S3Corp. Tech Blog

The Trans-Pacific Partnership (TPP) is easy-going to provide significant opportunities for Vietnam’s software outsourcing companies, positioning them to compete more effectively with other countries in the Asia Pacific region. The TPP, an extensive trade agreement signed by twelve countries in the Pacific Rim, excludes China and India, which are key competitors for Vietnam. This exclusion means that Vietnam software companies have a clearer path to expand their reach in global markets where China and India traditionally dominate.

The TPP’s Strategic Advantage for Vietnam’s Software Sector

Lam Nguyen Hai Long, CEO of Quang Trung Software City (QTSC) in Ho Chi Minh City, highlighted that the TPP creates an opportunity for Vietnamese software businesses to scale their operations beyond regional borders. According to Long, this new trade pact would give local companies the chance to explore markets that were previously more challenging to access due to the strong competition from China and India. Both of these countries, which are not part of the TPP, have a competitive edge in software outsourcing, yet their absence from the agreement allows Vietnam to gain a stronger foothold in the market.

Long shared his insights during the Vietnam IT Outsourcing Conference (VNITO 2015), which was held in Ho Chi Minh City shortly after the conclusion of the TPP talks. The conference brought together nearly 400 local and international business representatives, and it served as a significant platform to discuss the potential benefits of the TPP for Vietnam’s software outsourcing industry. For Long, the TPP was not just a trade agreement; it represented a strategic advantage for Vietnamese businesses looking to expand into global markets.

Challenges for Vietnamese Software Companies in the TPP Era

Despite the promising opportunities, Long cautioned that Vietnamese software firms must be prepared to navigate strict regulations set out by the TPP, especially those relating to intellectual property (IP) rights. These new rules could present challenges for domestic companies that are accustomed to a more flexible legal framework. The TPP’s focus on IP protection aims to ensure fair competition and safeguard the innovations of businesses within the agreement. However, for local firms that may not be fully equipped to meet these standards, the shift could require significant adjustments in business practices and operational models.

Vietnam’s Growing Competitiveness in Software Outsourcing

Vietnam’s software outsourcing industry has seen rapid growth in recent years, and it has gained recognition as one of the top players in the Asia-Pacific region. According to a report by IT research and advisory firm Gartner, Vietnam has been ranked as a level-one emerging market for software outsourcing, alongside major players like China, India, and Malaysia. This places Vietnam IT outsourcing in a competitive position within the Southeast Asian market.

In 2014, Gartner’s report placed Vietnam among the top ten countries in Asia-Pacific for software outsourcing, and it was ranked in the top thirty worldwide. This achievement reflects the country’s increasing ability to meet the global demand for outsourcing services, particularly in software development. Moreover, Vietnam’s cost-effective labor and growing pool of skilled IT professionals continue to make it an attractive destination for companies seeking outsourcing solutions.

The Role of Regional Competitors and Emerging Markets

Vietnam’s success is further underscored by the rapid growth of other Southeast Asian nations, such as Indonesia, Bangladesh, and Thailand, in the software outsourcing sector. While these countries are growing quickly, Vietnam’s established reputation and strong market positioning give it a distinct edge. The country has managed to carve out a competitive space, aided by its increasingly skilled workforce and favorable business environment. The absence of China and India from the TPP adds another layer of advantage, as Vietnam IT outsourcing will have fewer competitors in this new, trade-facilitated landscape.

Survey Findings on Vietnam’s IT Outsourcing Potential

KPMG Vietnam’s deputy general director, Nguyen Cong Ai, expressed optimism about the development prospects of Vietnam’s IT sector. KPMG conducted a survey involving directors and representatives from large software outsourcing companies in Vietnam. According to Ai, about 70% of the 80 respondents anticipated growth rates of 20% or more in the upcoming year. This positive outlook reflects the confidence that industry leaders have in Vietnam’s ability to continue its upward trajectory in the outsourcing market.

The findings of the survey align with the broader trend of growth in Vietnam’s software outsourcing sector. Many local companies are investing in upgrading their technological capabilities, which allows them to remain competitive in a fast-changing market. The forecasted growth in the sector highlights the potential that the TPP could unlock for Vietnam, as the country looks to further establish itself as a global outsourcing hub.

Vietnam’s Technological Adaptability: A Key Advantage

One of the key strengths of Vietnam software companies, as noted by Hoang Nam Tien, chairman of FPT Software, is their ability to quickly adapt to new technologies and global trends. This flexibility allows companies like FPT Software to implement solutions based on cutting-edge technologies, such as cloud computing, which has become increasingly important in the global market. Tien emphasized that this adaptability has been crucial in FPT Software’s success with international clients, particularly in the area of cloud-based services and solutions.

This quick adaptability to new technologies provides Vietnam software companies with a competitive edge, as they are able to meet the evolving needs of clients in diverse markets. By staying at the forefront of technological advancements, Vietnam’s software firms are positioning themselves to take full advantage of the opportunities created by the TPP and other international trade agreements.

The TPP as a Catalyst for Growth in Vietnam’s Software Outsourcing Industry

In summary, the Trans-Pacific Partnership presents both significant opportunities and challenges for Vietnam’s software outsourcing industry. The exclusion of major competitors like China and India from the trade pact positions Vietnam software outsourcing to expand its market share in the Asia-Pacific region and beyond. However, this growth comes with the responsibility to adhere to stricter rules, particularly around intellectual property rights, which may require local companies to adapt their business practices.

Despite these challenges, the overall outlook for Vietnam’s software outsourcing sector is positive. With its growing reputation, skilled workforce, and ability to rapidly adopt new technologies, Vietnam is well-positioned to leverage the benefits of the TPP. As the country continues to invest in its IT infrastructure and human capital, it is likely to see continued growth in its software outsourcing industry, solidifying its place as a leading player in the global outsourcing market.