Outsourcing IT to Vietnam: Pros & Cons and How to Get Started in 2024

Is Outsourcing IT to Vietnam the right decision for your business? What are the outstanding benefits of IT outsourcing as well as challenges you will face when choosing Vietnam as a destination in 2024? Let's follow the article below

Why Outsource IT to Vietnam?

Cost-Effective IT Solutions

Vietnam has rapidly established itself as a top destination for offshore IT outsourcing, offering businesses a rare combination of cost-effectiveness and high-quality services. A key factor driving the trend is Vietnam's low labor costs compared to traditional outsourcing giants like China and India, making it an attractive option for companies looking to reduce operational expenses without sacrificing service quality.

According to a report by Statista, revenue from IT services in Vietnam is expected to reach 1.99 billion USD by 2024, of which IT Outsourcing accounts for the majority with an estimated market size of 0.69 billion USD. 

 This reflects not only Vietnam's growing role in the global IT outsourcing industry but also its capacity to deliver specialized services at competitive rates.

The cost advantage in Vietnam is clear. Vietnam's labor costs are about 50% lower than those of developed countries like the United States, and even 30-40% lower compared to India and China, as noted by industry experts. This cost disparity is especially appealing for small and medium-sized businesses (SMBs) and startups seeking to optimize their budgets without compromising on the quality of their IT solutions.

Moreover, Vietnamese developers are known for their technical expertise, making it possible for businesses to enjoy both affordability and quality. In fact, a survey by NASSCOM revealed that 70% of companies outsourcing to Vietnam reported satisfaction with the quality of work delivered, underlining the country’s ability to meet international standards while keeping costs low.

To explore how Vietnam's IT outsourcing costs compare globally, check out our detailed guide on offshore software development rates by country for insights into pricing trends and cost advantages.

Leveraging Vietnam's Skilled IT Talent Pool

Vietnam boasts an abundant and highly skilled IT workforce, which is one of the key reasons why businesses around the world are increasingly outsourcing their IT needs to the country. According to the Vietnam Ministry of Education and Training, the country produces over 40,000 IT graduates annually, all equipped with modern technical skills and knowledge, ready to meet the demands of global tech industries. This large number of graduates contributes to the country’s rapidly growing IT talent pool, making it an attractive destination for outsourcing.

The government of Vietnam has made substantial investments in STEM (Science, Technology, Engineering, and Mathematics) education in recent years. This emphasis on technical education ensures that a steady stream of well-trained professionals enters the workforce each year. A World Bank report from 2022 found that Vietnam has made significant strides in improving its higher education sector, particularly in engineering and IT fields, resulting in a highly skilled labor force that is competitive in the global marketplace.

In fact, 60% of Vietnam's university graduates major in STEM fields, one of the highest percentages in Southeast Asia, according to a report by KPMG. This focus on technical education not only strengthens the country's IT capabilities but also positions Vietnam as one of the top outsourcing hubs in Asia, especially for companies looking for high-level expertise at competitive prices. By outsourcing their IT departments to Vietnam, companies can significantly reduce operational costs while accessing a skilled talent pool.

Vietnam's thriving tech industry is not only a hub for full-scale IT outsourcing but also for companies seeking to augment their teams through IT staff augmentation companies.

A Strategic Business Advantage in Global Markets

Outsourcing IT to Vietnam does not only offer cost savings and access to a skilled workforce; it also provides a strategic advantage in the global market. As companies continue to expand and seek new ways to stay ahead of competitors, outsourcing IT operations to Vietnam enables them to scale rapidly without the constraints of high operational costs.

Vietnam’s position in Southeast Asia, along with its robust digital infrastructure, makes it a prime hub for companies looking to innovate and enter new markets. The country’s government policies are also highly favorable for foreign investment, with tax incentives and free trade agreements further enhancing its appeal as an outsourcing destination.

Moreover, the Vietnamese government’s focus on digital transformation and technological innovation provides businesses with the opportunity to leverage the latest trends in AI, machine learning, and big data. For instance, MOR Software, one of Vietnam’s leading outsourcing firms, has successfully helped global clients integrate AI solutions into their operations, improving efficiency and customer satisfaction.

Discover why Vietnam as IT outsourcing powerhouse is transforming the global tech landscape by leveraging its skilled workforce and cost-effective solutions. Read more about this remarkable rise in our in-depth analysis.

Socio-economic stability

Vietnam’s socio-economic stability is a critical factor that makes it an attractive destination for IT outsourcing. A stable environment minimizes risks, ensuring smoother operations and successful project outcomes. 

