high-tech industries is booming and aside from well-known global tech giants, many US small and mid-sized enterprises are showing a keen interest in hiring Vietnamese tech talent.
Statista confirms it — the source says when it comes to IT outsourcing to Vietnam, the US companies make up a large part of the сlient base.
But what is driving this influx of American influential engineering firms into Vietnam and why local IT outsourcing companies are so popular among American IT services buyers? Let’s figure it out.
The Biggest Benefits for American Companies Outsourcing IT Work to Vietnam
Access to a Wide Pool of Quality Talent
Technical education in Vietnam is relatively inexpensive. What could amount to $70,000 for a computer science undergraduate degree in the United States may only cost a few thousand dollars in Vietnam. Additionally, the Vietnamese government plays an active role in driving the growth of tech talent and heavily subsidizes higher education.
Consequently, there is a vast pool (+57,000) of IT specialists graduating annually from over 400 local universities, among which are world-renowned Duy Tan, Ton Duc Thang, and Vietnam National University in Ho Chi Minh City.
The nation boasts its ever-growing cohort of data scientists, cybersecurity experts, AI engineers, and cloud architects — the most sought-after IT jobs these days.
Vietnamese tech professionals are well-known not only for their number and cost-effectiveness. Local developers have gained global appeal for their exceptional technical proficiency and strong communication abilities.
Their skills are backed by strong evidence — in 2022, The Pentalog Group, a global IT Service Platform, included Vietnam in its Top 10 countries with the best developers worldwide.
Another significant aspect is that in 2023 Vietnamese employees proved their English proficiency at an upper intermediate to advanced level, ranking 58th out of 113 countries in the EF English Proficiency Index. Vietnam is also among the top 10 English-speaking countries in Asia.
Such an abundance of highly qualified, English-proficient IT professionals comes as good news for America, for the nation is in dire need of tech talent. The Bureau of Labor Statistics predicts that the deficit of engineers in the United States will hit 1.2 million by 2026, with 545,000 software developers leaving the market by that time.
Share of organizations affected by staff shortages in selected countries
Source: Statista
Focus on Core Business
As Mitt Romney once said, corporations are people too. Although these words sparked controversy, there is a grain of truth in his comparison. Much like people, if a corporation is stuffy and feels overworked, productivity goes down. Moreover, when leaders worry about a dozen daily tasks, they often lose out on business growth and development.
American companies know this and prefer to outsource non-core functions. This way, they are making time and room to focus on core business operations and innovations, which help them grow, succeed and make more profits.
Certain business owners express concerns about the possible lack of supervision and control when delegating some tasks or projects to an offshore service provider. Yet, it’s not a problem with Vietnamese software engineering companies.
Vietnamese business partners are recognized for their commitment to transparent business dealings. At Elinext, for example, we strongly believe that transparency is vital for rock-solid business partnerships. So, we are always happy to allocate meetings, accommodate on-site visits, and provide other transparency measures to ensure that clients are well informed and actively engaged throughout the development process.
Additionally, loyalty to employers and respect for elders and superiors is a part of a Vietnamese work culture. Thus, American clients can rest assured that their instructions and tasks will be carried out with due diligence and on time.
Cost Reduction
Most US companies have a mature, progressive approach to outsourcing and offshoring. They are less enticed by cost reduction but view partnerships with external IT vendors as an opportunity to access some specialized skills, improve their processes, and globalize their operations.
Meanwhile, although cost-reduction is no longer the dominant factor behind IT outsourcing for US clients, money-saving still matters. The salary of software developers in America is the highest among all countries.
To illustrate, software engineers’ salaries in Silicon Valley reach $200K per year. In comparison, in Vietnam, developers are paid a humble annual salary of approx $8,000.
Access to the Most Developed Technology
A great portion of our American clients view an outsourcing relationship as a real chance to get access to innovation, which is mission-critical for their business.
Americans also are well aware of how much money they would have to spend purchasing advanced technology themselves. Thus, US firms strategically outsource their IT requirements to external partners, which are typically subscribed to the latest tools and technology, required for customers’ project implementation.
