current situation of outsourcing development, a number of favorable factors promoting this industry as well as analysis of outsourcing activities FPT Software.doc

current situation of outsourcing development, a number of favorable factors promoting this industry as well as analysis of outsourcing activities FPT Software

II The significance of the study 2

III Aims of the study 2

IV Research questions 3

V Scope of the study 3

VI Methodology of the study 3

VII Design of the study 4

CHAPTER ONE: LITERATURE REVIEW 5

1.1 The concept of software, outsourcing, and software outsourcing 5

1.1.1 Software definition 5

1.1.2 Outsourcing concept 5

1.1.3 History of software outsourcing 7

1.1.4 Types 7

1.1.5 Advantages of software outsourcing 9

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

2.2 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

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

REFERENCES 70

Information technology (IT) is seen by the Vietnam Government as one ofthe most significant driving forces for the economic development and socialadvancement It steps up the reform process, intensifies the industrialization andmodernization of economic sectors, and strengthens the competitiveness ofbusinesses The development of IT industry, especially the software industry hasbecome a key industry in many developing countries because of the increasingapplication of information technology in business, manufacturing and many othersectors Among them, the software outsourcing stands out as one of the mostprofitable 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 thesoftware outsourcing activities in FPT Software Once we have figured out thepotentials, we can work out some solutions to first maintain and make use of thesefactors and then to promote the Vietnam software status in the international arena.

LIST OF ABBREVIATIONS

AIC : Advancing Technologies & Investment Consultants CorporationAPEC : Asia-Pacific Economic Cooperation

BPO : Business Process Outsourcing

CDIT : C-DIT-Center for Development of Imaging TechnologyCDMA : Code Division Multiple Access

CEIC: Computer and Enterprise Investigations Conference

CMC : Computer Manufacturing Corporation,

CMM : Capability Maturity Model

CMMI : Capability Maturity Model Integration

COSIS : Copernicus Online Service + Information System

ERP :Enterprise Resources PlanningFCG : First Consulting Group

FPT : Financing and Promoting Technology.

GCS : Global CyberSoft, IncGSE : Global System Engineering

HCA : Hochiminh Computer Association

IBM : International Business Machines CorporationIEEE : Institute of Electrical and Electronics EngineersIPR : Intellectual Property Rights

IT : Information Technology

KPO : Knowledge Process Outsourcing

Kyu : Japanese levels of proficiency or experience

NASDAQ : National Association of Securities Dealers Automated QuotationSystem

NASSCOM : National Association of Software and Services Companies

NTT : Nippon Telegraph and TelephoneOSS : Open Source Software

VASC : Vietnam Association of Software and Communication

W3C: The World Wide Web Consortium

W-CDMA : Wideband Code Division Multiple AccessWifi : Wireless Fidelity

WiMAX : Worldwide Interoperability for Microwave AccessWLAN : Wireless Local Area Network

LIST OF CHARTS AND TABLES

Table 1: Top reasons for outsourcing 9Table 2.1: Companies and workers in Vietnam Software Industry (2006 -2007) 16Table 2.2: Structure of the number of companies specified by the number of

Table 2.3: Kearney ranking for offsite service locations 20Table 3: Revenue and staff growth from 2000 – 2008 44

I Rationale

Software outsourcing is the term given to the process of programming andengineering services beyond national boundaries (eDINUS) As the global markettoday is highly competitive and continuously changing, a company must thus focuson both productivity and at the same time cut down costs Thus, a lot of processesthat take up precious resources are being outsourced The three most commonmotives in executing the software outsourcing activities are cost reduction,competition and the utilization of third-country supplies of resources Nowadays,software outsourcing is becoming a global trend and Vietnam also strongly engagedin this practice Although software industry is now a young industry in Vietnam, itis growing rapidly with impressive turnover and increasing contribution to thecountry’s prosperity.

It is the fact that India has long been taking part in these activities, makinghuge success and currently is the world leading outsourcing site with revenue fromoffshore software development of up to US$ 50 billion – as much as the VietnamGDP China is the follower as an attractive hub to the globe and this industry hascontributed to Chinese state budget a significant amount of total revenues fromsoftware products and services Attracted by such visible benefits, other less-developed countries like Malaysia, Philippines, Russia, etc…are attempting tobecome others alternatives to India Software manufacturers worldwide are seekinginternational markets to localize their products to countries with well developed ITsupport infrastructures, favorable demographics and labor costs, competenttechnical education, a favorable government regulatory environment supporting.While the markets are open to many participants, It raises the question that whyVietnam can not join and get one piece of this profitable cake? Vietnam is now just

a 10-year-old player in the game with the bright future ahead to make strides in thisarea.

In order to fully grow up, it is important to this country to look into some ofthe key potentials and strengths to prioritize the development efforts Thegovernment and enterprises should be better aware of what advantageous factorsthey possess, the awaiting opportunities and difficulties as well Only by goodpreparation and coordination, they can best utilize the available resources andrealize the objectives of following in the footsteps of India and become a prominentplayer in the world software outsourcing.

II The significance of the study

The research attempts to provide a background understanding of the softwareoutsourcing activities and an overall picture of the prevailing software outsourcingmarket in Vietnam However, much focus is paid to look into the potentials factorsdriven the future growth of the industry An in depth analysis on the business ofFPT Software a leading company in this field will give insights into how softwareenterprises in Vietnam work and make the activities pay off Then, the paper alsofigures out the opportunities, difficulties and raises the suggestions to promote theindustry development in line with the whole economy.

III Aims of the study

The study is designed with the hope to achieve the following primary aims:To understand about the software outsourcing practice.

To investigate the current situation of software outsourcing development andanalyze some of strengths and a case study of software outsourcing company tohave general picture of the whole industry.

To give recommendations to address some of the key issues and overcomedifficulties to better grow and flourish.

IV Research questions

The above aims of the study can be realized by the following research questionsi) What is software outsourcing, its advantages and disadvantages?

ii) What is current situation of software outsourcing in Vietnam and whichpotentials it possesses?

iii) What is FPT Software and how FPT Software can be successful softwarecompany?

iv) What are the possible solutions to better boost the growth of this industryin Vietnam?

V Scope of the study

The study mainly examines the software outsourcing activities in the world,in Asia and in Vietnam but focuses on the FPT Software in particular Then,suggestions will be recommended to overcome these obstacles and gain strongresults.

