(2) Inside Vietnam’s IT Industry: Current Trends and Future Strategies

Vietnam has overcome challenging global economic conditions, achieving a GDP growth rate of 8% in 2022 (compared to Korea's 2.6%) and an estimated 5% in 2023 (compared to Korea's 1.4%). However, due to a decrease in global demand, the manufacturing sector in Vietnam has experienced a decline in factory utilization, leading to job losses and a more challenging hiring environment compared to 2022.

While Vietnam is commonly perceived as a hub for manufacturing industries, as reflected in the VN30 index focusing on banking, telecommunications, infrastructure, distribution/dairy, and petroleum, it is essential not to overlook the significant development in the IT sector. This is because digital native companies such as Korea's Kakao, Coupang, and Toss exist in Vietnam, and traditional companies are also actively carrying out digital transformation. Key players like VNPay, Zalo Pay, Momo in fintech, Zalo Messenger, Grab, BE vehicle-sharing service, Shopee, and Tiki represent the thriving digital native landscape.

Since the number of smartphone subscribers in Vietnam reaches 101 million (as of June 2023), there is a good environment for digital native companies to operate. The gaming industry, with an estimated 54 million users and a projected annual growth rate of 9%, exemplifies Vietnam's potential in digital entertainment.

The report from the "Vietnam Game Development Alliance" in October 2023 suggests that while the number of game companies is currently around 30, government efforts are being made to increase this number to 150 and foster 400 game startup companies. The focus is on attracting foreign investors and exploring collaboration opportunities between foreign and Vietnamese companies.Notably, many technology-based digital native companies in Vietnam are not yet listed on the stock market. It is anticipated that once they go public, the Vietnamese stock market will experience rapid growth.

As mentioned earlier, the widespread use of smartphones among the population has led to the ubiquity of mobile commerce and mobile app usage. Vietnam's population of over 100 million necessitates considerations for large-scale simultaneous user processing and scalability. Since the technology legacy is relatively small, the biggest characteristic is that there is no hesitation in introducing new technology.When I was in Korea, it was not easy to find developers and engineers based on new technologies such as Container, Kubernetes, and MSA (Micro Service Architecture). While recruiting in Vietnam, I found out that there were many developers with MSA experience, and I was curious about the reason.

I came to understand this by reviewing more than 1,000 resumes and conducting more than 250 interviews for software development center recruitment. This was because there were many companies including Zalo, Zalo Pay, and Momo, have developed services that handle a large number of users simultaneously, adopting architectures based on MSA and Kubernetes.

In light of cases in other countries, companies such as India's Tata Consultancy Services and Infosys are outsourcing IT to Western companies, including the United States, and are acquiring information through domain knowledge and projects in various fields such as manufacturing, distribution, high-tech, finance, and communications. Similar to increasing the added value of the IT sector by creating products and solutions based on.In my opinion, the IT outsourcing sector is leading the current Vietnamese IT industry. Despite the comprehensive services provided by groups like VNG (comparable to Korea's Kakao) in messaging, fintech, and game publishing, other sectors like ride-sharing (Grab), and e-commerce (Shopee, TikTok Shop, Lazada) are dominated by foreign companies.

In the gaming industry, while there are many local studios, they often focus on outsourcing game development and media creation to other countries, such as Korea, Japan, the United States, and China. Nevertheless, Vietnamese IT outsourcing companies exhibit global competitiveness through their technical expertise, relevant experience, domain knowledge, data security, customization capabilities, agile processes, and flexibility.

Prominent among these companies is FPT Software, founded in January 1999, with 22,000 employees as of January 2023. Other notable players include TMA Solutions (founded in 1997), CMC Global (established in 2017), and NTQ Solution (founded in June 2011).

