Vietnam's IT way to social progress

In December 1986, Vietnam--under its Doi Moi (renovation) policy--decided to shift from a centrally planned economy to one that is based on market dynamics. To this end, the country has made significant progress building investments and maintaining growth.

The government in 2003 unveiled the "Vietnam Science and Technology Development Strategy by 2010", which raised the status of the country's science and technology development, together with education and training, as key foundations to boost industrialization and modernization processes in Vietnam.

Among the country's early initiatives were the construction of two high-tech zones in Hoa Lac and Ho Chi Minh City.

Lam Nguyen, IDC Vietnam's country director, said local provincial governments also allocated land to establish hi-tech parks to attract foreign investors with tax incentives and favorable investment benefits.

Truong Gia Binh, president of the Vietnam Software Association (VINASA), said the country's software industry was spawned 10 years ago when several companies began focusing on developing applications required by the domestic market. Those business tools included human resource management, accounting, office management and document management software, Truong said.

In 2000, some corporations shifted focus and looked at applications designed to help large businesses. With that, Vietnam added enterprise resource planning (ERP) applications to its software development market. Besides companies such as Microsoft, Oracle and SAP, which provided enterprise software, Vietnamese IT vendors were also capable of developing ERP applications.

Truong said in an e-mail interview: "Currently, ERP is still very hot in Vietnam."

Penchant for outsourcing
Local IT companies have also identified outsourcing as another key market, and since 2000, have started to provide such services.

Lam said the country is aggressively training its people in hopes of building Vietnam as a regional offshore hub for outsourcing work.

Vinasa's Truong noted that at the onset of Vietnam's outsourcing business in 2000, the sector churned some US$50 million in revenue.

"Currently, Vietnam's most successful market for outsourcing is Japan, comprising more than 70 percent of outsourcing revenues, or US$498 million, in 2007. The other major markets for Vietnam are the United States and Europe."

Luxoft President and CEO Dmitry Loschinin told ZDNet Asia: "We see software development as a particularly bright spot due to the favorable level of technical expertise and education in Vietnam." The Russian company provides software application and product development outsourcing services, and made its entry into Asia in April via a new delivery center in Vietnam's Ho Chi Minh City.

IDC's Lam said the government also wants to encourage Vietnamese based overseas to return to the country, and establish technology companies that could attract offshore outsourcing contracts.

The government also hopes to attract IT vendors to set up assembly equipment and testing centers in Vietnam, he added. "It aims to attract high foreign direct investment into the country, and to build Vietnam into a low-cost regional hub," the analyst said.

According to Stree Naidu, Tumbleweed Communications' regional vice president of Asia-Pacific and Japan, the Vietnamese IT sector is booming with the erection of manufacturing plants and factories by major companies such as Intel, NEC, Stats ChipPac and other well-known manufacturers.

"[However], the IT Infrastructure needs to be set up quickly to accommodate such big growth, especially in Ho Chi Minh City", Naidu said in an e-mail interview.

"To date, Vietnam has been free from many cultural or political issues, in comparison to China, and its younger population is more eager to learn new technologies," he explained. "Of course, one of the most important factors is Vietnam's low wage rates in comparison to its neighboring countries," he said.