VI Methodology of the study

To achieve the set aims, I have approached to a variety of books and articlesregarding on software and software outsourcing Besides, I tried my best to accessFPT Software Company get the internal documents and contact developers who areworking there to obtain the basic knowledge and concept of software outsourcingprocess While searching for the materials, I mostly paid attention to the factors thatunderpin the future development of software industry Based on the thoroughanalysis, suggestions for better stimulating the growth of the industry are also made.In my study, I used a number of business books, various reference books,newspaper, magazines and different sites of Internet as the sources.

VII Design of the study

The study consists of three main parts.

The introduction represents the rationale, the significance, the aims, researchquestions, scopes and methodology of the study

Chapter one provides theoretical background about the software industry andthe software outsourcing activities, the concept, types, advantages anddisadvantages, then the software outsourcing development in the world, in India andChina Chapter two investigates the development of software outsourcing inVietnam and focuses on some of the key factors for development, as well as theopportunities and the challenges Chapter three is aimed to learn about the successstory of software outsourcing in FPT Software (FSoft) Chapter four offers somepossible recommendations to foster the growth of this industry in the next fewyears

The conclusion sums up all the issues addressed and suggests some mainpoints for further research.

CHAPTER ONE

LITERATURE REVIEW

1.1 The concept of software, outsourcing, and software outsourcing

1.1.1 Software definition

Software constitutes (1) instructions (computer programs) that when

implemented provide a desired function and performance, (2) data structuresthat enable the programs to adequately manipulate information, and (3)documents that describe the operation and use of the programs (Pressman, 1997).

Software is a logical element According to Pressman (1997) a softwareproduct has three main characteristics Firstly, software is developed or engineered,not manufactured Secondly, software is not “worn out” It is not susceptible tothe environmental condition which causes hardware to be worn out, but it maydeteriorate Finally, most software is custom – built, rather than being assembledfrom existing components.

Software Process: According to the Institute of Electrical and Electronics

Engineers, software engineering is (1) the application of a systematic, disciplined,

quantifiable approach to the development, operation, and maintenance ofsoftware; that is, the application of engineering to software, and (2) the studyof approaches to application (IEEE, 1993) A software process determinesactivities and organizational procedures to enhance collaboration in thedevelopment team so that a quality product is delivered to the customers (Leszek,2001).

1.1.2 Outsourcing concept

Outsourcing is an information technology term represents the process in

which one company deliver services to another company that one part of the jobs

will be made in house or offsite Since its development, Outsourcing is becoming apopular trend not only in information technology but other industries for servicesthat are seen as essential to run and manage a business In other words, outsourcingis an arrangement in which one company purchases services from another while stillkeeping ownership and ultimate responsibility for the underlying processes Theclients inform their providers what they want and how they want the workperformed So the client can delegate the provider to operate as well as redesignbasic 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-ownedfacilities located in foreign countries with lower labor costs.

Offshoring versus outsourcing: A lot misunderstandings happen between two

terms ‘offshoring’ and ‘outsourcing’ The former refers to taking advantage oflower-cost labor in another country and can be handed off to third-party vendors orremain in-house while the latter targeted one or all processes to only the third-partyvendors The misconception is that offshoring involves outsourcing In fact,outsourcing includes organizations that establish dedicated captive centers of theirown in remote, lower-cost locations.

Software outsourcing is a specialized task providing a creative series of

solutions from concept to implementation Software outsourcing helps acceleratebusiness performance, save time and money, however, this activity requires hugeinvestments and a technique intensive workforce Software outsourcing industrycould also give the companies a chance to develop software at a lower rate, employspecialized labor at a cheaper cost, promote software research and save time This isthe reason why most companies decide to outsource their software developmentactivities to offshore destinations A software company can save about 40% ofexpenses by outsourcing an application development project overseas Theoutsourcing activities comprise the installation of a dynamic database-driven

website or a fully functioning e-commerce website by using creative talent and

technical expertise to satisfy another company's web development needs.Undoubtedly, software outsourcing industry is the most effective way to stretchyour budget More and more organizations nowadays enter into big software

outsourcing contracts to reduce their costs Participating in software outsourcingpractice, companies should focus on the most important and key activities locally

and less strategic activities should be passed to the externally foreign serviceproviders.

1.1.3 History of software outsourcing

Software outsourcing owed its origin to the industrial boom that began in thelate 17th century Manufacturers at that time had soon realized the benefits ofprocessing some parts of the production stages to the third external parties A pointin this case, the America passed the job of making covered wagon and clipper ships'sails to workers in Scotland; England's textile industry flourished in the 1830s asthat work was outsourced to Indian manufacturers Some big empires such as theancient Chinese and the Japanese used to outsource their material extraction jobs totheir conquered nations In recent days, many computer companies in the USA usedto outsource their payroll processing Even though outsourcing existed since thevery early days, but the concept of outsourcing is often blurred Because ithappened on a small scale and was concentrated in some specific regions, such asthe USA and Europe In 1980s, the U.S and Japanese software outsourcing marketsare very bustling, but in 1990s software outsourcing in India, China and EasternEurope rose sharply Now, software outsourcing in Southeast Asia is booming withIndia leading role With $400 billion revenue per year, outsourcing now is anindustry that the world can hardly ignore Globalization, explosive growth ofInternet, and the development of information society in every region of the worldhas made outsourcing an integral part of the world economy.

1.1.4 Types

With regard to function, software can be classified as application s o f t w a r eor system software Because there are so many different uses for computers, thereare correspondingly a large number of different application programs Some ofwhich are of special functions or packages tailored for a specific purpose (e.g.,inventory control or payroll)

Others are general-purpose application programs that are not linked to any specificbusiness task, but support instead general types of information processing Someof the most widely used general-purpose application packages arespreadsheet, management, word processing, desk publishing, and graphics,multimedia.

According to Krishnan (1998) the software industry can be broadlyclassified as custom software, software service and packaged software Customsoftware includes internal system development within an organization.Software service includes the systems integration and systems consultingservices provided by a wide range of organizations, from an independentprogramming consultant to large consulting organizations The packagedsoftware domain includes all software sold as merchantable products.

