Vietnam is becoming a “hot” destination for outsourcing. You don’t have to take my word for it, just listen to the industry experts.
- Vietnam is ranked as the 12th most attractive location in 2014 by AT. Kearney
- Tholon’s Top 100 Outsourcing Destinations – The de facto ranking of outsourcing cities around the world (2014) ranked Ho Chi Minh City at 17th (above Kuala Lumpur) with Hanoi at 22nd
- Vietnam remains one of the most competitive options in the world for outsourcing due to its competitive labor costs and other business costs. Gartner 2013
Some of the reasons in Vietnam’s favor are:
- Vietnam has a population of 92 million people, of which 65% are under the age of 35
- Young and talented skilled people with an increasing English speaking population
- One of the fastest growing economies in South East Asia over the last 5 years
- Politically stable with strong government support for the offshore industry
- Labor costs are ~ 50% lower than India or China (compare with tier-one cities)
- Rapidly becoming the major manufacturing alternative to China (“China +1” strategy)
- Has the potential to be the ITO/BPO alternative to India (“India +1” strategy)
For me, personal safety for business personnel, employees, and clients is extremely important. With numerous reports in the press about the rape epidemic in India, kidnapping in the Middle East and Africa and high crime rate in South America, safety in an offshore country becomes a priority concern. One recent survey result is telling for the future – a 2014 survey by a New York-based travel agency for the “Best Countries for Solo Travelers” ranked Vietnam as number 6th (the highest rank in Asia).
This sentiment is echoed by many of my business acquaintances. “When I travel to Latin America or India for business, personal security is a big challenge. I have to make sure everything is secure for both me and my clients. For some Latin American countries I have to arrange for bodyguards and secure transportation. But I feel very safe in Vietnam. For example, last month I checked into hotel in Ho Chi Minh City late at night, popped down the street to the ATM for some cash and went to a local restaurant for a quick meal … it is almost 11pm at night” reported by a Senior Vice President based in NYC with global responsibilities.
Some of the top BPO firms in Vietnam are:
- DIGI-TEXX : Founded in 2003, over 500 employees
- Harvey Nash: Established in 2000, over 2000 employees.
- SPI Global: Located in Vietnam since 2002, approximately 600 employees.
- Swiss Post Solution/GHP Far East: Founded in 2004 for GHP. Now owned by Swiss Post from 2014, approximately 1200 employees.
- TPL: Established in 2004 with approximately 700 employees.
- Officience: Founded in 2005, with approximately 500 employees.
In my opinion, BPO is a high growth potential segment (much more than IT Outsourcing) due to the availability of resources, low cost pressure and the potential untapped demand from companies with mature outsourced operations in India or China. Similar to the shift of semi-skilled manufacturing jobs from China to Vietnam in the early 2000s, there could be a similar shift from India and China to Vietnam for US companies.
Unfortunately, if you look at the list of top players above, none of these companies appear to have the infrastructure or scalability to be able to ride this next wave of BPO. This area will be the focus in my next few postings since I had the opportunity to spend a week with the CEO/Founder of two of the companies listed above. We visited a handful of Fortune 500 companies in the US to discuss BPO opportunities for Vietnam. Stay tuned …