Catch-22 of IT Outsourcing in Vietnam

More than six months have passed since the Flappy Bird phenomenon, but international eyes are still on Hanoi and half the country is still wondering what to make of it. Over the weekend, I attended an event to speak about trends in Information Technology in Vietnam and the effect of globalisation on the industry. The discussion turned towards the different flavours of software development, and how the rapid growth of the IT outsourcing industry, paradoxically perhaps, might actually prevent an innovative indigenous technology sector from emerging.

Several months ago, I was interviewed on the news in Vietnam about some similar topics relating my experience with creative software development in the region, my thoughts on the future of the IT sector in Vietnam and whether the target of having 1 million people working in the IT sector in Vietnam by 2020 could be achieved. I was thrown by one of the questions, specifically because the interviewer specifically said creative software development. I stammered a bit about the importance of creativity which didn’t really address what was being asked. Thankfully the translator did me a favour by improvising a more articulate response in Vietnamese.

This past weekend, the same issues cropped up again. The audience was largely IT students who were inspired by Dong Nguyen’s success, wondering what the future holds for tech in Vietnam. The theme of the day was “we can do it, can’t we?”

Vietnam’s advantage

What is the greatest asset that Vietnam has? Without a doubt, it is the vibrant young generation. Over 17,000,000 people in their 20’s. To put it into perspective, in Ireland we’ve got about 615,000 people in that age bracket. The demographics are remarkable.


Anybody who has visited a technical university in Hanoi or Ho Chi Minh City can tell you how bright and eager the students are. We just need to make sure to provide the right environment to keep the spark alive after they graduate.

Too many “Project Managers”, not enough “Product Managers”

We depend too much on outsourcing on behalf of overseas companies.

There is a huge appetite internationally for Vietnam to pick up the pace, to keep churning out developers to work on big .NET ERP systems and payroll software until they’ve reached the target of 1 million tech guys. It sounds great, right? More jobs, more developers, happy suppliers, happy customers. I fear that it’s not so straightforward, and the warning signs are already visible.

Fundamentally, it’s about the culture. The motivation and incentives that drive an IT outsourcing company are different from those at an indigenous software product development firm. It comes back again to creativity.

To win that big project for Japanese banking software, your company needs to aspire to become a machine; ISO 27001, CMMI level 5, etc. Competitive hourly rates, a reasonable timeline. There’s not a lot of room for error, and there’s no chance to deviate from the specifications. Working in this kind of factory environment builds up a certain set of skills. Project Managers are experienced with estimation techniques, deadlines, quality management, process. Developers become focused and specialised.

Such standardised processes and technologies means less differentiation between different outsourcing providers. As the industry becomes more commoditised, Vietnam still has a cost advantage that can be maintained for years to come. But competing on price is not pretty, and where will the innovation come from?

At the other end of the spectrum, consider companies that build their own cutting-edge software in-house. It is a more artistic flavour of software development. It calls for an environment that can encourage creative thinking, independent research tangents, and experimentation. Product Managers need to understand how a customer thinks and engages with a system, to continuously search for ways to improve the product. Companies are willing to come to Vietnam and create this kind of environment. There have been some innovative startups cropping up over the past few years, as well as the likes of Atlassian who are really making efforts along these lines.

The problem is, the vast majority of the experienced workforce has been conditioned by a very different working culture, and it’s not easy to make the transition. How can we find leaders with the right kind of experience? Modern software companies looking to build a product development team will try to hire the best developers they can find. They’ll look for cross-functional tech guys with decent English and an agile mindset, and they’ll be willing to pay well above the going rate. One of these days, a big American software company will come to Vietnam and try to hire hundreds of developers. The question is, will they be able to find the right calibre of people?

There needs to be a better balance between factory-style outsourcing work and creative product development. We are relying on this new generation of 20-something year olds to become the shift in the tech culture. Agile Vietnam has an important mission to play in this, as do the various incubators and accelerators that have been springing up over the past few years. Students should note that we are all on a level playing field now, more or less, and a young developer in Vietnam has as much opportunity to be a great coder as the guy in California or Krakow. With the likes of Coursera and Github there is an abundance of free resources online for someone who has the passion and the commitment. Companies who feel their corporate culture has become too restricting must try to think of ways of encouraging internal entrepreneurship, perhaps by introducing coaching initiatives that promote self-organisation, such as the Fifth Discipline. It’s not always easy to do when you’re dealing with tight deadlines and demanding customers, but in the long run it will be worth it.


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