How to Set Up An Offshore Development Center in Viet Nam?

In the fast-paced world of software development, building a strong, cost-effective team can be challenging. An Offshore Development Center (ODC) can be the perfect solution.

Vietnam, with its booming tech industry, competitive rates, and government support, has become a particularly attractive location for establishing an ODC. But how do you actually set up an ODC in Vietnam? This guide will walk you through every step, from planning and legal considerations to building your team and ensuring long-term success. Get ready to tap into Vietnam's potential and take your development capabilities to the next level!

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Why Vietnam is An Attractive Location for ODCs?

Vietnam is rapidly emerging as a top destination for Offshore Development Centers (ODCs) due to a compelling combination of factors:

Cost-Effectiveness

Vietnam offers significant cost advantages. According to Glassdoor data, Vietnamese developer salaries typically range from $8,900 to $22,200 USD per year, considerably lower than established tech hubs. Compared to the US, where developer salaries average $97,000 to $158,000 USD per year, you can expect to see cost savings between 342% and 568%. Similarly, UK developer salaries (roughly $40,000 to $77,000 USD) translate to 176% to 247% higher costs compared to Vietnam.

Beyond salaries, operational costs like office space and equipment rentals are also generally lower in Vietnam. These combined factors can lead to substantial cost savings for businesses looking to build a strong development team.

By leveraging Vietnam's skilled and affordable talent pool, you can significantly reduce development costs while maintaining high-quality standards. 

Skilled Tech Talent Pool

Vietnam has a young and growing tech workforce with a strong educational system producing a steady stream of IT graduates. You'll find a wide range of talent with expertise in various programming languages and technologies. Here's a breakdown of the key factors:

• Young Population: Vietnam enjoys a demographic sweet spot with a large young population. Over 60% of the population falls under the working age (15-64 years old) according to World Bank data. This translates to a steady stream of potential tech talent entering the workforce.
• Educational Focus on STEM: Vietnam's education system prioritizes Science, Technology, Engineering, and Mathematics (STEM) subjects. This emphasis is evident in the growing number of leading universities offering IT-related degrees.
• IT Graduates on the Rise: According to a 2/2024 report by GlobalData  ("Vietnam EdTech Market Summary, Competitive Analysis and Forecast to 2028"), the Vietnamese EdTech market is projected to grow at a Compound Annual Growth Rate (CAGR) of 13.9% between 2018 and 2023. This growth signifies continuous investment in education technology, further enhancing the skills of future graduates.

Government Support

The Vietnamese government actively encourages foreign investment with business-friendly policies and incentives. Initiatives like the National Digital Transformation Programme further support digital businesses operating in the country. Here's how government support fuels Vietnam's IT industry:

• National Digital Transformation Agenda: Launched in 2020, this comprehensive plan focuses on digitizing government services, promoting innovation, and developing skilled IT professionals. This agenda signifies the government's long-term commitment to digitalization, creating a stable and supportive environment for tech businesses.
• Investment Incentives: The Vietnamese government offers attractive incentives for foreign investors in the IT sector. These include tax breaks, simplified administrative procedures, and special economic zones with relaxed regulations. Such incentives make it easier and more cost-effective for companies to establish and operate ODCs in Vietnam.
• Government Support for Education: The Vietnamese government actively invests in education and technology initiatives. As highlighted in a 2023 report by Viettonkin Consulting ("A Brief Overview of Vietnam's EdTech Market"), government policies encourage tech development and equip graduates with industry-relevant skills.

Strong Infrastructure

Vietnam's major cities boast a modern and robust infrastructure that provides a strong foundation for operating an efficient ODC. Here's a breakdown of the key advantages:

• Reliable Internet Connectivity: High-speed internet access is crucial for seamless communication and collaboration within your ODC team. Major cities like Hanoi and Ho Chi Minh City offer reliable internet infrastructure with various service providers, ensuring flexible and scalable connectivity solutions.
• IT Support Services: A thriving IT services sector provides a wide range of technical solutions, from hardware/software maintenance to network security and cloud services, keeping your ODC running smoothly.
• Growing Transportation Network: Vietnam's ongoing investments in modern highways, railways, and major airports ensure smooth movement of personnel, equipment, and resources, boosting overall operational efficiency.

