Harnessing Vietnam’s Offshore Software Development Potential: A Catalyst for Global Tech Dominance

Today, businesses can source talent from various locations, including outside of their own country. This has opened up opportunities for businesses to access quality work and specialized skill sets from around the world.

As a prime example, offshore software development involves outsourcing development operations to a partner in a different time zone than the company’s headquarters. Businesses work with off-site and remote teams to develop software projects, ranging from basic coding to product design, custom software, web, and mobile applications, as well as software support and maintenance.

For companies looking for specific expertise and high-quality deliverables that may be hard to find locally, offshore software development services in Vietnam could be a great solution.

Post-pandemic Software Development Boom

As companies accelerate their digital transformation and upgrade their business models in response to COVID-19, technology roles have demonstrated their resilience, particularly the growing demand for software engineering specialists across various industries.

According to LinkedIn, between December 2019 and February 2021, the proportion of software engineer positions increased tremendously, especially in countries where the IT industry is rapidly expanding. 

Country	Change (%)
India	15
Philippines	66
Brazil	80
Costa Rice	50

This heightened demand for software development talent can be attributed to several factors, including the proliferation of new smartphone applications, digital innovation in technology-driven industries, and increased investments in security software.

Best Practices for Hiring Offshore Software Developers

Preparing Your Internal Team

When adding an offshore software development team to your workforce, it’s essential to be transparent about your intentions. Some employees may be apprehensive about their job security or question their worth to the company. In contrast, others may feel that offshoring restricts their potential to grow and enhance their skills.

Look for individuals within your organization who embrace the process and can act as change champions to help alleviate any worries among your in-house team members as your project progresses.

Establishing Strong Connections with the Provider

The connection between your organization and the offshore provider is the basis of all your efforts and successes. There is no straightforward way to cultivate and maintain this connection, but here are some steps you can take as a starting point:

• Create Time for Knowledge Sharing: Ensure your team is given sufficient time to effectively transfer knowledge and establish strong relationships with offshore software engineers. 
• Get Documentation Updated: Before engaging with remote developers, ensuring that your documentation and processes are current and up-to-date is crucial. When outsourcing to offshore software developers, they may be required to reverse engineer your products, but providing thorough documentation can help reduce the time it takes for the application development process.
• Establish Communications and Processes: Effective communication and collaboration protocols are essential when managing a remote team. A robust onboarding process is also crucial to train the team on products, tech stacks, and processes.
• Define the Scope of Work: To avoid miscommunication or unexpected changes in the future, it is essential to clearly define the scope of work when hiring offshore developers or a software development company. This is particularly important when developers are paid hourly. While some unexpected elements may arise that require changes, having a detailed scope of work can save costs in the long run. 

Choosing the right offshore partner from the start can set the foundation for a successful and long-term partnership. However, certain challenges need to be addressed by the management.

Biggest Challenges of Offshore Software Development

According to Polish software developer CrustLab, these are the main challenges of offshore outsourcing (for IT as well as other services):

• Cultural differences: With the different value systems of your target region or country, you must conduct research or seek insights from the local individuals to minimize conflict and misunderstandings.
• Time zones & geography: Scheduling meetings, logistics, and even general communication are often impacted by these differences. A synchronized system is what you need to stay efficient.
• Lack of trust: When outsourcing, confidentiality, quality, and punctuality can be significant points of concern. Try to create an exhaustive plan and regularly review your projects’ progress.
• Language barriers: It’s easy to run into miscommunication without an interpreter in most outsourcing countries. However, providers are becoming more globalized and multilingual.
• Poor communication: On top of time differences, different assumptions and expectations can cause delays and poor efficiency. It’s important to maintain transparency and control when communicating with providers.
• Lack of skills and expertise: This is especially a problem with low-quality outsourcing teams in favor of low prices. You need to carefully consider the compromises you make with each project.
• Project management: Project managers are the key to the team’s understanding of the project’s goals and objectives. They must be able to recognize and tackle unexpected issues.