Over the past decade, Vietnam has consistently demonstrated strong economic performance, maintaining a stable GDP growth rate of approximately 6-7% annually—one of the highest in Southeast Asia, according to the World Bank.

Foreign direct investment (FDI) has surged in Vietnam in recent years, reaching a record 20 billion USD in 2022, according to data from the Ministry of Planning and Investment. Much of this investment has flowed into the technology and IT sectors, showcasing Vietnam's growing reputation as a hub for outsourcing. This influx of capital further strengthens the country's socio-economic foundation, creating a stable and thriving ecosystem for IT development.

IP Protection and Data Security

Vietnam’s commitment to IP protection is evident in its adherence to international security standards. The country is a signatory to numerous global agreements and treaties, such as the World Intellectual Property Organization (WIPO), and has passed strong legislation to protect intellectual property rights. According to the International Trade Administration (ITA), Vietnam has strengthened its IP laws over the years, ensuring that businesses can confidently protect their innovations and creations while outsourcing to local firms.

In addition to robust IP protection, Vietnam has implemented stringent measures to safeguard data security. Businesses outsourcing to Vietnam can rely on local firms that comply with international security frameworks such as ISO 27001, a standard that outlines best practices for information security management. According to MOR Software, one of Vietnam’s leading outsourcing companies, they adhere to these international security protocols to guarantee that customer data remains protected at all times. The company states, "We prioritize data security and strictly follow global standards to ensure that our clients’ sensitive information is never compromised."

According to Forbes, Vietnam has surpassed China to become the next IT hotspot in Asia-Pacific. Gartner initially recognized Vietnam as one of the top 30 countries for IT services. 

Subsequently, Gartner analysts elevated the country to a top 5 position, placing it alongside India, China, the Philippines, and Malaysia. Many large corporations such as Intel, LG, Samsung, and IBM have a presence in Vietnam, demonstrating the country's capacity and reputation in the IT field. This further reinforces the view that Vietnam is a top choice for future IT development projects.

Vietnam's IT Outsourcing Industry Overview

Growth of the IT Sector in Vietnam

According to International Data Corporation (IDC), Vietnam is now considered one of the fastest-growing IT markets in Southeast Asia. The country’s IT sector has expanded at an average rate of 15-20% annually, outpacing regional competitors such as India and China in terms of market growth. This robust growth is not just driven by internal needs but also by the increasing global demand for high-quality, cost-effective IT services from Vietnam. In a report by PwC Vietnam, it was noted that “Vietnam’s IT outsourcing industry has become a global hub, attracting international firms seeking to lower costs without sacrificing quality.”

The global IT outsourcing market is expected to reach USD 1 trillion by 2025, with a significant share of that growth attributed to Vietnam. In fact, Vietnam's IT outsourcing market is projected to reach USD 1.2 billion by 2024, according to the Vietnam Ministry of Information and Communications. This growth is being driven by the increasing complexity of global businesses and their need for specialized IT services such as offshore software development, cloud computing, big data analytics, and artificial intelligence (AI).

The growing number of IT outsourcing companies in Vietnam reflects the country's rapid development as a global tech hub.

Key Cities for IT Outsourcing in Vietnam

Hanoi and Ho Chi Minh City are the two largest IT hubs in Vietnam. In addition, Da Nang is also emerging as an ideal destination for IT outsourcing projects thanks to the rapid development of infrastructure and high-quality human resources. Hanoi ranks among the top in Vietnam's IT and digital technology sectors. 

Hanoi, the capital city of Vietnam, is at the forefront of the country's IT and digital technology landscape. The city hosts more than 7,300 digital tech businesses, with a thriving ecosystem that attracts both local and international companies. Hanoi is renowned for its highly educated workforce, with universities and technical institutes consistently producing top-tier graduates. As a result, businesses can easily access a talent pool of software engineers, data scientists, and IT consultants.

Furthermore, Hanoi was the first city in Vietnam to establish an IT Industry Department, a move that has facilitated the growth and development of the local IT sector. This government support has led to numerous infrastructure advancements, making Hanoi a favorable location for IT outsourcing projects. The city also has over 7,300 digital tech businesses and was the first to establish an IT Industry Department. According to a report by VietnamNet, the city has become a key player in the global IT outsourcing market​.

By 2023, it is expected to be third in revenue, reaching 327,000 billion VND (about 13 billion USD), accounting for 10% of the national IT revenue. 

Ho Chi Minh City (HCMC), the largest city in Vietnam, is another leading hub for IT outsourcing. The city boasts a robust business infrastructure, with numerous technology parks and business incubators fostering innovation. HCMC is home to many global tech giants and has a highly developed digital ecosystem, making it an ideal destination for businesses looking to outsource IT services.