Cultural Fit

Beyond technical expertise, cultural alignment is key to a thriving ODC. Here's why Vietnamese culture shines:

• Respectful & Dedicated: Vietnamese culture fosters a work ethic built on respect for authority and dedication. This translates to a team that's eager to learn, receptive to guidance, and highly motivated.
• Adaptable & Agile: Vietnamese professionals are known for their diligence and adaptability. They readily embrace new technologies and processes, making them valuable assets in the dynamic IT world.
• Clear Communication: English proficiency is on the rise in Vietnam, especially in tech. This ensures smooth communication between your ODC team and headquarters, minimizing misunderstandings and fostering project success.
• Collaborative Spirit: Vietnamese culture emphasizes teamwork and collaboration. ODC teams in Vietnam are known for their willingness to work together and achieve shared goals.

8 Phases to Successfully Set Up An Offshore Development Center in Viet Nam

Phase 1: Market Research

Before diving in, thorough research is crucial. Analyze Vietnam's tech landscape, focusing on:

• Talent Pool: Assess the availability of skilled developers with expertise relevant to your needs. Consider factors like education, experience levels, and salary ranges.
• Infrastructure: Evaluate internet connectivity, data security measures, and access to IT support services in potential ODC locations.
• Business Environment: Research government regulations, tax incentives, and overall business climate (political stability, economic growth, and ease of doing business) to ensure a smooth operation for your ODC.

By conducting thorough market research, you can make informed decisions and establish a strong foundation for your Vietnam ODC.

Phase 2: Location Selection

Choosing the right location in Vietnam for your ODC is a critical decision that can significantly impact its success. Here are some tips for choosing an ideal destination: 

• Prioritize cities with a concentration of IT talent aligned with your skill requirements. Major cities like Hanoi and Ho Chi Minh City offer the largest talent pool, while Da Nang is emerging as a hub for tech startups.
• Consider the cost of living for your team when selecting a location. While Vietnam offers lower overall living costs compared to many Western countries, there can be variations between cities.
• Ensure your chosen location has reliable internet connectivity, modern data centers, and access to IT support services to maintain smooth operations.

Phase 3: ODC Model Selection

There are two primary models for operating an ODC in Vietnam:

Managed ODC Services (MOS):

• Pros: Provides a quick and efficient setup with minimal upfront investment. Managed service providers handle recruitment, infrastructure, and ongoing management.
• Cons: Less control over your team and potentially higher overall costs compared to the BOT model.
• Considerations: Carefully evaluate the service provider's reputation, expertise, and cost structure to ensure a good fit for your needs.

Build-Operate-Transfer (BOT) Model:

• Pros: Provides greater control over your ODC team and operations. Offers potential cost savings in the long run.
• Cons: Requires a larger upfront investment and resources for recruitment, infrastructure setup, and ongoing management.
• Considerations: Assess your long-term commitment to Vietnam and your in-house resources before opting for the BOT model.

Phase 4: Legal and Regulatory Compliance

Having a clear understanding of Vietnam's legal and regulatory environment is crucial for your ODC's smooth operation. Here are the key steps to take:

• Business Registration: Understand and navigate the business registration process in Vietnam. Consider seeking assistance from a legal professional to ensure proper incorporation and compliance with all regulations.
• Work Permits and Visas: If you plan to have foreign staff in your ODC, research work permit and visa requirements. Understanding the process and lead times ensures your team can work legally from day one.
• Tax Implications: Research Vietnamese tax laws and regulations relevant to ODCs. This may include corporate income tax, payroll taxes, and other potential levies. Consulting a tax advisor can help you navigate the system and ensure proper tax compliance.