In terms of the software outsourcing activities, we have other kinds of

classification such as business process outsourcing (BPO) and knowledge processoutsourcing (KPO) BPO is a process in which a company passes some of its in-

house operations/processes to a third party The main implementations include (1)back office outsourcing, which includes internal business functions such as ITdepartments that keep the phones and computers running, accounting works, andhuman resources; and (2) front office outsourcing, which includes customer-relatedservices such as marketing or technical support In which, accounting works and

financial chain outsourcing take bigger part of the pie BPO helps free up a

company’s capital and reduce costs The outsourced operations or processes vary

from manufacturing to customer service to software development Multinationals,or companies from western countries often use BPO.

KPO, on the other hand, involves outsourcing for high-end knowledge work.This includes research and work on intellectual property, equity and finance,analytics, market research and data management, etc It is estimated that, within thenext 10 years, Knowledge Process Outsourcing will be the big trend in the

outsourcing marketplace KPO deals with executing standardized processes,

involves higher-end services which require advanced analytical and technical skills.KPO is often used in such following areas: pharmaceuticals, biotechnology, datasearch, integration and management services, financial services, research andanalytics, technology research, computer-aided simulation and engineering designand professional services, such as business research and legal services

KPO versus BPO: KPO is driven by the depth of knowledge, experience and

judgments while BPO in contrast is more about size, volume and efficiency.

1.1.5 Advantages of software outsourcing

Table 1: Top reasons for outsourcing

Source: 2001 Outsourcing World Summit

Focus on core business activities: From the pie chart above, it shows that the

most notable benefit of software outsourcing is the concentration on the mainbusinesses, accounting for 36% At present, some companies choose to outsource

the less important and secondary activities to the third party while still deal with thecore business activities in-house For example, back office operations are intrinsicto a company’s daily operation and require high maintenance and specializedattention By outsourcing their back office operations businesses can concentrate ontheir core competencies while their back office operations are being managedsmoothly by a specialized third party company.

Cost reduction and productivity increase: Of the same percentage, cost

reduction is the traditional reason for offshore development Low-level tasks suchas coding and software testing can be performed in less-developed countries at costsas low as ten percent of domestic ones Software outsourcing enables a company toget access to skilled and well-trained work force at extremely low cost, thus theoperational cost is minimized In fact most companies can cut their operating coststo half by outsourcing Such an inexpensive and efficient labor can help save uplabor training cost This in turn leads to an increase in productivity, create customersatisfaction as well as cost savings By outsourcing a company saves onrecruitment, training and other human resource costs it would otherwise have tomaintain internally.

Fostering innovation technology: For companies that depend a lot on

technology for the production, investing in new technology is very costly and oftenrisky As the technology development changes day by day, it is difficult to keep upwith latest innovations and solutions Thus just outsourcing to companies that havethe resources, expertise and desire, the providers have chances to continuouslyupdate their technological solutions

Beat Competition: In a fast growing global economy, high-quality services as

well as cheap prices are of the determining factors to retain customers and keepthem loyal to your products Outsourcing in this case can provide the company withbetter service solutions, thereby giving them a better market position or even acompetitive advantage.

1.1.6 Disadvantages and concerns

Socio-economic concerns: The country with political turmoil, unstable

economy, poor infrastructure, and data insecurity is such great risks to theoutsourcing process These related concerns need to be weighed out when you aredeciding to outsource to a third-party company during the vendor selection stage

Infrastructure and operational concerns: Things should be taken into

consideration including the likelihood of whether the country you are going tooutsource can provide sufficient and adequate communication infrastructure,developed disaster recovery capacity, power generation capacity, and nonrenewable resources availability Thus before choosing an offshore location, it isvital for a company to make sure that all the above factors may have the leastnegative effects on your operations

Project related concerns: Project related issues depend wholly on the

provider, the project to be undertaken, the process of the project and the relationshipwith the provider These aspects include potential risks such as expertise andmanpower of provider, reliability and ability to execute the required tasks as agreedand for example whether the provider can fulfill the outsourcing demand up to thecompany’s expectations

1.2 Software Outsourcing Industry in the world, India and China

1.2.1 In the world

Undoubtedly, software outsourcing industry is experiencing a rapid growthglobally In order to survive in today’s competitive world, companies need the bestcombination of cost effective development and best quality services Softwareoutsourcing process is proving to be the best solution for sustaining oneself today.More and more IT companies now are shifting toward overseas services providersbut they are facing tough competition in the market As software outsourcingservices help the companies tap into the global market for best possible combinationof resources that can be utilized and also help these companies better grow up, the

global demand of the software outsourcing services and development process is alsoincreasing at high speed Many IT companies have also undertaken this process astheir core business strategy Being pioneers in the software outsourcing industry,Australia and Unites States have long been making the fortune of this practice bygaining more than 50% to 70% profit from overseas IT services to India Countrieslike India, China, Russia, the Philippines and many other developing nations getinvolved in this high demand service But among this list India is leader for ITservices, while China is on the second place Countries such as Russia, thePhilippines and others are relatively growing and new players for such softwareoverseas services India has numerous factors that make it the ‘spot of attraction’globally for almost all the types of IT services Among which, call-center, BPO(Business Process Outsourcing) and KPO (Knowledge Process Outsourcing) areoften highly demanded services.

1.2.2 In India and China

At present, India & China are the two major software constructions thatoffering the best quality and cost-effective IT services to the world The twocountries are also the close competitors and playing almost equal role for offeringthe overseas developments services in software industry However, each of themhas distinct specialties in particular field, such as India takes the lead in softwareindustry while China holds the first position for offering hardware services Buttogether both of these countries have dominated the whole overseas IT Industrybusiness market and accounts for the majority of the market share in theirspecialized industry

In the map of the Asian software outsourcing, India is a big mark andpossesses the biggest market share for software outsourcing services Some of thekey features for the success of India for software outsourcing development arelower-labor cost, high quality development services, best infrastructure andtelecommunication facility in the country, highly qualified and fluent English

speaking IT professionals and so on With a remarkable investment in software andback-office operations around the US$ 7-7.3 billion by the year ending in March2007 and the current investment figure of the local market is around US$ 6 billion

(NASSCOM), India is putting a high expectation in this lucrative industry The

annual growth of the domestic software market is occupied up to 20-25 per cent inthe coming years Sectors such as banking, finance, retail, healthcare and manyothers are now becoming more and more advanced with the technology growth,which creates chances for software outsourcing companies to serve the country.Currently, IT Companies and IT Industry of India are getting around 80 percent ofthe revenue from United States and Western Companies, but now the competition inthe market is becoming much fiercer, as most of the major software development

companies such as IBM and others are expanding their business possibilities in

other alternative sites outside India.

