Do you know that there are different ways to outsource to Vietnam? And the different ways can cost you a lot more. Interested? Let me give you the detail of this case.
I evaluated an Offshore IT team for a midsize US company recently. Surprisingly, this company wasn’t unfamiliar with offshore to Vietnam. They had been using a small development team in Vietnam for almost 6 years (the Vietnam team is part of a US based IT Service provider). The company is very happy with the talents from Vietnam and like the fact that their cost is much lower than the Indian team they had been using before moving the work to Vietnam.
The company is using a Sourcing consulting team to help them save cost across multiple categories. The consulting team didn’t think there was any opportunity in this contract due to the highly technical nature of the work AppDev, but a friend of mine on the consulting team thought that there isn’t any harm to benchmark the contract with me. See the high level SOW below.
The scope of work: For minimum for 2 years
Scrum Master/Senior developer = 3 FTE
Project Manager = 1 FTE
Developer = 3 FTE
Tester = 5 FTE
Technical architect (1) and onshore/offshore developer (1).
The challenge was a little different in this case due to the scope being in Vietnam already. Usually, it is better to compare Vietnam with India or China where the rate differences are in the ~40% range, but in those cases One is faced with the job of persuading the client to move the work from India/China to Vietnam. Some clients are still “unsure” of the prospect of moving to a new country. But in this case, it is a Direct Vietnamese company against a “subcontract” Vietnamese company and if the client decide to move forward the transition would be easier.
I turned the quote around within one day, with over 25% savings for the company. My friend was excitingly surprised, after further discussion he is working with the CTO to organize a more detail evaluation of the scope and we will submit a binding proposal within the next few days.
It come to show you that the original Sourcing strategy of reducing the “supply chain” and remove the distributor (or in this case the US company) is yielding the typical 25%-30% cost reduction.