The enigma of the US Market for Vietnamese ITO companies – The Unsolved Problem
Over the last 9 months, I have had the opportunity to talk to a large number of Vietnam executives at technology outsourcing companies (the Top 5 companies in Vietnam). The most important topic for these executives relates to the US market and how to enter or expand their participation in this market.
Based on these discussions, the common focuses for these executives are:
- How to get contacts in US companies to market Vietnam’s offshore services.
- How to obtain sufficient “appropriate” resources to support the US market.
- How to mitigate the challenges of US-Vietnam business, e.g. language, time-zone, data security etc.
I am not sure these are the right questions, and we will discuss them within this article.
In general, Vietnam companies have made steady progress in the areas of technical capabilities, process standardization and data security. Almost all the top companies have achieved global certification such as Best-in-Class Processes/Quality Management SEI CMMI Level 5, ISO 9001:2008; and ISO/ TS 16949, Information security standard ISO 27001:2005 and EU Standard follows the EU Directive 95/46/EC for Data Protection.
In terms of market penetration, the top Vietnam companies have:
- Made significant progress in the APAC market. In particular, gaining market share in Japan from China and India suppliers. One major reason is due to the degrading relationship between Japan and China. Japan companies are looking for a viable China +1 location and Vietnam appears the optimal candidate.
- Made some good progress into the European market (excluding the UK). One major advantage is that Vietnam can support the multiple languages spoken across Europe (20+ languages). In this market, Vietnam’s main competitors are more from Eastern European countries, e.g. Poland, Romania, Hungary, or low-cost centers in North Africa rather than from India.
- Made some progress in the US within limited industry verticals or customer clusters.
Some revenue numbers for Vietnam companies in the US:
- Harvey Nash reported annual revenue of $40M (public data but the revenue includes significant onshore staff augmentation).
- The rest of the Vietnam offshore players, e.g. TMA, CMC, GCSoft and Officience, have annual revenue below $40M per year, with most of them having less than $5M.
Based on my experience and discussions with key players thus far, I don’t believe any of the top Vietnam companies have quite achieved the market entry strategy to succeed as a major US player and be able to compete appropriately with domestic or India outsourcers.
In my opinion, all the Vietnam companies I know of are missing some key elements in their US market entry strategy. Some of the missing strategies are:
- How to position their firm in the US market.
- What market or service segments the firm should focus in. Some companies do not utilize successful case studies to leverage across different industry verticals.
- There is no global pricing strategy. Most just stick with the cost plus model.
- A lack of an integrated marketing strategy. For most, the approaches tend to be opportunistic and they just try to be “everything to everyone”.
The most common phase I’ve heard is “if only we can get the opportunity to do the work, then we will win the customer over with our talent, hard-work and dedication”. The sad truth is that everyone in the world is following the same strategy. The companies that are truly successful in the US are companies with a well designed and focused market entry strategy, well aligned delivery capabilities, and flawless execution ability.
I will continue to push for a more strategic approach to the US market by the top Vietnam players but we may have wait for a new entrant with the right strategic leadership to change the game.
Refer to my other blog where I facilitated a one-day strategy workshop on a market entry strategy for a Vietnam company in Ho Chi Minh City earlier this year.