As mentioned above, China made its success worldwide much more in thehardware rather than software industry China is known as an enormous market forany industries not alone the software industry Being the most populous country inthe world, China is taking the full advantage of this vast labor pool to producecheap products and services The overall growth of Chinese software and systemintegration stood at more than 30% in 2006 The total amount of China softwareoutsourcing now is up to US$ 4.696 billion and China is emerging as the mostcompetitive rival against India Apart from the low labor cost, another driving costto Chinese software outsourcing industry is the transparency in regulations andprocedures, the huge investment in education for IT workers, their improvement inthe protection of IPR as well as good IT infrastructure and software developmentplatforms However, China software industry is desperately seeking for independentcore technologies as well as distinctive products In the meantime, China is knownto many investors by a substantial number of high-end system software, generalsoftware In the next few years, China software outsourcing industry aims to obtainthe annual growth of about 50%, being far higher than that of the international

market The political stability and economic prosperity of China attract overseasclients to search for more software development opportunities in China as China isgaining the competitive advantage as the labor cost here is much lower by 20%-40% than that in its direct competitor – India.

India is regarded as the best destination for software outsourcingdevelopment while Chinese competence in the field of hardware is demanded themost globally The combination of Indian software outsourcing experience andChinese hardware expertise is considered to bring evolutionary changes globally inthe 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-catchingindustry in Vietnam economic ground and it has recently enjoyed a surge in interestand development, receiving much attention and support of the country'sgovernment It can not be denied that Doi Moi process has brought aboutsignificant changes in policies and regulations that boost Vietnam economy togrow very quickly Market economy transformation has made Vietnam acountry of high economic growth rate, stable macroeconomic environment andintegration into the world economy Along with country’s economicdevelopment, IT sector is growing and influencing other sectors of theeconomy while software outsourcing is the most profitable and dynamicsegment In recognition of the importance and benefits that this fresh industrycontributes to the country, Vietnam government has put emphasis on this industryas the leading sector to help Vietnam turn into knowledge – based economy.

In the 90s, software outsourcing in Vietnam was a new concept when theunderdeveloped economy was still facing with mounting difficulties, but now thisindustry is blooming due to relatively strong demand for IT and software productsand services Since then, the industry has continuously growing with sharp risein the number of established software companies and the increasing applicationof software products in state and private owned enterprises in Vietnam Accordingto the latest statistics from Agency for SMEs Development, currently about 300.000small & medium enterprises, 6000 SOEs, nearly 260,000 limited companies applyand install the software programs accounting for 86,5 % However the level and

extent of application vary from enterprises to enterprises A among which thenumber of companies used the ERP service is just around 7% and 1, 1 % forenterprises in Hanoi Vietnam is a viable market but the development of softwareindustry remains at the initial stage Besides, the country’s successful accession toWTO has paved the way to an increase in FDI capital, bringing about a prosperouseconomy.

2.1.2 Key players

Table 2.1: Companies and workers in Vietnam Software Industry (2006-2007)

Source: IT Industry Department, Ministry of Posts and Telematics of Vietnam

From the above chart, there were nearly 400 software companies with 12,000software programmers in 2003 This also reflects a steady rise in the number of bothcompanies and software developers year by year with an equal increase of 100companies with 2000 employees But in the early 2007, the number has sharplyincreased by 750 software firms employing around 35,000 workers However, mostsoftware companies in Vietnam are of small scale with less than 25 developers.These enterprises are made up of stated owned enterprises such as FPTCorporation, AIC, CDIT, VASC, foreign invested enterprises such as PSV, GCS,Silkroad, GlassEgg, PSD, Silverlake, Digitexx, NEC Soft, Fujitsu Soft, SangTao.GSE and private enterprises such as CMC, Harmony, Vietsoft, Elcom, Quantic,Lacviet, Dolsoft, Diginet, TMA…

According to Ministry of Posts and Telematics of Vietnam criteria forclassifying by size, the small local business has from 10 – 20 employees

accounting for over 70 percent, the medium size business has about 50 – 150employees with nearly 20 percent, and a large company is with more than 100employees accounting for less than 10 percent There are only some companies withmore than 200 employees such as FPT, a Vietnam’s largest software producer, has800 programmers, or Tuong Minh & Associates (TMA) – a largest outsourcingcompany – has about 600 engineers The productivity of programmers in 2003reached the level of US$ 10,000 per man – year (HCA, 2004).

Table 2.2: Structure of the number of companies specified by the number ofemployees.

Source: IT Industry Department, Ministry of Posts and Telematics of Vietnam

Currently, Vietnam has around 10 software parks and 20 IT trainingcenters nationwide Ho Chi Minh City and Hanoi seem to be the focus of mostsoftware development and advanced training centre for the country as a whole.Notably, Hoa Lac high-tech Park, 30 kilometer west of Hanoi City, established in1999, Saigon Software Park and Quangt rung Software Park, established in July2000 and March 2001, respectively in Hochiminh City, Danang Software Parkin Danang worth US$ 1.7 million, established in 2000, Cantho Software Park in2002 In addition, the Virtual Software Village project valued at US$ 7 million isnow being implemented to attract software customers and support domesticcompanies in marketing their software.

