SOFTWARE OUTSOURCING INDUSTRY IN VIET NAM

TABLE OF CONTENTS Acknowledgements Abstract List of Abbreviations List of Charts and Tables INTRODUCTION I Rationale II The significance of the study III Aims of the study IV Research questions V Scope of the study VI Methodology of the study VII Design of the study CHAPTER ONE: LITERATURE REVIEW 1.1 The concept of software, outsourcing, and software outsourcing 1.1.1 Software definition 1.1.2 Outsourcing concept 1.1.3 History of software outsourcing 1.1.4 Types 1.1.5 Advantages of software outsourcing 1.1.6 Disadvantages and concerns .11 1.2 Software Outsourcing industry in the world, India and China 11 1.2.1 In the world 11 1.2.2 In India and China .12 CHAPTER TWO: SOFTWARE OUTSOURCING INDUSTRY IN VIET NAM 15 2.1 Overview 15 2.1.1 The introduction of Software outsourcing to Vietnam 15 2.1.2 Key players 16 2.1.3 Principal services .18 2.1.4 Markets for Vietnam software outsourcing industry .18 2.1.5 Achievements 19 2.1.6 Main objectives 21 2.2 Prospects of Vietnam software outsourcing 22 2.2.1 Appealing factors 22 2.2.2 Highly appreciated by the big software outsourcing service providers 30 2.2.3 Increasing government support 32 2.3 Situation .33 2.4 Opportunities 36 2.5 Challenges 40 CHAPTER : A CASE STUDY OF FPT SOFTWARE 43 3.1 FPT software in general .43 3.1.1 Formation and main services 43 3.1.2 Vision 43 3.1.3 Strong business results .44 3.2 Businesses 46 3.2.1 Enterprise Resource Planning (ERP) service 46 3.2.2 Web Meister (WM) 48 3.3.3 FPT.iHRP 48 3.3 Success factors 49 3.4 Direction and challenges 53 CHAPTER 4: RECOMMENDATIONS 56 4.1 Strong commitment of the government 57 4.1.1 Financial support 57 4.1.2 Promotion 58 4.1.3 Legal and Regulatory framework 59 4.2 Human resource and training 59 4.3 Associated solutions 62 4.3.1 Enhance the IT infrastructure .62 4.3.2 Copyright protection 63 4.4 Open source software (OSS) development 63 4.5 Set up quality control system 64 4.6 Other suggestions .65 CONCLUSION 67 REFERENCES 70 ABSTRACTS Information technology (IT) is seen by the Vietnam Government as one of the most significant driving forces for the economic development and social advancement It steps up the reform process, intensifies the industrialization and modernization of economic sectors, and strengthens the competitiveness of businesses The development of IT industry, especially the software industry has become a key industry in many developing countries because of the increasing application of information technology in business, manufacturing and many other sectors Among them, the software outsourcing stands out as one of the most profitable and fast-growing industry This paper studies the current situation of software outsourcing development, some of the favorable factors that boost this industry as well as the analysis of the software outsourcing activities in FPT Software Once we have figured out the potentials, we can work out some solutions to first maintain and make use of these factors and then to promote the Vietnam software status in the international arena LIST OF ABBREVIATIONS AIC : Advancing Technologies & Investment Consultants Corporation APEC BPO : Asia-Pacific Economic Cooperation : Business Process Outsourcing CDIT : C-DIT-Center for Development of Imaging Technology CDMA : Code Division Multiple Access CEIC : Computer and Enterprise Investigations Conference CMC : Computer Manufacturing Corporation, CMG : Computer Measurement Group CMM : Capability Maturity Model CMMI : Capability Maturity Model Integration COSIS : Copernicus Online Service + Information System ERP :Enterprise Resources Planning FCG : First Consulting Group FPT : Financing and Promoting Technology FSoft : FPT Software GCS : Global CyberSoft, Inc GSE : Global System Engineering HCA HSBC : Hochiminh Computer Association : Hongkong & Shanghai Commercial Bank IBM : International Business Machines Corporation IEEE : Institute of Electrical and Electronics Engineers IPR : Intellectual Property Rights IT : Information Technology KPO : Knowledge Process Outsourcing Kyu : Japanese levels of proficiency or experience LAN : Local Area Network NASDAQ : National Association of Securities Dealers Automated Quotation System NASSCOM Companies : National Association of Software and Services NEC : Nippon Electric Company NTT : Nippon Telegraph and Telephone OSS : Open Source Software PC : Personal Computer PSD : Pyramid Software Development PSV : Paragon Solutions Vietnam QA : Quality Assurance SMEs : : Small and Medium size Enterprises SO : Software Outsourcing SOEs TMA : State Owned Enterprises : Tuong Minh & Associates VASC : Vietnam Association of Software Communication W3C : The World Wide Web Consortium W-CDMA : Wideband Code Division Multiple Access Wifi : Wireless Fidelity WiMAX : Worldwide Interoperability for Microwave Access WLAN : Wireless Local Area Network and LIST OF CHARTS AND TABLES Table 1: Top reasons for outsourcing Table 2.1: Companies and workers in Vietnam Software Industry (2006 -2007) 16 Table 2.2: Structure of the number of companies specified by the number of employees 17 Table 2.3: Kearney ranking for offsite service locations 20 Table 3: Revenue and staff growth from 2000 – 2008 .44 Vietnam intends to commit software copyright pledges to the WTO But it does not mean that Vietnam has to buy all the copyrights but to consider carefully suitable ones for the higher improvement of economic efficiency And there should be strong disciplines for businesses which use government money to buy separately large quantities of copyrights or use software programmer wastefully 4.4 Open source software (OSS) development Open software is considered to be a top choice in the government’s fight against the copyright piracy Compared with other products, this cheap alternative has an advantage over traditional products as it can download and use them free of charge