Vietnamese software engineering providers, in turn, are always staying abreast of the latest trends, innovations, and developments in the tech world.
Big local players like Elinext, Groove Technology, Saigon Technology, Newwave Solutions, Orient Software, FPT Software, TMA Solutions, and many others, fully realize how important it is for today’s companies to remain agile and adaptive, so they use the most progressive technologies and cutting-edge techniques in their work.
As a whole, modern Vietnam is a nation deeply committed to technological advances and innovation. The country saw a notable 48% rise in its national digital transformation index from 2020 to late 2023.
In the 2023 Oxford Insights report, the Vietnamese Government ranked 39th out of 193 countries for its artificial intelligence readiness.
Ranking of South and Southeast Asian countries by economic health driven by digitalization
Source: Robocash Financial Group’s research
Globalization
Offshore outsourcing has become a crucial strategy for American companies looking to expand globally.
Entering international markets not only allows ambitious Americans to access new customer bases but also helps them diversify their revenue streams, mitigate risks from regional disruptions, and take advantage of economies of scale within their operations.
Partnering with Vietnamese IT outsourcing service providers enables US firms to gain valuable insights into Vietnamese, highly attractive for foreigners, market dynamics, regulatory requirements, cultural differences, and consumer preferences.
This localized knowledge is essential for building market entry strategies customized to meet the unique requirements of the new market.
Round-the-Clock Operations
Follow-the-sun, also known as round-the-clock is another major benefit American companies outsourcing their IT projects to Vietnam enjoy.
Originally pioneered by IBM, this concept involves software development teams located in various parts of the world working together on a common project. Each team, as they finish their workday, hands off their work to the team who is just starting their day on the other side of the world.
With proper coordination, this approach enables continuous work progress, potentially shortening project timelines.
Due to the time difference between the US and Vietnam (the time in Vietnam is 12 hours ahead of New York) American companies offshoring to Vietnam, can expect to take advantage of productivity around the clock.
Importantly, by partnering with Elinext, American businesses benefit from having an English-proficient Team Lead from Europe. Europe strategically serves as a time zone bridge, offering a convenient overlap for real-time collaboration.
From our experience, we’ve observed that the pairing of a Vietnamese development group with a Europe-based Team Lead sharing the same time zone with a client enhances communication efficiency between distributed teams with no overlapping hours (8+ hours difference).
Having a Team Lead based in Europe who is available during both the client’s and the Vietnamese development team’s working hours ensures:
- thorough and timely gathering of the project requirements from all stakeholders, and
- swift resolution of project issues.
Faster Project Execution and Delivery
Vietnamese employees are renowned for their strong work ethic and commitment to professional excellence. There is a cultural expectation of working extended hours when needed to complete tasks and meet deadlines. Diligence and hard work are highly emphasized in Vietnamese work culture, and the willingness to go the extra mile is considered a virtue.
There are very few things people from the US appreciate more than punctuality and speed when it comes to performing business tasks; that’s why offshoring IT tasks to Vietnamese vendors is a great fit for them.
Build Something Real with Elinext — Leading Software Outsourcing Company Based in Ho Chi Minh City, Vietnam
Elinext is a premier full-service custom software development company with international offices spanning across the USA, Germany, France, Ireland, Singapore, and Hong Kong, and multiple delivery centers around the world, including Vietnam, Poland, Georgia, Kazakhstan, and Uzbekistan.
With nearly three decades of spotless reputation, we modernize legacy systems and build progressive scalable custom software solutions from scratch in ERP and asset management, CRM and loyalty, banking, healthcare, IT infrastructure management, data analytics, Artificial Intelligence, Machine Learning, blockchain, cybersecurity, and IoT domains.
Elinext continuously invests in their vetted IT professionals, so that they can clearly understand the business drivers of our client’s products and develop great solutions in a reliable and secure way.
See what people have to say about Elinext services and don’t hesitate to contact us today.