2.1.3 Principal services

Vietnam software firms supply both domestic and foreign markets byoffering a wide range of services for nearly every economic sector from banknetwork, tax authorities, customs offices, enterprises to government such as:software for enterprise management, which includes ERP solutions, accounting,finance and banking, human resource and wages, customer relationsmanagement…, software for state administration, which covers state budgetmanagement system information exchange system among agencies of taxation- statetreasury- finance, monitoring, system to receive tax documents, spending unit codeprovision system, e-payment for the state treasury tax declaration support system…software solutions for website and e-commerce application, for architecture andconstruction, healthcare and education In addition, they also provide the managedservices such as IT infrastructure, network, server, database, technology support andcustom application management Moreover, Vietnam is a big vendor for foreign ITcompanies in terms of processing some stages of the whole projects such as thevideo game development, web programming and content development, 3DAnimation…

2.1.4 Markets for Vietnam software outsourcing industry

For the local market, we are aiming to reach a vast number of SOEs andSMEs, multi-national companies, government agencies, ministries and internationaland non-profit organizations operating in Vietnam who has demand for theenterprise software solution to increase the productivity For instance, in thebanking and finance area, a list of state owned, joint-stock, commercial banks andsecurities centers installed the Smartbank and capital management subsystemsolution such as Vietnam DevelopmentBank, The State Bank of Vietnam, Bank forForeign Trade of Vietnam (Vietcombank), Hanoi Securities Trading Center, HCMSecurities Trading Center, Bao Viet Securities Company, Saigon Securities Inc.Other customers including Vietnam airlines, Electricity of Vietnam, PetroVietnam…etc, government offices, ministries, people’s committee and people’s

council in provinces and international organizations such as World Bank, UnitedNations Development Program, World Health Organization (WHO), United NationsChildren’s Fund (UNICEF) which are using at least one suitable software solutionto work properly and run smoothly And this increasing number of these enterprisesand institutions is a good signal to the software industry development.

For the external markets, the U.S and Japan remain Vietnam’s keyoutsourcing markets Recently dozens of Japanese companies including UnicoVietnam, Ichi Corporation, Individual Systems, Aplis and Fusione have moved intoVietnam, with a view to expanding their software outsourcing in the future.According to statistics of the IT Industry Department, the US is a big softwareexporter but its import of software accounts for 30% of the total spending forsoftware of the world and its payment for outsourcing is approximately US$ 20billion Meanwhile, Japan accounts for 20% and 17 western European countriesaccount for 23% of the spending on software of the world and the trend of movingsoftware outsourcing to developing countries like India, China and Eastern Europe,and more recently, to Association of Southeast Asian Nations (ASEAN) countries.

2.1.5 Achievements

Vietnam’s software outsourcing industry is growing, with annual averagegrowth rate of around 40% in the past five years In 2007, the software industryyielded more than US$ 350 million, including US$ 110 million from exports.Export turnover from software is a main source to the industry total revenue as theexport value can be much bigger compared to domestic market size The year 2003was a successful one for software outsourcing in Vietnam with exportsrevenue US$ 30 million (HCA, 2004) In three consecutive years from 2003 -2005, the turnover of software outsourcing for export have had the growth rateof 50% In 2005, this number reached US$ 70 million (HCA, 2006).

Average annual productivity varies from US$ 7,500 to 10,000 per softwarelabor in domestic software enterprises Productivity is higher in enterprises thatprovide outsourcing for foreign companies, estimated at US$ 11,000 to 15,000.Among Vietnam’s software companies, there are about 15 companies that have won

the quality certificate ISO-9000, and there is only one that has won the highestquality rating of Capability Maturity Model (CMM) – Level 51 Two others havewon CMM-4, and around 20 software companies are now striving to apply forCMM-3 or CMM-4 The Ministry of Post & Telematics, together with the VietnamSoftware Association (VINASA), has taken steps to increase quality standards forthe industry.

Vietnam is rapidly emerging as one of the top choices for Japanese ITbusinesses in software outsourcing, after India and China The Corporation forFinancing and Promoting Technology (FPT) was top of the list for softwareexports in 2004 of US$ 3.05 million (HCA, 2004) However, export revenue ismainly from outsourcing and sub-contracting activities while revenues fromsoftware package are limited With such impressive turnover, Vietnam ranked the20th of high potential software and service outsourcing countries in the worldbecause of many advantages, and could become a major software outsourcingdestination in the world with annual average growth of around 40% in the pastyears In terms of the Knowledge Index and the Knowledge Economic IndexVietnam ranks 95th and 99th out of 132 surveyed countries around the world), 14places higher than the previous year (Vietnam's IT industry in 2007 – HCA).

Table 2.3: Kearney ranking for offsite service locations

Source: A.T Kearney Global Service

These impressive results indicate the rapid development of the country'ssoftware outsourcing industry over the past years The software outsourcing marketexpanded by 22.6 percent in 2006, surpassing the US$ 1 billion benchmark, ofwhich, software and services increased by 43.9 percent One of the notable things isthat Internet use is highly increasing in Vietnam with a growth rate of 25 percent.This places the country 17th in terms of global Internet usage The number ofInternet users in Vietnam accounted for 20 percent of the country's population ofmore than 80 million.

The industry strives to maintain a growth rate of 35-40% per year from nowto 2010, with revenue ranging from US$ 800 million to US$ 1 billion, makingVietnam one of the top 15 software outsourcing and exporting nations The softwareoutsourcing industry represents one of Vietnam’s greatest growing potential sectors.A recent market study by a major private-sector research organization suggestedthat during the period from 2004-2008, Vietnam’s spending on this sector ranksamong the top ten in the world.

2.1.6 Main objectives

In the period 2005-2010, Vietnam software industry will occupy thedomestic market, and will be recognized by global market, especially in terms ofsoftware outsourcing Much attention will be paid to train a large number of highlyskilled software developers and professionals to embrace more big projects ITtraining systems need to reach the international level both in professional skills andcommunication and language skills A large software outsourcing labor force willbe exported to foreign markets (Japan and Korea) Violations of IntellectualProperty Rights in software will be reduced to fewer than 70% The annual growthrate of software industry will reach about 35-40% in the 2006-2008 period and thenstay at 25-30% in later years.

2.2 Prospects of Vietnam software outsourcing

Vietnam has gained initially encouraging results when just joined the worldoutsourcing market for over a decade This is a true indication of the countrypotentials and capacity to go further and make firmer steps in capturing biggermarket Vietnam was chosen by many strategic partners in serving their business inthe field of software, web design, website, application testing and so on In thisrespect, India and China are well known as the industry leaders for outsourcingsoftware development Despite their huge market share in offshore development,

Vietnam is quickly emerging as a 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 force, lowcost, sound and secure business environment in terms of economic, political,religious and legal conditions; coupled with the high praise from the big partnersand support from the government These factors will be carefully examined in theorder of importance to find out why they are the fostering factors and what thegrowing factors for higher acceleration should be Vietnam may be the nextsoftware industry success story in Asia, highlighting the growing competition inAsia in this knowledge- intensive sector While it is far too soon to suggest Vietnamposes a threat to the positions of regional powerhouses like India and Singapore, itslow wage costs for skilled software developers are helping it make inroads into themarket.