At several hundred dollars, the price of the familiar Windows operating system and Microsoft Office software is too high for normal users or organizations in Vietnam As a result, open source software has become a suitable choice for many agencies The Information Association is also developing an open-source software community model for Vietnam which aims to use domestic products as a means to develop the country In addition, the association has proposed to establish centers to research and develop open-source software applications and universal training models open source software development as an alternative to copyrighted products However, developing OSS application and software products should comply with intellectual property regulation and international standards, reducing the cost of software used in government offices, government companies, and education systems, creating demand for a local industry which connects Vietnam to global trends Operating costs to open source software include technical, assistance, training services and others Its long-term and real benefit in countries like Vietnam is that it will become a counterpoise to expensive products Vietnam government’s strong determination to fulfill its commitments in the areas of IPR protection and reduction of software piracy is widely welcome among big IT corporations To share the government financial burden in buying the genuine licensed software copy rights, FPT Software and CMC Corporation two leading Vietnamese ICT companies have entered the Enterprise Agreements signed by Microsoft to support the Government of Vietnam as it installs genuine copies of Microsoft Office System across rural and government desktops This cooperation will help FSoft enhance its ability to deliver quality services and efficiently manage the needs of its government customers through the successful implementation of the agreement 4.5 Set up quality control system In order to advance and attract more foreign investors and customers, Vietnamese software companies have strived to earn international certifications such as the ISO-9000 and Capability Maturity Model (CMM) of all levels as a proof for its excellent quality and service As Vietnam is still a newcomer to the international IT market, with a CMMI certificate, Vietnamese companies are more likely to catch the attention of foreign customers As the CMMI certification process requires a strong determination from the management board, the commitment of money, time and human resources, at present, only four Vietnamese companies - GCS, PSV, FSoft, Silkroad Systems - have earned high-level CMMI certification Other two enterprises, Lac Viet and TMA Solutions, are just beginning the CMMI process For companies with less than 100 staff are unable to afford the Software Engineering Institute's (SEI) high CMMI consultancy fees It is suggested that in order to save the money, they their research online and begin to implement CMMI guidelines In this way, small companies will be able to improve their quality and management systems on their own, so that in the future they can invite SEI consultants to observe their process and hopefully grant CMMI certification From the government point, it is crucial to public the advantages of CMMI for software companies and make it an industry standard To create more favorable conditions for local companies wishing to obtain CMMI, Ministry of Post and Telecommunications is to consider setting up CMMI consultancy companies to help reduce expenditures and make the process familiar to local companies 4.6 Other suggestions Vietnam software has obtained the first positive trust and support from the foreign investors but in the long run, it is important to continue maintaining the confidence of big customer’s and having a professional working team come first Being selected as one of the top 20 software outsourcing hubs with the status of ‘Offshore Software Outsourcing Best Practices’ by Aberdeen Group in 2002 is just one piece of evidence of the success Also, suiting business strategies, mainly in software processing, strong human resources, and high-quality software solutions are the keys for our success But the industry should build its own identity by developing a distinctive software service from software services such as application development, testing, maintenance and support, and other professional services, including technical support, network integration, and education and training Then it is Vietnam that comes first in the outsourcing decision of this service rather than any other countries Last but not least, the computerization of industry management or the pursuit of the e-commerce is essential to create the domestic playing field for the software industry IT applications has been implemented both in deep and broad scale The electronic information are developing and offering their impacts on socials Electronics newspapers, web pages together with online services have considerably contributed to the communication tasks, especially for the external information providing For the government, computerization of state management systems is implemented in departments, district, and people's committee and Party offices For education, IT is applied in managing the education system and in teaching (corresponding to each subject); implementing distance learning from high schools to higher education For healthcare system, computerization of healthcare management and City health network continued to develop IT hospital management systems currently underway; stepping up efforts towards remote Q&A, guidance and diagnosis For ecommerce, online market software includes building a database of equipment and technology available for sale in Vietnam, especially the results of Vietnamese research; online job market involves building a database of labor supply and demand in all fields, training