The city's economic growth has been exceptional, with Ho Chi Minh City contributing significantly to the national GDP. According to the Vietnam Ministry of Information and Communications (MIC), HCMC has seen a continuous increase in the number of IT startups and foreign investment in recent years, solidifying its position as a major outsourcing destination.

While Hanoi and Ho Chi Minh City are well-established leaders in Vietnam’s IT outsourcing industry, Da Nang is rapidly gaining recognition as an up-and-coming destination for outsourcing. Da Nang has made significant strides in improving its IT infrastructure, offering high-speed internet, state-of-the-art technology parks, and attractive tax incentives for businesses. The city is particularly appealing to IT startups and small-to-medium-sized enterprises (SMEs) seeking affordable yet high-quality tech solutions.

Da Nang is also known for its growing pool of tech talent, with many local universities and training programs focused on software development and networking. With its competitive labor costs and high standard of living, Da Nang is becoming a top choice for businesses looking for reliable IT outsourcing partners. As of 2024, the city is projected to attract a larger share of Vietnam's IT outsourcing market​.

Learn more about why Vietnam is considered one of the best countries to outsource software and how it compares with other leading destinations.

IT Services Commonly Outsourced to Vietnam

Vietnamese IT firms offer various IT outsourcing models and services, allowing businesses to choose the one that best fits their needs and project scope. The most commonly outsourced IT services to Vietnam include:

• Software Development: Vietnam's software industry has maintained an annual growth rate of 30-50% over the past decade, with revenues reaching nearly $3 billion by 2013. The country is recognized for its high-quality software services, ranking among the top 10 globally for IT graduates and top 6 for quality software services.
• IT Consulting and Implementation: The IT services market in Vietnam is projected to reach $1.99 billion in 2024, with IT consulting and implementation services playing a significant role.
• Web Hosting and Maintenance: Vietnam's IT outsourcing market includes web hosting services, contributing to the overall market volume projected to reach $694.80 million in 2024.
• Quality Assurance and Testing: Vietnam is recognized as a major player in software testing outsourcing, with Ho Chi Minh City ranked among the top established global outsourcing cities for software testing functions.
• E-commerce and Fintech Solutions: Vietnam's e-commerce market is one of the fastest-growing in Southeast Asia, with a projected market value of $39 billion by 2025, up from $13 billion in 2020.

These services are supported by Vietnam's competitive labor costs, a large pool of young and skilled IT professionals, and strong government support for the tech industry. The country's IT outsourcing industry is expected to continue its rapid growth, with an impressive annual growth rate of 16.38% from 2024 to 2028, resulting in a substantial market volume of $1,282 million by 2028.

According to The 2023 Kearney Global Services Location Index, Vietnam ranks 7th in the list of leading countries for offshore IT outsourcing services, one place above the United States.

How to Start Outsourcing IT to Vietnam?

Vietnam has rapidly emerged as a preferred destination for IT outsourcing, offering cost-effective solutions, a skilled workforce, and a favorable business environment. If you're considering outsourcing your IT needs to Vietnam, here’s a step-by-step guide to help you get started.

Step 1. Identify Your IT Outsourcing Needs

Before you begin outsourcing, it's crucial to clearly define your business goals and IT requirements. Consider the following:

• Assess Project Scope: Determine whether you need help with software development outsourcing, IT support, or specific services like cloud migration or cybersecurity.
• Set a Budget: Decide on your financial limits while factoring in Vietnam's competitive labor costs. Reports show that outsourcing to Vietnam can save businesses 30-50% compared to developed countries.
• Define Success Metrics: Establish clear KPIs (Key Performance Indicators) to measure progress and outcomes.

This initial clarity will make it easier to communicate your needs to potential outsourcing partners.

Step 2. Research and Shortlist Outsourcing Partners

Vietnam is home to top best IT outsourcing companies, each with unique strengths. To find the right partner:

• Explore Trusted Platforms: Websites like Clutch.co and GoodFirms offer verified reviews of Vietnamese IT outsourcing companies.
• Evaluate Expertise: Look for companies with proven experience in your industry or with the specific technology stack you require. For instance, the leading Vietnam software outsourcing companies like MOR Software and FPT Software are known for handling complex software projects.
• Check Certifications: Ensure the company adheres to international standards like ISO 27001 for data security and CMMI Level 5 for quality management.

A thorough vetting process minimizes risks and helps you find a reliable partner.