2.2.1 Appealing factors2.2.1.1 Strong labor pool

It can be said that, low cost and abundant labor force are still the twocompelling factors that attract greatly foreign investors to locate their productionsites in Vietnam These two factors are of among the leading comparativeadvantages to set Vietnam out from other Asian nations, enabling the country to bethe top list place of investment in the region As the nature of this industry requires

a huge technical human resource, then if outsourcing technology products andservices make good business sense, it will be better to take a close look at Vietnam.Vietnam possesses a population of 85 millions people; over 65% of the populationis under the age of 30 or younger compared to the UK’s rate of 23 per cent belowthe age of 30 And, 83 per cent of graduates study science – compared with just 11per cent in the UK In Vietnam, there are about 20,000 technical engineersgraduated each year This dynamic generation provides a great pool of skilledsoftware developers required to meet the growing demand of outsourcing

development The youthful energy of Vietnam is apparent in the eagerness of

high-school and university students to learn computer science and learn very fast.Moreover, the workforce is underemployed and very easy to train A joint reportissued by Oracle and IBM stated that Vietnamese could be trained twice as quicklyas their counterparts in most other Asian countries With such a dynamic andyouthful population trainable at low costs, Vietnam is greatly capable of fueling itstechnology sector with skilled professionals Moreover, Vietnam is also a country of97% literacy rate – among the world’s highest and 83 per cent of all graduates arescience-based At present, there is a pool of around 80,000 IT graduates, with 9,000added per year and a highly stable workforce: less than 10% turnover rate forsoftware industry and less than 5% for BPO & Content industry (compare to 10% inIndia) As a statement to the quality of the talent, Vietnamese programmers wereranked second out of more than 60 nations in the 1999 International SoftwareOlympiad (Schmid, 2000).

As mentioned above, the large population indicates that Vietnam has strongpotential in both market supply and demand, in other words, a probable market.Furthermore, low production costs (Vietnamese software professionals are abouthalf the cost of Indian equivalent software professionals and have much higherretention rates), coupled with the government’s obvious support and favorableincentives make Vietnam one of the most competitive markets for IT investors Thelabor force also has much lower turnover and much higher stability than do those of

most other countries that are active in outsourcing It can be highlighted that“significantly low attrition rate” and “strong labor pool” as two other reasons for thecountry’s presence in its list of the top 50 outsourcing cities.

2.2.1.2 Price

Obviously money determines the enterprise’s decision to produce andexpand One of the main reasons of outsourcing is to save money, so naturally youwill be interested in the price quoted by the offshore provider One of the costbenefit to those who enter the outsourcing contracts is that they just care about thefinal results and keep control on the overall process, leaving the all the costs such aslabor, operation, recruitment and insurance to the other parties of the contracts Butit is critical to know exactly what that price includes Costs for labor and overheadare both important components of the total price Before doing direct comparisonsof outsourcing providers’ labor costs, you should consider how much overhead youwill incur in managing the outsourced work.

Labor costs: Labor refers to who exactly will be working on your project.

You should take into considerations these workers’ professional experience,education, and technical expertise Also, make sure that there are enough workersavailable and loyal to work on your projects, so that your work won’t be sloweddown by labor bottlenecks Find out what kind of turnover rate the offshoreprovider has, because if the turnover rate is high, a lot of time will be wasted on re-training and transferring information to new offshore employees

Vietnam has lower labor cost than most other outsourcing destinations due tothe low minimum wage level and competition among numerous IT companiesVietnam can offer a competitive cost for outsourcing Salaries paid in Vietnam areover 30% less expensive for both IT outsourcing and business process outsourcing(BPO) than India (Global Services, August 2006) Developing software in Vietnamis 90% cheaper than in the United States and between one third and one sevenththan developing in India, which means a significant cost savings for your company.

According to the figures presented by U.S Department of Labor, the annualminimum wage for outsourcing industry in the United States in 2006 was US$31,300 Meanwhile, latest statistics in 2008 tell that a typical outsourcing firm inVietnam pays its employee around US$ 2000 - 3,000 per year And a Vietnamesesoftware engineer earns between $3,500 and $13,000 while in India, the pay rangeis $7,000 to $30,000, while valley engineers can earn between $79,000 and$125,000 Hence, this huge gap in terms of payment between industrialized anddeveloping nations can result in a significant reduction in firms’ personnel costs.Even compared to other outsourcing destinations, Vietnam’s labor costs areattractive According to an article of Global Services in August of 2006, Vietnam’slabor cost for outsourcing IT functions and business processes are half the cost ofIndian rivals, and also less than those of countries in Eastern Europe That is whyHochiminh City is ranked among the top 50 outsourcing cities in the world, due toits having “one of the lowest production costs,” among other reasons.

Production costs: One of the renowned outsourcing intermediary claimed

that outsourcing software outsourcing activities in Vietnam costs 50% less than therivals from India Cheap labor, low rental in land and infrastructure together withtax incentive have reduced the overhead costs In addition, it is estimated thatoutsourcing per person in Vietnam is only $20,000 per person compared to $40,000per person in India (Anderson, 2006) These figures are convincing enough to placeVietnam as the top future contender for offshore development projects As Indiancompanies enter the maturing cycle, and the overload of outsourcing constructionthere, the outsourcing costs in India are most likely to increase in the coming years.Outsourcing to Vietnam then makes a lot of sense for companies looking for the

most cost effective business solutions.2.2.1.3 Socio-Economic factors

Doing business in other countries involves navigating tricky political andlegal issues and operating in a stable and secure environment can lessen the risks In

facts, associated risks can greatly be reduced in outsourcing by choosing to workwith an offshore provider that is located in a country that has high economic, ethnic,religious, and political stability If the offshore provider is located in a country withsignificant instability and conflict, his project may proceed more slowly or come toa complete halt If the country unexpectedly ends up with new leadership, you mayfind that the business favorable policies that originally attracted you to the countrysuddenly change and become dangers to foreign investment Common outsourcingdestinations in Asia-Pacific are often annoyed by instability For example, the 2006coup in Thailand, the Kashmir conflicts between Pakistan and India, and the SriLankan military’s struggles against the Liberation tigers of Tamil Elam, butfortunately these chaos and upheaval do not happen in Vietnam In fact, Vietnam isa very stable country, which creates a sound business environment for outsourcing.