By addressing these legal and regulatory considerations, you can establish a secure and compliant foundation for your Vietnam ODC.

Phase 5: Finding a Partner

While operating an ODC independently is possible, partnering with a local ODC service provider can also benefit. If you decide to partner with a local provider, carefully evaluate their:

• Expertise: Choose a partner with experience in your specific industry and a proven track record of success in establishing and managing ODCs.
• Experience: Opt for a partner with a deep understanding of the Vietnamese IT landscape and regulatory environment.
• Cultural Understanding: Their ability to bridge cultural differences can significantly impact the overall success of your ODC.

Phase 6: Recruitment and Talent Acquisition

Attracting top Vietnamese IT talent is crucial for your ODC's success. Here are some strategies to consider:

• Job Boards: Utilize Vietnamese online job boards and recruitment platforms to reach a wider pool of potential candidates. For example: Linkedin, CareerViet, VietnamWorks, TopCV, ITviec, etc.
• Universities: Partner with Vietnamese universities specializing in IT and computer science to tap into graduate talent pipelines and identify highly skilled individuals. For instance: Ho Chi Minh City University of Technology, The University of Information Technology (UIT), etc.
• Headhunting Firms: Consider collaborating with local headhunting firms that specialize in the IT sector for targeted recruitment efforts aimed at attracting experienced professionals.

Additionally, develop a well-defined interview process that assesses technical skills, cultural fit, and communication abilities. This ensures you build a team that possesses the necessary expertise and can effectively collaborate within your ODC structure.

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Phase 7: Office Space and Infrastructure

Securing the right office space and infrastructure is vital for your ODC's functionality and team well-being. Here's what to consider:

• Workspace Setup: Choose an office space that fosters collaboration and productivity. Consider factors like location, accessibility, amenities, and layout to create a stimulating work environment for your team.
• Equipment: Provide your team with the necessary equipment, such as high-speed computers, reliable internet connections, and appropriate software licenses, to ensure they have the tools they need to perform their jobs effectively.
• IT Infrastructure: Establish a robust IT infrastructure within your ODC. This can include secure data storage solutions, efficient communication platforms, and reliable project management tools to facilitate seamless collaboration and workflow management.

Phase 8: Ongoing Management and Development

Building a successful ODC is an ongoing process. Here are key aspects to consider for long-term success:

• Performance Management: Implement a performance management system to track individual and team progress, identify areas for improvement, and provide ongoing feedback and development opportunities.
• Communication and Collaboration: Foster open communication channels and establish clear collaboration processes between your Vietnam-based ODC team and your headquarters to ensure alignment and efficient project execution.
• Cultural Integration: Promote cultural integration initiatives to bridge potential cultural gaps and create a more cohesive and positive work environment within your ODC.
• Compliance Maintenance: Continuously monitor and maintain compliance with Vietnamese laws and regulations to avoid any legal or operational issues.

Relia Software - A Reliable Vietnam-based ODC Service Provider

As a leading software development outsourcing company, Relia Software is passionate about helping businesses leverage the potential of Vietnam's thriving tech talent pool. We offer end-to-end Offshore Development Center (ODC) services, empowering you to establish a seamless extension of your development team in Vietnam.

We boast a wealth of experience building and managing successful ODCs for clients across the globe. Our team of experts will guide you through every step of the process, from initial market research and legal considerations to recruitment, infrastructure setup, and ongoing management.

Are you ready to unlock the potential of a Vietnam-based ODC? Don't wait – take the first step towards a successful ODC in Vietnam. Contact Relia Software now! Our team will discuss your specific needs and provide a customized plan to establish a thriving ODC that fuels your company's growth.

Final Thoughts

Establishing a successful Offshore Development Center (ODC) in Vietnam requires careful planning, execution, and ongoing management. By following the steps outlined in this guide, you can gain valuable insights into the Vietnamese tech landscape, navigate legal and regulatory considerations, build a talented team, and establish a robust infrastructure for your ODC.

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