Representatively, FPT Software recognized the shortage of software developers in Japan and established branches in Japan and Singapore in 2005, later opened branches in Paris, France, and the United States in 2008, and opened software delivery centers in Ho Chi Minh and Da Nang. In 2014, they acquired Slovakia's RWE IT company and began overseas business in earnest. In 2016, reached the era of $230M in sales and 10,000 employees. The sales of the Japanese branch alone reach $126 million, showing that the company entered the market in line with market needs and achieved rapid growth. Based on the results created by starting IT outsourcing, the company took advantage of the market's digital transformation momentum and secured customers such as 20 of the Fortune 500 companies, Airbus, Siemens, and UPS in 2017,secured 75 customers. Currently, FPT Japan has a workforce of 1,000(excluding employees working in Vietnam). Currently, it provides Digital Consulting Service, Digital Technology Service, and traditional outsourcing service. It covers most industries, including manufacturing, automobiles, utilities, energy, finance and insurance, communications, media, transportation and transportation, and healthcare. It has branches in 26 countries and operates 59 offices. What is noteworthy is that it owns FPT University, a private university, and has adopted a strategy of conducting classes in English for four years and discovering excellent students who can communicate in English in advance. In the technology area, they provide Digital Transformation, Software Development, System Integration, and IT services.

TMA Solutions began serving Europe, Australia, Singapore, and India in 2004 with 300 engineers. It has branches in the United States(San Jose), Canada(Ottawa), Germany(Munich), Australia(Melbourne), Japan(Tokyo), and Singapore. It specializes in digital technologies in addition to traditional technologies such as big data & analytics, IoT, e-commerce, blockchain, and DevOps. Currently, it has 4,000 employees and provides Custom Software Development, Software QA, Digital Transformation, and Innovation as a Service.

CMC Global, established in 2017, started with 50 employees and currently serves over 30 countries, collaborating strategically with Samsung SDS. They differentiate themselves by offering the BOT (Build, Operate, Transfer) model and providing customized services based on clients' needs.

CMC Global started a little later in 2017 with 50 people, and currently provides services to more than 30 countries and has branches in Japan(Tokyo), Japan(Osaka), and Singapore. It is known that Samsung SDS acquired a 30% stake and is collaborating as a strategic partner in Samsung SDS' overseas IT outsourcing. As a business that provides a BOT(Build, Operate, Transfer) model, CMC directly hires the necessary personnel to meet the needs of the first customer, develops and delivers software according to the customer's request, enhances capabilities, and meets the customer's level. When the appropriate level is reached, they are seeking to differentiate from the top operators by converting the team into employees of the customer company. It is estimated that Samsung SDS has more than 1,000 people dedicated to development and operation. It is listed on the Vietnamese stock market.

NTQ Solutions was founded in 2011 and has branches in Hong Kong, Japan (Tokyo), Korea (Seoul), and Germany. The companyis carrying out projects targeting various industries such as finance, transportation, media & entertainment, etc. They provide services tailored to customer needs, including project-based, staff augmentation, hybrid, and result-oriented. It has high capabilities in the digital transformation area such as cloud, data analytics, RPA, and low code platform, as well as AWS and Azure architect and operation services.

Among Korean software and IT companies, it is difficult to find a company that has overseas customers and conducts business directly in the local area. Among Korean conglomerate affiliates, it is not easy to find those that establish overseas branches and conduct business targeting external customers other than group companies, whereas Vietnamese IT outsourcing companies tend to have overseas customers from the beginning because the domestic market in Vietnam was not large. While conducting IT outsourcing for companies in various industries around the world, developers gain development experience in various domains. For example, when a developer with 3 to 4 years of experience working at FPT Software moves to another company, the level of the developer at the other company increases. The turnover rate of Vietnamese developers is said to be around 22%, so companies that lose developers will immediately experience difficulties, but as good developers move to various companies, the capabilities of those companies will grow together. I have visited FPT Software's Hanoi and Ho Chi Minh campuses in person, and I remember being surprised by their size, facilities, and ongoing projects. I would say it felt like seeing Microsoft's Seattle campus. 

The reason I’m paying attention to IT outsourcing companies is that, similar to how Korean SI companies bundle repetitive or commonly needed functions into products or services while carrying out SI projects, Vietnamese IT outsourcing companies create and possess products and services needed in various domains. As I watched it, I came to believe that it would grow into a software company and a service company. Vietnamese IT outsourcing companies are no longer IT outsourcing companies because they have already succeeded or are changing into companies that provide not only outsourcing but also digital transformation, digital products and services. It is growing beyond Vietnam and Asia to become a global IT company that encompasses not only IT outsourcing but also digital transformation and IT services.
 

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