VietNamNet Bridge – It is really good news for Vietnamese software firms that Japan tends to increase the number of outsource orders to other countries. However, this remains the “pie which is difficult to swallow” for Vietnamese information technology firms.

It is estimated that the value of Japanese outsource contracts is very high, about tens of billions of dollars a year.

Japanese IPA, an IT promotion agency, which has finished a survey on 1100 Japanese IT firms about their outsourcing activities, has reported that 31.5 percent of enterprises said they want to seek Vietnamese partners, 20.6 percent with Indian, and 16.7 percent with Chinese.

23.3 percent of Japanese firms have placed orders with Vietnamese firms, while 78.1 percent with China and 13.5 percent with India.

However, the value of the Japanese outsourcing orders to Vietnam is just equal to 1/30 of the total value of the orders placed with Chinese companies.

Japan wants to place more orders

Naoki Ookubo form IPA said 88.5 percent of the enterprises are wanting to work with Vietnamese firms because they want to reduce the expenses and are to seeking the personnel sources which can replace the Japanese workers who are getting orders. They also tend to seek new partners from other countries rather in China.

Meanwhile, according to Dr Nguyen Trong Duong, Director of the Information Technology Department of the Ministry of Information and Communication, Vietnam’s total turnover of the ICT industry reached 20 billion dollars, an increase of 17.6 percent over 2010. Of this amount, 13.7 billion dollars came from the information technology sector, up by 79 percent.

However, most of the income came from hardware production such as electronics and phones which always have low added value. Software outsourcing proves to be the industry which can bring the highest income. However, it gained only 1.2 billion dollars in 2011 with 1500 IT firms and 80,000 workers.

The productivity in the software industry in 2011 reportedly reached 18,855 dollars per worker per annum, a very slight increase over the last many years of developing the industry.

The figures explain why Vietnam can only earn four percent of the big cake worth 10 billion dollars offered by Japanese firms.

Great opportunity, little capability

According to Chu Tien Dung, Deputy Chair of the Vietnam Software Association Vinasa, Japan has always been a big partner for Vietnam which can bring 35 percent of total revenue. The market has been developing very rapidly by 30 percent per annum.

However, Dung has also warned that the Japanese demand increase does not mean that Vietnam would earn more money from Japan, due to its limited capability in satisfying high requirements in terms of technique and language.

Nguyen Doan Hung, President of VJC, has pointed out that the proportion of the projects Vietnamese firms do the outsourcing for Japanese partners remains modest. Vietnam strives to increase its market in Japan from four percent currently to 10 percent in the next 10 years.

Hung has admitted that the biggest challenge now for Vietnam is the lack of the labor force with good knowledge basis and fluent foreign language skills.

“There is a common challenge for both the parties, which is the lack of IT engineers keen on Japanese language, while the salaries have increased and IT investments have decreased,” Hung noted.

Ngo Van Toan, Deputy General Director of GSC, has agreed that Vietnam is seriously lacking the engineers who are fluent in Japanese language.

He has noted that in the long term, the low labor cost in Vietnam would not be its advantage any more, since the wages tend to increase.

SGTT