Anna Frazzetto's Blog

Digital Innovations and Technology Solutions

Tough Market Favors Vietnam Offshoring over India

You can't feel bad for the Indian offshore market. The country has defined and led the global IT offshore industry for more than 10 years. Since the beginning of this decade, India's IT and outsourcing companies have seen record growth and profitability.

But now the market, as markets tend to do, is shifting. Times are tough and inflation is very high the world over. India's long-term dominance has now made it a higher-cost offshore destination. This recent Wall Street Journal article, "For India's Tech Titans, Growth Is Waning," underscores the growth in salaries alone by looking at the country's biggest IT and outsourcing success story, Infosys. According to author Niraj Sheth, the company's "average salaries are rising 12% a year, and increasingly high turnover is forcing the company to spend more on training."

It is low-cost countries that pose the biggest threat to India's offshore dominance, and I am going to argue, again, that Vietnam is the contender of choice. First, there is the cost factor. Vietnam salaries fall significantly below those across the Indian market.

Second, there is the talent factor. Vietnam continues to produce thousands of highly skilled technical professionals every year. The government is firmly behind the effort to build a skilled, high-tech workforce for today and tomorrow, which has resulted in an outstanding and flush IT talent market.

Investment, while slowing in India, continues to boom in Vietnam. From high-tech leaders like Microsoft to investment firms like Franklin Templeton, the business world has recognized Vietnam as an important emerging market and have committed to its growth through investment. The Vietnamese government has responded by creating a business-friendly policy of economic restructuring.

Vietnam, like India and all countries worldwide, is experiencing the challenge of inflation and dealing with the reality of higher oil prices. However, the commitment of the entire country--from the business community and government to its citizens--to become a modern, prosperous nation coupled with the impressive youth of the country (80 million people with almost 75% under the age of 35), will continue to make Vietnam an important player in today's IT services market.