Economic: From an economic viewpoint, Vietnam has a strong and robust

economy The country economy is healthy and growing rapidly reflected via itsgross domestic product (GDP) growth rate at 7.5% over the past ten years.Vietnam’s GDP growth rate in 2007 reached 8.5 percent, second fastest in Asia, andforeign investment in the country also increased dramatically to a record high ofover US$ 20 billion, which is a 38.4% year- on –year increase Vietnam now is thesecond fastest GDP growth in all of Asia after China with FDI (foreign directinvestment) was almost US$ 5 billion in 2005, which makes a favorable comparisonwith that of other countries that are popular destinations for outsourcing work.Today, Vietnam has one of the most enviable economic growth rates in the world.The Vietnamese government has proven to be both stable and secure and is nowwidely recognized as legitimate by many worlds’ major trading nations Relativelypositive relations with neighboring countries have been promoted In an age ofheightened security concerns, it was noteworthy that in 2002 Vietnam ranked as thesafest nation in Asia for US travelers It offers great incentives in the software

industry in order to capitalize on globalization.

Ethnic/Religious: Religion is one of the market indicators influencing the

investment decision as human values originate from religious beliefs Differentreligions take different views of work, life and other aspects Understanding whythey do may help us understand why companies from certain cultures are morecompetitive in the global marketplace than those from other cultures Knowing howreligion affects business practices is especially important in countries with religiousgovernment as religion represents ethnic and religious groups in the country andwhether they are tolerant or intolerant of one another It is crucial to find outwhether this country has a history of ethnic unrest and or religious conflict Because95% of Vietnam’s population is ethnically Vietnamese and more than 80% of thecitizens do not identify themselves with any particular religion, largely because ofthis, Vietnam has none of the social and religious conflicts that arise in otheroutsourcing destinations A 2003 UNDP (United Nations Development Program)study claimed that Vietnam had one of the most secure environments forinvestment, given the conflicts in Iraq and the surrounding region Likewise,Vietnam was ranked in the safest among the 14 countries in the Asia-Pacific Regionby the Political and Economic Risk Consultancy in Hong Kong (Berth of a Nationin Time, autumn 2002).

Political: As political and legal matters can greatly affects the conduct of

international business, it is pivotal to understand the local political situation wherethe offshore provider is located Politics can positively or adversely affects thebusiness’s performance, for example, the government that holds the power with itsown ruling regime, its relationship with the neighboring countries as well as therecord of any rebellions or political turmoil can help enterprises anticipate itsbusiness future The current government has taken the power since Vietnam’s 1975reunification, meaning that there have been more than 30 years of political stabilityin the country The last major conflict with a neighboring country was almost 30years ago, in 1978 Since then, Vietnam has enjoyed political stability over the last30 years No major conflicts or tensions with its neighbors have been recorded One

of the manifestations is the event of two American presidents - Bill Clinton duringhis presidency and in 2006, and George W Bush during the APEC summit visitingthe country, meeting with several top officials including the president, primeminister, and Communist Party leaders.

2.2.1.4 Business Environment

IT-related work requires the exchange of information and intellectualproperty You need to know what policies the country has in place to protect yourcompany’s know-how and intellectual property rights As such, it is essential toknow whether the country have appropriate laws regarding economic development,taxes, and the labor force and the way and extent to which these laws are enforced.All of these issues are very important in fostering a favorable business environment.Vietnam has had a free market since its centrally-planned economy was reformedthrough “Doi Moi” twenty years ago Today, Vietnam government creates a warmand welcoming business environment for foreign investment Vietnam economicscenes have changed a lot in a positive ways since this country has successaccession to the World Trade Organization Vietnam’s economic growth topped 8%last year, foreign direct investment rose steeply to over $6 billion, and exportssurged by over 20% More must surely follow with the new laws, administrativemeasures, and commitments on goods and services that are in Vietnam’smembership package Vietnam is also making great effort in protecting intellectualproperty rights and since 2002 has largely been complying with the guidelinesestablished in the WTO Trade-Related Aspects of Intellectual Property (TRIP).When Vietnam became a WTO member, it agreed to comply with TRIPimmediately, without a transitional period The country is expected to achieve fullTRIP compliance soon, thanks to legislation that was passed in 2006 Thislegislation prompted the U.S to laud the country for its “extensive revisions andupdating of its intellectual property laws.

2.2.1.5 Language

Language plays a significant role in international business and especiallyimportant in the software outsourcing process You must be able to communicatewith the offshore service provider – not only with the top managers, but also withthe workers who are involved with your project on a daily basis Language skills inVietnam still lag behind the rich pool of native speakers in outsourcing hotspots ofIndia, Ireland and Canada However, the Vietnamese benefit from an alphabet basedon Roman characters and a historical legacy that has created a greater awareness ofFrench and English than many East Asian rivals Young Vietnamese with betterEnglish communication have already overcome the language barrier that wasbelieved as a weakness earlier And these are just a few of the clear signs thatVietnamese society is becoming more educated, more technically capable, and moreglobally competitive Unlike many Asian languages, Vietnamese uses the Latinalphabet, just as English does, which makes it relatively easy for Vietnamesespeakers to learn English English is the second most popular language in thecountry, and is a compulsory subject in many educational levels from primary tocollege; hence the majority of Vietnams’ college graduates have high proficiency inEnglish Consequently, most IT workers in Vietnam are able to communicate easilywith U.S companies in English when completing outsourcing projects.

2.2.1.6 Modern infrastructure

A series of reforms started in Vietnam 20 years ago resulted incomprehensive accomplishments in all aspects of life Some multilateral tradeagreements and foreign investments have directly or indirectly led to changes in thetelecommunications and computing infrastructure - jumping directly into advancedfiber optic cabling and wireless capabilities More and more high-technologyproduction from the globally largest corporations has moved to Vietnam, namely,the US$ 1 billion investments from Intel Other multi-national companies such asIBM, Hewlett-Packard, and Canon etc have well established contracts

manufacturing computers, printers, and components These companies are inVietnam because of the quality of the products produced here.

