Great opportunities for developing outsourcing

Outsourcing means hiring an independent service provider to perform business processes that an organisation may have previously conducted internally when the market for outsourcing is booming worldwide. With large investment inflows and a favourable geographical location, Vietnam’s outsourcing services have huge potential for steady growth in the near future.

Outsourcing services cover many different fields such as accounting, legal services, personnel training, IT, office cleaning, housing and logistics.

IT outsourcing services include image processing, data entry and document digitalisation.

Some business process outsourcing (BPO) and IT outsourcing projects have got off the ground in Vietnam since 2010. Capgemini and Hewlett Packard, as typical cases in point are already and running in HCM City.

According to the Foreign Investment Department under the Ministry of Planning and Investment (MoPI), as of August this year, 672 new investment projects were licensed with total registered capital of $5.52 billion, equal to 56.5 percent of last year’s figure.

US$8.47 billion in foreign direct investment (FDI) has been poured into both newly licensed and capital increased projects in Vietnam over the past eight months, accounting for 66.1 percent of the amount recorded in the same period last year.

CBRE predicts that as an investment destination, Vietnam will continue to attract production projects from multinational groups following the China+1 and Thailand +1 models due to rising production costs in China and recent political instability in Thailand.

Multinational groups are now focused on BPO, IT outsourcing, and R&D services to meet investor requirements, offering the Vietnamese software sector a great chance for further development.

Hieu Le, Head of CBRE Vietnam’s Industry and Forwarding section, says in the face of ever higher input costs in the US and EU, groups will be searching for outsourcing services in third world countries, including Asian nations, with an abundant source of low-cost labour. India and the Philippines currently have the lion’s share of the outsourcing market in Asia.

Vietnam is seen as a potential destination for outsourcing services thanks to encouraging investment policies with incentives for hi-tech projects and corporate income tax breaks.

The Vietnamese government is also considering the possibility of reducing personal income tax for people working in the outsourcing field.

Being fully aware of the potential and market demand, HCM City has greatly increased investment in hi-tech and software parks, with special support packages aimed at creating a competitive investment environment for BPO, IT outsourcing and R&D services.

The HCM City hi-tech zone recently inaugurated the 16,000 m2 Sacom Internet Building designed exclusively for software development businesses, data centres and laboratories.

The high-tech zone has already attracted a number of projects from the US Micro Precision Calibration group and software centres from the US Rockwell Automation group.

They are all offered incentives and support packages for recruiting and training human resources to put their hi-tech projects into operation as quickly as possible.

Gartner, a US IT research and advisory firm with headquarters in Stamford, Connecticut, says BPO is one of the six IT sectors that will see a boom in the near future because it fits in nicely with the current global labour distribution pattern.

The Chinese group XGM Global estimates that total revenue from outsourcing hit approximately $500 billion last year.

According to Global Services and outsourcing consultancy firm Tholons, Hanoi and HCM City are expected to be the most attractive newly emerging outsourcing destinations in the world.

HCM City is just behind four Indian cities and Cebu in the Philippines.