ITO Companies in Vietnam

Vietnam’s IT services market is on the rise, and the numbers speak for themselves. According to Statista, the sector is expected to hit $2.21 billion in revenue by 2025, with IT outsourcing leading the charge at $792.63 million. While the country does not enjoy the same clout in ITO as more prolific places such as, India, Poland or the Philippines the interest keeps growing. This is further fueled by a strong local enterprise scene. International investors are establishing outsourcing companies with sales offices abroad. Furthermore, MNCs are opening development centers in Vietnam. This blog article, will take a look at the country's ITO scene and German ITO operations. The aim is to supports companies looking for outsourcing partners or those planning to invest into offshoring operations Vietnam.

Disclaimer: We are no experts on IT, so please forgive us any misnomers or things we forgot. If you see any any need for corrections you may let us know in the comments.

„ITO“ is an abbreviation for “Information Technology Offshoring/Outsourcing”. While the term “Information Technology” is broadly utilized, “Offshoring” and “Outsourcing” may need additional explanation. According to “Gabler”, Offshoring describes “the relocation of internal operations abroad”. For example: An enterprise establishes international subsidiaries fulfilling certain tasks for the parent company. In contrast, Outsourcing is defined by Gabler as “the transfer of value-add activities of an enterprise to external suppliers”. For example: A company chooses to use a contractor to take over some of its programming or engineering work.

For most investors into IT offshoring, a subsidiary abroad is an extension of their operations at home. However, in some cases business models are built around offshoring: In these cases, the “headquarter” in the company’s origin country/region only as an administrative and sales function while the “production” is wholly transferred abroad.

Overview of ITO forms

Advantages of ITO:

With ITO, companies may gain access to labour resources they cannot obtain at home. Furthermore, having multiple sourcing locations worldwide can make a business more resilient to external shocks. Also, having a worldwide presence may improve responsiveness to customer queries.

Disadvantages of ITO:

On the downside, ITO generally increases the complexity of a company’s operations mainly because of its cross-border nature and the need for increased coordination. For outsourcing, the protection of intellectual property may be a hurdle.

Outsourcing Companies

Vietnam is one of the top software outsourcing destinations in Southeast Asia, according to the Global Software Outsourcing Trends and Rates Guide. The country's digital technology sector is home to approximately 70,000 companies, according to Incorp, while Make It Vietnam estimates around 65,000 firms. Among these, an estimated 5,097 specialize in hardware, while 18,162 focus on software and IT services.

A true whale in this pond is “FPT Software” with + 30,000 employees. This probably is the biggest IT company in the country with several locations across Vietnam and internationally (e.g. FPT operates an engineering office in the city of Essen in Western Germany). Apart from ITO, FPT is also developing its own software platforms and services. To nurture future talent the company is running its own educational organization, wit more than 100,000 full time students. FPT with its huge operations and favourable public image surely is a competitor for talent that every incoming ITO investor must have on the radar.

Other big ITO companies are CMC Global (3,000+ certified engineers), TMA Solutions (4,000 employees) and Rikkeisoft (1,600) . Apart from these “giants” most of the outsourcing enterprises are small or mid-sized with an average of roughly 100 employees. The typical ITO firm might be much smaller because our sample does hardly include any startups or freelancers.

As a starting point, the companies listed in Clutch were used to analyze the IT landscape in Vietnam. Within the sample, a total of 261 companies were listed. The dominant services include Custom Software Development, Mobile App Development, and Web Development. Additionally, other notable services are IT Staff Augmentation, Cloud Consulting, and Blockchain. Beyond this sample, there are also many companies active in IT security and AI development. However, it remains unclear whether they are targeting overseas markets as 'ITO firms.'

Prices for these services mostly lie between 25 and 50 USD/hour, but they can go up to 200 USD/hour.

German ITO Companies

There are currently 22 ITO companies from Germany in Vietnam (only three of them are in aforementioned sample). They are employing at least 3,400 people; almost 10% of all “German” staff in Vietnam.

Most of these German ITO companies are offering outsourcing services to international external clients. Their “production” is based in Vietnam (and partly other countries) and only run sales/admin offices in Germany and other world regions. However, two companies, namely Hella and Bosch, are operating classic offshore activities in Vietnam. Here, they have engineering centers supplying their global production network with technical solutions.

Digi-Texx (estimated 500 employees in ITO) and MGM Technologies (300 employees) are among the largest ITO companies. However, both are overshadowed by Bosch, which has the aim to expand its software workforce to 6,000 by 2025. This growth is behind Vietnam’s updated legal framework, which promotes high-tech investments in areas such as semiconductors, AI, and software development. Excluding Bosch, German ITO investors employ an average of 110 people.

Many of these companies have entered the Vietnamese market recently, with most operating for less than 10 years, as 12 out of 22 firms received investment licenses after 2017.

Investment in IT outsourcing is expanding beyond traditional destinations, with many adopting the “China + 1” model. Vietnam stands out with its 100% foreign ownership policy and tax benefits making it an attractive destination for future market entries.

Overview: Selection of German ITO providers in Vietnam

Conclusion

And there you have it—Vietnamese ITO is gaining in popularity. The local industry is positioned well with its able, willing, and not-too-expensive workforce, its open legal environment, and its market traction. Besides the above-mentioned German companies, many other international firms, such as Microsoft, IBM, and Samsung, have set up offshoring (R&D) operations in Vietnam. At the same time, the Vietnam National Committee on Digital Transformation has laid the groundwork for the country’s digital transformation, focusing on advancing the digital economy through three main pillars: Information and Communications Technology (ICT), the digitalization of industries, and the management and utilization of digital data.

In a nutshell: ITO in Vietnam (based on research above)

Feel free letting us know if you need support with establishing an IT offshoring operation or if you need to find an outsourcing partner by sending a mail to info@vietnam.ahk.de.