November 20, 2017 | Professional Services Blogs
Vietnam is quickly emerging as an attractive sourcing destination for business process outsourcing (BPO) services, which added $2 billion to the country’s GDP in 2015. Vietnam’s BPO industry has been growing at a fast pace of about 20 percent per annum over the last decade. This has been corroborated by A.T. Kearney's 2017 Global Services Location Index, which has placed Vietnam at sixth place, just behind India, China, Malaysia, Indonesia and Brazil, and just ahead of the Philippines. On the Financial Attractiveness scale, Vietnam has been found to be better than most of the top-ranking countries, only falling behind India and the Philippines. While on the Business Environment scale, it has been benchmarked higher than India and Indonesia.
Cost-Effective BPO Destination
BPO is anticipated to be one of the key driving sectors for the country in the next five to 10 years, along with retail banking, solar and wind energy, luxury hotels, and modern agribusiness and food. Today, Vietnam-based BPO services are mainly sourced by enterprises for document process solutions such as data capture and entry, image processing, data categorization and data updating, among other tactical BPO services. The BPO offerings, which are heavily government-incentivized and tailored for 20+ different languages, provide enterprises a global, cost-effective sourcing option. English language offerings are still a difficult selling proposition for Vietnam, given the competition offered by better-skilled destinations such as the Philippines and India.
The USP of the Vietnamese BPO industry is its inexpensive labor - wages are 50 percent lower than that available in China and India. Also compared to the Philippines, Vietnam seems a more promising sourcing location, due to its relatively stable political environment and its government’s business-friendly policies and incentivization programs.
Availability of Young and Skilled Workforce
Vietnamese BPO services, which are often offered as a bundled package along with other ITO services such as software development, systems maintenance, and similar less complex IT services, are mainly sourced by enterprises in USA, Japan, Europe, Canada, Australia, Korea, India, and Singapore. These enterprises operate in the sectors of finance, healthcare, marketing, and logistics. Propelled by a 50-million strong young, tech-savvy workforce (under 35 years), Vietnam is already the hotbed for as many as 1000 IT companies which are currently employing ~80,000 workers in the country. Being one of the fastest growing economies pegged to grow at a rate of 7 percent per annum in the coming two decades, Vietnam is already adding close to 40,000 new IT graduates to the job market each year, providing a steady supply of fresh talent.
Other key differentiators of the Vietnamese BPO industry that can attract enterprises to this market are its relatively higher agent retention rate and close-knit team culture, which are important sourcing parameters (for longer tenure of contractual relationship and robust business continuity).
Guarding Against Potential Threats
However, Vietnamese BPO providers also realize the imminent threats that - rise of technology (especially automation and robotics), better connected geographical rivals and newer players such as Myanmar - pose to its budding BPO business environment. As a result, the government-backed Vietnam IT Organization (VNITO) Alliance has signed three MOUs in 2017 seeking support on technology and marketing from its U.S. and Japanese partners - the Silicon Valley Forum, the Vietnam IT Development Group and the Shonan Industrial Promotion Foundation. The plan is to cultivate Vietnam's BPO industry over the next 10 years before moving on to knowledge process outsourcing (KPO), which requires higher-skilled staff and specialists.
Given the promising cost-effective sourcing option offered by Vietnam, enterprises could consider taking a close look at some of the major BPO players in the country - DIGI-TEXX, Officience, Nash Tech Global, SPI Global, Swiss Post Solution, Transcend People Limited (TPL), Vietnam Smart BPO, etc. for BPO solutions.