Step 3. Establish Clear Communication Channels

Effective communication is essential for successful outsourcing. Once you’ve chosen a partner:

• Designate a Point of Contact: Assign a project manager to streamline interactions and avoid misunderstandings.
• Leverage Collaboration Tools: Use platforms like Slack, Microsoft Teams, or Jira to ensure smooth communication and real-time updates.
• Discuss Time Zones: Vietnam’s ICT Time Zone (GMT+7) makes it easier to coordinate with clients in Asia-Pacific and Europe. For U.S.-based companies, overlapping work hours can be planned effectively.

Building a solid communication strategy fosters collaboration and ensures projects stay on track.

Step 4. Start with a Pilot Project

To test the capabilities of your chosen outsourcing partner:

• Launch a Small-Scale Project: Begin with a short-term or less critical task to evaluate their skills, responsiveness, and overall reliability.
• Analyze Performance: Use your pre-defined success metrics to assess outcomes and identify any areas for improvement.
• Adjust Processes: Based on the pilot results, refine workflows and set expectations before committing to a long-term contract.

Starting small helps mitigate risks and builds confidence in your outsourcing relationship.

To explore how Vietnam's tech ecosystem supports specialized services, check out our comprehensive guide on JavaScript Development Companies in Vietnam. This article highlights top firms excelling in JavaScript development and their innovative solutions.

Step 5. Understand Legal and Contractual Obligations

Vietnam’s government has created a business-friendly environment for foreign companies. However, you must be diligent about legalities:

• Draft a Detailed Contract: Clearly define project scope, timelines, payment terms, and confidentiality agreements.
• Protect Intellectual Property (IP): Vietnam’s adherence to WIPO treaties and its own Cybersecurity Law provide robust protections, but ensure your contract explicitly addresses IP ownership.
• Understand Tax Policies: Vietnam offers attractive tax incentives for foreign businesses in IT. Consulting a local legal advisor can help you navigate these regulations effectively.

Addressing legal considerations upfront ensures a smooth and compliant outsourcing experience.

Final step. Monitor and Optimize Ongoing Collaboration

Outsourcing is not a set-it-and-forget-it solution. To maximize success:

• Schedule Regular Reviews: Conduct bi-weekly or monthly meetings to discuss progress, resolve challenges, and plan ahead.
• Provide Feedback: Openly share what’s working and what needs improvement. Constructive communication helps build a long-term partnership.
• Stay Updated on Industry Trends: Vietnam’s IT landscape is evolving rapidly, with advancements in AI, blockchain, and cloud computing. Staying informed ensures you can leverage emerging opportunities.

Continuous improvement strengthens your outsourcing relationship and drives business success.

Challenges of Outsourcing IT to Vietnam and How to Overcome

Communication Barriers

Language barriers can be a challenge when outsourcing IT to Vietnam. However, many IT companies in Vietnam have invested in improving the English proficiency of their employees. To overcome this challenge, businesses should choose partners with good English communication skills and establish clear communication processes.

Time Zone Differences

Time zone differences can make project management difficult. However, this can also be turned into an advantage if you know how to manage your time effectively. Businesses can set up online meetings at times that are convenient for both parties and use project management tools to track progress.

Navigating Cultural Differences

Cultural differences can affect the work process. To minimize this impact, businesses should learn and respect the culture of their partners. Organizing cultural exchanges is also an effective way to enhance understanding and cooperation between the two parties.

Case Studies of Successful IT Outsourcing Projects in Vietnam

A typical example of the success of outsourcing IT to Vietnam is MOR company. MOR has cooperated with many large enterprises worldwide. Below is a case study about the cooperation of MOR Software and Narosu

Summary and client:

The Narosu project aims to create a seamless international shopping experience through two main modules: BuyBee, which integrates products from Shopee and Lazada, and BeeMall, which supports international purchases from Korea. The system was developed using PHP, NestJS, NextJS, and AWS by a team of 8 people in 9 months and continues to be upgraded. The client is a Korean business that wants to improve access to international products for consumers in Korea and Vietnam, offering unique and high-quality products that are difficult to find locally.

Solution and results:

MOR Software used PHP, NestJS, and NextJS to develop a powerful and flexible backend, while AWS provided a stable cloud infrastructure to handle fluctuating traffic. The team has applied advanced data synchronization techniques to ensure product information is always accurate and up to date across platforms. 

As a result, the Narosu system was successfully launched, delivering a smooth shopping experience and enhancing access to international markets. BeeMall has become an important bridge between consumers and global sellers, improving user satisfaction and expanding the market. This platform is still being developed to expand its features and number of users.