Rising presence of foreign software firms a positive sign

A visitor at an IT exhibition in Ho Chi Minh City walks past an advertisement for Vietnamese dictionary software Lac Viet. The rising presence of foreign companies may help create a good environment for IT development in Vietnam, industry insiders say.

More and more global software companies are setting up shop in Vietnam - a positive trend for the country’s information technology (IT) sector, industry insiders say.

On May 11, German-based Bosch Group, a leading global supplier of IT services, opened a center focusing on embedded software and mechanical engineering services in Ho Chi Minh City.

“With this center, Vietnam is the first country in the world where Bosch operates with a closed (end-to-end) cycle, which includes manufacture, trading, and research and development,” said Vo Quang Hue city, general director of Robert Bosch Vietnam.

The US$4.5-million center, located at the Saigon High-tech Park in District 9, is expected to employ around 500 local engineers by 2015.

Hue said the Bosch Group has seen many development opportunities in the Asia-Pacific region and setting up business in Vietnam was part of the plan.

Last year, Bosch’s technology and services centers in the region generated 11 billion euros ($15.6 billion) of its total sales of 47.3 billion euros ($67.1 billion).

Other big IT names like HP, Aricent, Sigma Designs, Texas Instruments, and Simax Global Services also opened up in Vietnam early this year.

“Thanks to young human resources and cheap labor costs, Vietnam is currently an attractive destination for software businesses,” said Nguyen Tung Giang, an executive with IBM Vietnam.

Nguyen Quoc Hung, chairman of software testing firm Logigear, said the rising presence of foreign companies in Vietnam may lead to competition with local entrepreneurs in terms of human resources at first.

However, in the long term, the penetration of foreign firms will create a good environment for IT development in Vietnam, he said.

Skilled labor

While there are more than 1,000 software businesses operating in Vietnam, only a few have more than 1,000 employees, making it hard for them to win big, important outsourcing contracts.

The human resources issue will get tougher to deal with as outsourcing orders increase sharply.

The global software market, especially in North America and Japan, started to rebound significantly in mid-2010 thanks to the world economy recovery, said Ngo Van Toan, deputy general director of Global CyberSoft.

Ngo Hung Phuong, general director of CSC Vietnam, agreed, saying domestic software outsourcing companies reported year-on-year revenue growth of between 20 and 40 percent last year. He said he expects the figure to increase to 50-60 percent this year.

One stumbling block to this growth would be the lack of human resources, industry insiders say.

“When export orders climb, software companies seek a large number of engineers in a short time, but this is very difficult. Many companies want to recruit employees at the same time, leading to a strain in human resources on the market,” said Nguyen Huu Le, chairman of TMA Solutions.

“To implement a project, firms typically need 70 to 80 percent of the total number of engineers to have at least three years of experience. However, in the current situation, only 40-50 percent meet this criterion. Therefore, local companies may lose the opportunity to outsource high-value projects,” he said.

Few home-grown products

About ten years after its inception, Vietnam’s software industry is yet to make impressive gains compared to its potential, experts say.

They say that Vietnamese software firms are too small with limited staff, and too dependent on outsourced work. Most importantly, they do not have their own products.

There are just “a few sporadic cases” in the country’s software industry, said Toan of Global CyberSoft, referring to businesses that have developed their own software solutions.

For example, national IT giant FPT Software is developing software solutions for a locating GPS system to be used in the transport sector. Logigear has developed a software-testing program while TMA Solutions has developed software to be used in mobile phone services.

A small number of other companies and experts have come out with products popular among the Vietnamese people, like the Lac Viet dictionary of Lac Viet Computing Corp., Vietnamese keyboard Unikey developed by IT expert Pham Kim Long, and anti-virus BKAV software of Bach Khoa Internet Security Company.

Le of TMA Solutions said besides doing outsourcing work, his company has “gradually” invested in its own products.

But such investment is “risky,” he added.

“We opt to cooperate with foreign partners because if Vietnamese firms make new products alone, they don’t have enough funds and find it hard to market their new software on the international market,” said Le.

Le Hai Binh, chairman of Mat Bao Company, said the solution to the risk taking was to be found elsewhere.

“The local software industry can develop only when the government pays more attention to copyright issues, management policies and punishment of copyright violations,” said Binh.

For a decade, piracy has been a nightmare for software companies. They say the situation has not improved although a great deal of hue and cry has been raised about it in the media several times in recent years.

Pham Anh Chien, general director of FIS, a software research arm of FPT, said there was another important aspect to keep in mind when discussing development of the software sector in Vietnam.

“Information technology is not merely about technology. It also requires the accumulation of experience in other industries for many years,” Chien said.

“Companies have software designed for them because they need modern management solutions but Vietnamese software is yet to reach this level. We need time to gain in-depth knowledge so that we can develop large-scale solutions that specialize in specific areas,” he said.