Factors to Consider When Evaluating Software Development Costs 

In-Demand Skills

As the scarcity of top tech talent persists, expect to pay a premium for specialized expertise. Skills such as DevOps, artificial intelligence, and data science will command higher rates than basic web development skills.

English Proficiency

Poor command of English can increase the likelihood of errors and confusion, leading to project delays, poorer outcomes, and even the need for costly rework. Therefore, it is crucial to select outsourcing firms with a good mix of fluent English speakers, from the management level down to the developer level.

Location

Certain regions develop a reputation for specific expertise, creating demand and driving up prices. Rates also tend to be higher in countries situated close to first-world economies.

Experience

Senior developers generally command higher rates, but they bring the benefits of hiring experienced professionals. Rates may differ even within the same region, based on experience and skill.

Length of Engagement

Outsourcing firms consider project timing when setting rates, offering better pricing for longer engagements compared to short-term ones. If planning to run the engagement for several years, it is advisable to disclose this upfront for potential rate concessions.

When negotiating a lower hourly rate with an outsourcing partner, companies must carefully consider the trade-offs they are willing to make. A seemingly shrewd negotiation may force the partner to cut corners and compromise on quality, ultimately undermining the benefits of outsourcing. Additionally, if the outsourcing relationship breaks down completely, the transfer process may result in the loss or misinterpretation of valuable intellectual property and knowledge.

To avoid these risks, companies must carefully weigh the costs and benefits of outsourcing and determine what they are willing to give up in return for lower rates. If the primary goal of outsourcing is cost reduction, companies should still strive to pay the absolute most they can within their budget, rather than compromising on the quality of output, English competency, and expertise in development.

Hourly Rates of Software Outsourcing by Region

Collaborating with offshore software development companies can help businesses save between 40% to 70% of overall costs. Regardless of the location – onshore, nearshore, or offshore – development rates have increased due to high demand for developers and an increase in outsourcing as a response to the pandemic forcing remote work and efficiency to be prioritized in the corporate agenda.

However, Asian regions remain the least expensive, and Central and Eastern Europe is a hotbed of growth. 

Region	Lower Range ($)	Higher Range ($)	Average % of Asian compared to Western countries
North America	41	175	60.81
Latin America	21	93	24.82
Central and Eastern Europe	21	118	39.26
South Asia	19	75	–
South East Asia	14	61	–

When comparing the outsourcing rates of Asia with those of Western countries, it is evident that Asia offers significantly lower rates. This price disparity makes Asia an attractive destination for outsourcing services, as businesses can save costs while accessing a skilled workforce and quality services. 

Southeast Asia: Top Software Development Hotspot

Vietnam

Vietnam has emerged as a major player in the business process outsourcing (BPO) and IT outsourcing (ITO) industries. Many large companies from South Korea, Japan, North America, Australia, and Europe are now pivoting towards Vietnamese companies for outsourcing.

With the latest technologies such as big data, artificial intelligence, and the Internet of Things (IoT), Vietnamese engineers and developers can deliver projects for companies worldwide with expertise.

Moreover, the country has been one of the world’s fastest-growing information technology and telecommunications markets over the past decade. With nearly 60% of the country’s population below 35 years of age and more than half of the population using the Internet, access to new technologies has become easier than ever in Vietnam.

The Philippines

With an impressive 94% English literacy rate and a robust higher education system, the country is home to a skilled workforce possessing strong competence in IT and other specialized areas. More than 30,000 Filipino programmers enter the workforce every year, making the cost of hiring software engineers in the Philippines up to 80% lower than in Western countries.

Thailand

According to a survey conducted by A.T Kearney in 2016, Thailand ranks sixth among ASEAN countries in terms of its proficient offshore workforce. The country boasts excellent infrastructure and a well-established education system that produces a skilled IT offshoring workforce every year. The increasing proficiency in the English language has further positioned Thailand as an attractive destination for foreign investors seeking opportunities in the IT industry.