Outsourcing software development is now an integral feature of business life. As a growing number of global companies search for more cost-effective ways of working, finding a third party to take care of non-core functions could be an ideal and trending solution.
So whether you intend to outsource in Vietnam or not, this article will surely provide you with a myriad of valuable information.
What is outsourcing software development?
Outsourcing is a management approach that allows delegating to an external agent operational responsibility for processes or services previously delivered by an enterprise. It can be defined as “the purchase of a good or a service that was previously provided internally”.
The leading driver for outsourcing is cost efficiency and production reorganization. By outsourcing, companies can focus their efforts on core business, medium/long-term targets, and diversification opportunities.
From 2010 to 2019, the global outsourcing industry revenue has seen some dramatic changes. For traditional IT outsourcing, there are intricacies in transferring staff, novating contracts, and assessing the financial impact of selling physical assets. These complications have been recently compounded by on-demand IT offerings, the evolution of offshore centers, and the advent of cloud-based offerings.
With globalization and the rapid advancement of information and communication technology (ICT), it is now easier for companies to break up their service functions and outsource some of these functions to low-cost locations overseas on the basis of geographical diversification either by contracting the job to a third party (offshore outsourcing) or by setting up a subsidiary at an overseas location to undertake the same (which is also termed offshoring).
Vietnam has recently overtaken India to become Japan’s second-largest software outsourcing partner after China, accounting for around 21% of the market, according to the Japan External Trade Organization, while US and European markets have generated growth rates of 20-30% per year.
See what CMC Global can do for your business with our outsourcing software development services, download our handbook: Vietnam outsourcing guide for buyers.
Or read more about Vietnam IT Talent Pool
You can see different outsourcing models available in software project management. However, in this handbook, we only mention 2 typical models that may fit you the most. Besides we also provide our own insights for a diverse view of the two models.
- Project-based model
- Dedicated teams model
According to Outsourcing Review, with project-based IT outsourcing, you delegate the completion of an entire project to a third party. This typically involves having to first explain the full requirements of the project to members of the outsourcing company, such as project managers and business analysts. They will then be responsible for forming the development team and seeing the project through to its completion.
Project-based model Advantages
Project-based outsourcing takes a large bulk of the work off your hands, as the outsourcing company will be largely responsible for the development of the entire project from start to finish. They will form the development team, carry out project management, and implement quality control.
Project-based model Disadvantages
This method gives you limited control over your project and developers. With extra services such as project management, business analysis, and quality assurance, this model can also cost a lot. It also requires that you define the full specifications of your project at the beginning, which may be very hard. Moreover, misunderstandings with project requirements can lead to significant mistakes that can delay project completion.
See How you can Win Vietnam IT Market With an Offshore Development Center.
Dedicated team model
With the dedicated team model, you hire remote developers who will report directly to you and work for you full-time but will remain in the dedicated team provider’s office. They may form your entire development team, or they may collaborate with your in-house developers. This model is also known as IT staff augmentation or IT out staffing.
Dedicated Team Model Advantages
Hiring dedicated developers gives you full control over your project. It also gives you more flexibility with your project costs, as you can easily add or remove developers as your requirements change. Moreover, it does not require you to define the full set of project requirements at the beginning, and you can immediately detect and correct mistakes as they appear.
Dedicated Team Model Disadvantages
Staff augmentation requires constant communication and collaboration with your remote dedicated developers, so when hiring from a distant country, time zone differences and language barriers may pose challenges. However, this is also true for project-based outsourcing.
Choose the right outsourcing software development service provider
Pick an appropriate location
You will go to Vietnam and find your own IT service vendor but which city? Have you ever thought about it? In Vietnam, Ho Chi Minh City and Hanoi are two main places that have many potentials for IT outsourcing services.
HCMC is a dynamic city that is expected to be the Silicon Valley of Vietnam with the establishment of Sai Gon Hi-tech Park, one of the national technology projects. Because of the support from the government, HCMC has stable social conditions, positive GRDP growth, favorable IT infrastructure, and convenient living standards.
Hanoi is the capital of Vietnam, with a rapidly growing economy. The city also welcomed many tech giants like Intel, Nokia, and Samsung to open offices and factories here. Since this is a capital city, the social and political conditions are extremely stable and safe to develop businesses. In recent years, Da Nang has emerged as a major outsourcing hub in Japan. In 2017, Japanese IT enterprises contributed 47% of the software industry revenue of this city. Da Nang is expected to be fertile ground for many enterprises to visit and develop their business.
CMC Global has its footprint in all these cities with the continuous establishment of offices in Ho Chi Minh and Da Nang last year. In a year, we have opened two new branches exposing our imperative strategy of expanding and becoming a leading IT service provider in the region. By 2023, CMC Global sets the target to become the Top 5 Technology Services and Solutions companies in Vietnam.
Define your final goal when looking to outsource software development
When it is widely known that Software development Outsourcing can benefit business expansion, there are more about these services. A business owner can optimize their company and maximize their resource with its help, yet they need to have a SMART goal.
So, in this situation, you need to think about:
- What are your business priorities: is it cost-saving, scalability, time-to-market, competencies, vendor diversification, or something else
- Which outsourcing model will align with your current business strategy?
- What services do you expect?
- What can be outsourced, and what can be kept in-house?
- Timeline: What is your delivery plan? When do you want to finish the work?
Compare your vendor list of Vietnam outsourcing software development
Once you have set your final goal to achieve, you need to start working on researching and collecting as much information as possible. Make a vendor list and create your own criteria to ensure that you’ll find the right partner. Here are some sources to consider:
Your friends: If you have a network in Vietnam, that is a lucky sign, you can ask them for insights about the IT industry or related information or even request them to help you connect directly to a service vendor. That could save a lot of time!
Google: Of course, this is the top-of-mind search engine for everyone. You can visit sites for seeking top IT service providers in Vietnam, such as Clutch, Crunchbase, Goodfirms, Vinasa. CMC Global is proud to be on the list of Sao Khue Awards from Vinasa for Best Outsourcing Service in 2019.
Consulting vendors: Before working with an IT partner in Vietnam, you can find reports from Nielsen, McKensy, etc., to get an in-depth understanding of the market and make it easier to choose a partner.
CMC Global’s blog: Here, we provide insights into the IT service industry in Vietnam and share our experience during years working in this field; if you have any ideas sharing, do not hesitate to contact us for advice.
CMC Global is a Vietnam IT company founded in 2017. With 26 years of experience acquired from CMC Corporation in the field of Information & Communication Technology (ICT), CMC Global has been providing a wide range of comprehensive IT services, from consulting firms to implementing infrastructure to achieve the highest level of requirement.
CMC Global will not stop as an exporter of IT services to international customers but will become a provider of system integration services and solutions in Vietnam to the world.