2.2.1.7 Good environment

The country has experienced no political conflicts, no religious and ethnicconflicts (Nearly 95% of the country is ethnic Vietnamese and over 80% of thepopulation has no declared religion) Stable and strong economic growth, especiallyin recent years (GDP growth has averaged 7.4% over the past six years; WTOmembership, good government policies: pro-business, large investment in IT areas

Some key international agreements and government policies have greatlypaved the way for a prosperous economic future The summer of 2000 was ahistoric period for Vietnam with the inauguration of the first stock exchanges in HoChi Minh City and Hanoi in June, and in July, Vietnam and the US signed theBilateral Trade Agreement, spurring investment, trade and technology transferbetween the two countries Another proof to the government commitment to thegrowth of their nation’s economy and businesses is their participation in the AsianFree Trade Agreement, which brings about a new era of technology exchangebetween Vietnam and its Asian neighbors.

2.2.2 Highly appreciated by the big software outsourcing service providers

Being chosen as the new viable outsourcing market has created greatmomentum for Vietnam to widen its software outsourcing prospects At present,most software companies in Vietnam are small-sized, with exception of a few mid-sized enterprises Despite this fact Vietnam has been quite successful in attractingnumerous major big corporate and government names to outsource softwareprojects to Vietnam The trust represents in the big outsourcing contracts, projectsand huge investment in training and building premises Top names investing inVietnamese IT such as International Data Group, Intel and Microsoft have helpedspread Vietnam’s IT potential all over the world If played properly, these contractscould initiate to even bigger software outsourcing contracts

Over the past few years Vietnam has increasingly been host to multinationalslooking to outsource software development such as Anheuser Busch, Bayer, BP,Cisco, Critical Path, Daiwa, Fuji, IBM, Merrill Lynch, Nortel Networks, NTT, theState of Oklahoma and Sony All have outsourced software projects to Vietnameither directly or through third-party subcontract Over the past six months, twoVietnamese firms have won major software contracts with NASDAQ listed USfirms, beating out competition from Indian and Australian software companies todesign leading-edge applications These came from a decision in the last minute bythe government of the US state of Oklahoma to choose a Vietnamese-based partner,SilkRoad Systems, to outsource the development of its trade website This decisionis exceptional because the US public sector has traditionally outsourced to Indiandevelopers Major players like Cisco, IBM and Canada’s Nortel Networks havebeen exploiting Vietnam’s inexpensive software outsourcing resources for someyears In particular, Nortel Networks has been working with a Vietnamesedeveloper since 1997 In spite of small scale business, their presence has promptedother multinationals like Daiwa, Fuji, NTT and Merrill Lynch to outsource softwareprojects to Vietnam.

Many Japanese companies are choosing to outsource much of their IT workto Vietnam According to Global Services, as much as 10% of Japan’s softwareoutsourcing may be processed in Vietnam by the year 2010 Intel is also heavilyreliant on Vietnam to meet its outsourcing needs In October of 2006, Intel Capital,the unit involved in venture capital for the Intel Corporation, announced a $3.5million investment in FPT, Vietnam’s largest software company, located in Hanoi.Earlier in that same year, Intel stated that it was going to build a factory for chipassembly and testing with a price tag of $300 million.

So far, significant reforms, including a bilateral trade agreement with the USand the promise of World Trade Organization membership in 2006, have paved theway for significant investments in education, transportation, housing, andtechnology looking for capable off-shore partners and foreign investments, now

exceeding $30 billion Many world leading companies are already pouring billion ofdollars for outsourcing and investment on Vietnam: IBM, Citibank, CMG, NTT,Sanyo, Sony, Lucent, Nortel, etc ; HSBC plans to set up 2000 heads center(moving from China); Intel is building 600 million chip factory where 1.200 peoplewill work A lot have shown their trust in a country with a growing and youthful ITworkforce, low costs and high aspirations to develop its software services; Vietnamis a natural offshore location and has all the ingredients to become the leadingmarket choice in the next few years.

Further proof of Vietnam's potential is the high recognition of IT status thecountry has received from some of IT biggest names In March, Intel ChairmanCraig Barrett announced their plans for a $600 million chip testing and assemblyplant Intel subsequently bumped up the figure to $1 billion The presence of theseleading international IT companies indicates the growth potential of the localmarketplace and has a positive impact on the number of trained experiencedtechnical employees.

2.2.3 Increasing government support

The nation’s communist government once shut its economic and politicaldoors to other countries faced tremendous difficulties in the liberalization effort.However, the nation is clearly moving to the market economy and maturing inunderstand about the world’s market Since the decree to build and develop thecountry’s software industry was signed by the Prime Minister Phan Van Khai in2000, the local and foreign enterprises have enjoyed full financial incentivespackages The selection of software as a key industry for development withgovernment support and commitment has made other industries in Vietnam envy ofattention it receives from the government The strongest examples of active supportfrom government indicating by a nationwide strategy for software developmentindustry, software development investment stimulating and encouragement policy,and tax incentive commitment …etc

Moreover, the government has applied most preferential treatments tosoftware enterprises, especially tax rates (Nguyen Duong, 2004), and manydecrees related to the policy of developing Information technology have beenissued More importantly, software outsourcing is currently the most protectedeconomic sector in Vietnam It currently enjoys many favors including tax andinvestment incentives, such as low corporate tax rates, exemption from value addedtax, exemption on tariff for imported materials that are directly used for theproduction of software, etc This has created potential prospects for foreigninvestors to thrive in this high speed growth market.

Vietnam Government has aimed at building software industry the leadingsector with high growth rate Officially, the government has shown its commitmentto develop Vietnam into a main software exporter in the region via significantinvestments in software promotion projects A number of software parks havebeen built and put into operation by municipal, provincial authorities and relevantgovernment agencies They offer tax exemptions and other incentives to softwareand related services firms These decrees continue to strengthen the ITmanagement of the government and to reduce the increasing piracy rate

These factors make Vietnamese one of the best nations that is globallycompetitive and technically advanced Companies have started to capture this great

opportunity of thriving to Vietnam with low cost and exceptional quality The

world history of outsourcing has a new chapter to Vietnam and this country markitself as a perfect fit to any software outsourcing projects and process For all thereasons described above, Vietnam is clearly an excellent choice for meeting anybusiness’ outsourcing needs Vietnam is going to win the outsourcing game.

2.3 Situation

The world software industry is growing rapidly with the increase in thenumber of companies prepared to use offshore providers by 50 per cent in the nextdecade Existing companies utilizing outsourcing providers expect to double their