VietNamNet Bridge - Despite having enormous potential, the software industry should accelerate its pace of growth.

After more than one decade since its birth in 2000, the industry’s accomplishments are undeniable. In 2010, the software industry’s revenue increased by 20 times, the number of companies grew 20 times and the man power 10 times compared to 2001. It is clear that no single sector of the national economy can keep up with this fast growth rate.

During the same period, Vietnam attracted many world’s big names in the information technology (IT) field, which transformed the country into a melting pot for global outsourcing service. However, looking at the big picture, the software industry is being developed in a fragmented manner that is inadequate in making full use of its huge potential. The industry is still modest when its revenue and number of firms and manpower are still small, despite the fast growth rate.

Fast but not strong

Currently, Vietnam’s software industry is still stumbling at software outsourcing for foreign companies on a generally small scale. Even big company like FPT has some 6,000 employees working in the software and IT services, in which more than 3,000 specialize in software outsourcing. There are a few software processing companies having more than 500 software engineers like CSC, TMA Solutions, LogiGear and Global Cybersoft, while large projects require an army of high-quality engineers and programmers. However, this army has been affected by global economic downturn over the past 10 years.

Experts have pointed out that software outsourcing is crucial before focusing on writing software. Software outsourcing brings income and experience, which help build up a strong foundation before reaching a higher level: research and development (R&D). However, the added value from software outsourcing is low. Sometimes, products of software companies have to bear others’ names, said the director of a software company. He added: “Many of our products are widely sold and used in Japan, the U.S. and Europe. Yet, we are still anonymous. Customers only know the companies who ordered us to outsource their software!” This is the reason why Vietnam does not have any exported software with its own brand.

While many software firms in Vietnam have to bite their tongues abroad, they are also facing disadvantages in the domestic market. Vietnamese enterprises are only capable of writing simple software of low added value for small firms. The demand for IT in the public sector (e-government) and business sector has provided a potential market, but most domestic software enterprises are unable to fully exploit this potential. The public sector alone has shown needs in IT for judicial management, demographics, home addresses, business registration, customs and tax declaration. Only until recently was FPT chosen to implement the personal income tax declaration system as a contractor, while the two main operators are both foreign companies.

Orders of specialized software worth from hundreds of thousands to tens of millions of U.S. dollars in recent years mostly belong to foreign companies. For example, to provide modern retail services in the banking sector, each bank must invest tens of millions of dollars in the core banking system. This figure excludes the cost to deploy management solutions and infrastructure for daily activities, which is many times higher. State corporations and big businesses are also a huge market for the software industry. Many companies such as Tan Hiep Phat, Petrolimex, the Cement Corporation, Thu Duc House and Novaland invest millions of dollars in the overall management solutions provided by foreign firms. Even FPTS, the securities company of FPT, purchased software from two foreign providers a few years ago although an affiliate of FPT is providing software to about half of the domestic securities companies.

Reasons

According to experts, with Directive 58 of the Politburo and Resolution 07 of the Government, issued 10 years ago, followed by a series of development programs, Vietnam has developed a strong policy for the IT and software industries. However, according to Prof. Dang Huu, former minister of Science, Technology and Environment and former head of the National Steering Board for IT, the explanation for the lower-than-expected software industry is that leaders of management agencies have not yet been aware of and paid proper attention to implementing the policy seriously.

Le Manh Ha, director of the HCM City Department of Information and Communications, has pointed out that the Government and provincial people’s committees should spend three days every year, or one day every quarter, for all leaders to discuss IT. Till then would IT become a discussion topic on the table and gain permanent awareness from the Government and society. The development of an important industry, at the end of the day, is the responsibility of leaders. A right decision with determination will result in good growth of the industry.

Directive 58 introduced tight measures to support the development of the IT industry, such as requiring organizations that are beneficiaries of State budget to use domestically made IT products and software, and any violation or obstruction must be severely punished. However, reality shows that having foothold in the public market is a long, winding road. “They purchase products because of another goal,” a business manager complained. “The other goal,” according to him, is the kick back for those with the right to sign business contracts. This, no doubt, frustrates companies, forcing them to give up.

Software products are services, while the current mechanism poses a challenge to implementing projects at State agencies. This relationship eliminates the motivation for enterprises to develop in the long term. That explains why many software companies are not interested in the public sector.

On the other hand, many companies have not mapped out their own development strategies, especially in marketing and brand building. “Entering the public sector means facing harassment. Branding is required to sell products to public enterprises while software outsourcing companies have no brand at all,” said the director of a company. Due to this same reason, three years ago, a famous software outsourcing company’s plan to return to the domestic market to build up brand had to stop, not far from the starting line, after the company incurred a loss of nearly VND30 billion.

Yet, the biggest challenge of Vietnam’s software industry is manpower. According to Quang Nguyen, an IT management consultant, with a relatively low starting point, it is hard for Vietnam to receive a full contract but subcontracts to outsource parts of the project. Vietnam has long been developing a contingent of quality programmers, while the pressing issue falls on the management, research and creative manpower such as system architects, project managers and middle management staff.

Quang has pointed out that the development of software outsourcing must be supported by a detailed long-term development plan for the IT industry, which shifts the focus from oursourcing labor to creative labor. To succeed, there must be a general long-term development strategy for human resources. The workforce must be capable of approaching and applying new technologies, using their knowledge to build up the domestic IT industry and solve the domestic problems.

Source: SGT