A report released recently said the South Korean IT outsourcing market has a value of $600 billion, while there are only about 10 Vietnamese IT firms have expanded their business to the South Korean market.

“In fact, Vietnamese IT firms have been eyeing the South Korean market for a long time. However, they still cannot find the way to penetrate the market,” said An Ngoc Thao, deputy secretary general of Vinasa (Vietnam Software and IT Services Association).

The problem lies in the way South Korea’s economy is operating. The economy is influenced by Chaebols (large family-run economic groups) such as LG and Samsung. Enterprises have to enter the market via the Chaebols, or large partners of the Chaebols. Over many years, only very large partners can be chosen to implement IT projects in South Korea. 

But the good news is that in recent years, Samsung and LG have begun making big investments in Vietnam. They have set up production and R&D (research and development) bases in the country and begun seeking suitable partners in Vietnam. This gives Vietnam one more reason to hope that many more Chaebols will cooperate with Vietnamese businesses.

Mentioning the labor policy in South Korea, Thao said under South Korean laws, at first, businesses must recruit five Koreans for every foreign worker, and later, they must recruit three Korean for every foreign worker.

“South Korea is a comprehensive strategic partner of Vietnam and the two governments are open when discussing the cooperation,” Thao said.

“And it is now the story of management agencies. They need to figure out plans to bring businesses of the two countries closer to each other. If so, the door of the South Korean market will be open to Vietnamese IT firms,” he said.

New positions for Vietnam’s IT firms

The first Vietnam Digital Forum 2024, an important event for technology firms, organized by Vinasa, with the cooperation of NIPA (South Korean National IT Industry Promotion Agency) and KOSA (Korea Software Industry Association) with sponsorship by the Ministry of Information and Communications on August 2, is hoped to accelerate the process of ‘moving towards the South Korean market’.

The event, as well as the 11th Vietnam IT Day held in Japan on August 6, will ‘relate Vietnamese stories’ and introduce the great potential and capability of Vietnam’s IT firms. 

According to Thao, for the South Korean market, Vietnam’s IT firms should change their current approach to the market. Instead of doing whatever South Koreans order, Vietnam’s IT firms should get ready to act as partners with South Korean businesses. Vietnamese and South Korean businesses should work together in all phases of a value chain, including research, consultancy, software development, human resources supply and product testing.

Previously, Vietnam’s IT firms mostly grew with several coders at the beginning and they lacked financial capability, production capability and governance skills. But Vietnam’s IT firms’ capability has improved considerably. Therefore, they need new ways of working, new value and new partners.

Vinasa said it is cooperating with South Korean partners to not only bring Vietnam’s firms to South Korea, but also bring South Korean firms to Vietnam.

“South Korean IT firms are good at smart city solutions and products for end-users such as phones and smart household-used devices. They also want to access the Vietnamese market, but they are facing difficulties in providing products directly to Vietnamese users,” he explained.

Though Vietnam has been ranked among the world’s top IT service providers, Thao pointed out that Vietnam still doesn’t have strong IT brands and doesn’t have long-term large-scale trade promotion programs to popularize Vietnam’s name in the world’s market.

He said while rice and coffee production, tourism and other sectors run methodical long-term trade promotions, the IT industry doesn’t have such a program.

Other regional countries have their own international exhibition programs related to IT. Taiwan (China), for example, has Computex and Asia Smart City Summit, while Thailand has Infocomm Asia. Meanwhile, Vietnam still doesn’t have such a large event.

Binh Minh