schools and vocational centers, number rankings of annual graduates from universities, professional and vocational schools, providing connection between labor supply and demand sides and provide job training via the internet; online real estate market builds a database of real estate supply and demand in big cities, providing connection between real estate supply and demand sides, and organize online auctions CONCLUSION There is no doubt that software outsourcing has become a common trend in this era of the integration of the world production as no country produces a single and unique good or services inside its border but cuts them into small processes and hands over these parts to the most competitive and effective locations Apparently, joining the game we must understand the rules which means we have to follow the trend We in turn grasp and attract the processes that are appropriate to our resources Vietnam has just entered the software outsourcing chain for the last 10 years but has become a promising destination for software outsourcing of big giants in the world And in the future Vietnam may potentially overtake India and China as a site for outsourcing because the country possesses tremendous human resource with young skilled generation of highly motivated and technologically advanced IT professionals coupled with the rocketing economic growth rate, political stability and sound business environment, which are some driving factors to make the software outsourcing industry take off The presence of big world IT names in the market is the proof of the industry strong prospects of development Moreover, the Vietnamese government has paid much attention in the viable future of this industry as the government and the people desired to become a high tech nation in 2020 From the results of the study, it can be seen that the software outsourcing in Vietnam has not fully developed up to its potentials Cost savings are now the first factor in the initial decision to outsource to Vietnam, but are not the primary reason for the long term operation and commitment of foreign investors Besides the huge accomplishments, the shortage of human resource and copyright piracy are considered the main difficulties that need to be addressed to gain bigger success The study comes up with several suggestions for the development of the software industry in general and software outsourcing in particular These emphasize the role of the government policies in creating a level playing field for software enterprises and the positive impacts on their business performance They include strategies to further support this industry in areas such as IT investment, tax incentives, promotion, human resource and training, telecommunication infrastructure, quality control system establishment and the adoption of open source software Among which, the human factor is seen as the most precious and driving factor as knowledge and experience are the two features deciding the growth and level of software outsourcing industry The government should carry out the combined and comprehensive measures like improving management outcomes and administration mechanisms, developed education and training and proactive integration to achieve superior results Moreover, the government and enterprises should be better aware of the prevailing potentials, strengths and make greater efforts to promote, but co-operation between the two sides should be more efficient so that the industry will develop further With good preparation, we will have ground to believe in the bright prospects of becoming Southeast Asia’s outsourcing hotspot and follow the India’s outsourcing history in the near future It is hoped that, the study will make a significant contribution to better understand about the software outsourcing activities as well as partly better the current situation of this industry in Vietnam During the thesis preparation, great as efforts have been, certain errors are inevitable The researcher would appreciate every reader’s comment and tolerance for the shortcomings and deficiencies of the study Limitations and suggestions for further research As a matter of fact, nothing is perfect and limitations are inevitable The study presented in this thesis is of no exception Firstly, the writer chose this theme based on the desire to discover new research field rather than her intensive knowledge of the software outsourcing activities, therefore, the technical issues and terminology in the study may not be of the utmost accuracy and call for further investigation and research Secondly, due to the time constraint and the limited knowledge of the writer, the study merely focus on the potential for software outsourcing in Vietnam and can not provide a deep analysis of the FPT Software Further research on the outsourcing activities, export orientation and opportunities for development of the company seem to be of great usefulness Also, series of FPT Software customers associated with each software outsourcing types should be fully investigated to supplement the overall picture of software outsourcing in local enterprises Once again, I would like to express my special thank to Mr Pham Van Hat, my supervisor, without his invaluable guidance, this thesis would never been able to complete REFERENCES + Books Carmel, E (2003) Taxonomy of New Software Exploring Nations, Electronic Journal of Information System in Developing Countries, 13, 2, 1-6 Carmel, E and Agarwal, R (2003) Tactical Approaches for Alleviating Distance in Global Software Development, IEEE Software, 18, 2, 22- 29 Chidamber, S.R (2003) An Analysis of Vietnam’s ICT and Software Services Sector, Electronic Journal of Information Systems in Developing Countries, 13, 9, 2-11 Leszek, (2001) Computer Software Industry Pressman, R.S (1997), Software Engineering: a Practitioner’s Approach, the McGraw - Hill, Somerville, Software Engineering, Addison-Wesley, Schmid,(2000).Wrapping Windows NT Software for Robustness, Fault-Tolerant Computing, 1999 Twenty-Ninth Annual International Symposiums on Volume, Issue, 1999 Page(s):344 - 347 Schmid, T (2002) Hatching Vietnam’s Potential, Asia Image September, 50-67 + 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http://www.orientsoftware.net.html David Legard, (1999) Rampant Privacy Harms Vietnam Software Industry December 15, from the World Wide Web: http://www.cnn.com.html Ed Carroll, (2005) Outsourcing to Vietnam July, 19 from the World Wide Web: http://www.ironspeed.com.html Greg Stoller, (2004) Silicon Dream November 20, from the World Wide http://www.axamtrade.com/article/silicon_dream.html Web: Huynh Quang Minh, (2006) A Study on the Vietnam Software Industry from the World Wide Web: http://ewc64057.ewc.hawaii.edu.html Nguyen Duc Minh, (2007) Vietnam IT Outlook, October, from World Wide Web: http://www.hca.org.vn.html Nguyen Huu Le, (2007) Software Development and Outsourcing in Vietnam from the World Wide Web: http://www.shtp.hochiminhcity.gov.vn.html Software lights up the future, July, 2, 2007 from the World Wide Web: www.fpt.com.vn.html [...]... evolutionary changes globally in the field of software outsourcing CHAPTER TWO SOFTWARE OUTSOURCING INDUSTRY IN VIETNAM 2.1 Overview 2.1.1 The introduction of Software outsourcing to Vietnam Over a decade, software outsourcing emerges as a fresh but eye-catching industry in Vietnam economic ground and it has recently enjoyed a surge in interest and development, receiving much attention and support... scale and was concentrated in some specific regions, such as the USA and Europe In 1980s, the U.S and Japanese software outsourcing markets are very bustling, but in 1990s software outsourcing in India, China and Eastern Europe rose sharply Now, software outsourcing in Southeast Asia is booming with India leading role With $400 billion revenue per year, outsourcing now is an industry that the world can... most common motives in executing the software outsourcing activities are cost reduction, competition and the utilization of thirdcountry supplies of resources Nowadays, software outsourcing is becoming a global trend and Vietnam also strongly engaged in this practice Although software industry is now a young industry in Vietnam, it is growing rapidly with impressive turnover and increasing contribution... segment In recognition of the importance and benefits that this fresh industry contributes to the country, Vietnam government has put emphasis on this industry as the leading sector to help Vietnam turn into knowledge – based economy In the 90s, software outsourcing in Vietnam was a new concept when the underdeveloped economy was still facing with mounting difficulties, but now this industry is blooming... centers installed the Smartbank and capital management subsystem solution such as Vietnam Development Bank, The State Bank of Vietnam, Bank for Foreign Trade of Vietnam (Vietcombank), Hanoi Securities Trading Center, HCM Securities Trading Center, Bao Viet Securities Company, Saigon Securities Inc Other customers including Vietnam airlines, Electricity of Vietnam, Petro Vietnam…etc, government offices, ministries,... cost to Chinese software outsourcing industry is the transparency in regulations and procedures, the huge investment in education for IT workers, their improvement in the protection of IPR as well as good IT infrastructure and software development platforms However, China software industry is desperately seeking for independent core technologies as well as distinctive products In the meantime, China is... outsourcing activities and an overall picture of the prevailing software outsourcing market in Vietnam However, much focus is paid to look into the potentials factors driven the future growth of the industry An in depth analysis on the business of FPT Software a leading company in this field will give insights into how software enterprises in Vietnam work and make the activities pay off Then, the paper... processes in order to ensure the least expense involved and efficiency benefits Software outsourcing is the term given to the business of outsourcing software programming and engineering services to contractors or wholly-owned facilities located in foreign countries with lower labor costs Offshoring versus outsourcing: A lot misunderstandings happen between two terms ‘offshoring’ and outsourcing The... following research questions i) What is software outsourcing, its advantages and disadvantages? ii) What is current situation of software outsourcing in Vietnam and which potentials it possesses? iii) What is FPT Software and how FPT Software can be successful software company? iv) What are the possible solutions to better boost the growth of this industry in Vietnam? V Scope of the study The study mainly... investors by a substantial number of high-end system software, general software In the next few years, China software outsourcing industry aims to obtain the annual growth of about 50%, being far higher than that of the international market The political stability and economic prosperity of China attract overseas clients to search for more software development opportunities in China as China is gaining ... bring evolutionary changes globally in the field of software outsourcing CHAPTER TWO SOFTWARE OUTSOURCING INDUSTRY IN VIETNAM 2.1 Overview 2.1.1 The introduction of Software outsourcing to Vietnam... hot software outsourcing destination Outsourcing in Vietnam is gaining recognition as a low cost quality software maker in Asia Such benefits offered by Vietnam software outsourcing are big labor... Nowadays, software outsourcing is becoming a global trend and Vietnam also strongly engaged in this practice Although software industry is now a young industry in Vietnam, it is growing rapidly