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

Developing a good, reasonably priced team might be difficult in the fast speed of software development. The ideal answer may be an offshore development center (ODC).

Vietnam has proven as an attractive place for setting up ODC in recent years with its government support, low rates, and fast growing IT sector. How then do you set up an ODC in Vietnam? Well, I'll help you in this blog with a detailed guide from legal and planning issues to team building and guaranteeing long-term success. Prepare to leverage Vietnam's potential and raise your capacity for personal growth!

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• Offshore Software Development Rates By Country
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Why Vietnam for Offshore Development Center?

Viet Nam is rising as a leading destination for Offshore Development Centers (ODCs) thanks to a convincing mix of elements:

Cost-Effectiveness

Vietnam offers significant cost advantages. Vietnamese developers typically make between $8,900 and $22,200 USD yearly, significantly less than in other IT hubs according Glassdoor data. Compared to the US, where developer salaries varies from $97,000 to $158,000 USD annually, you might save 342% to 568%. Similarly, UK developer pay—between $40,000 and $77,000 USD—translates to 176% to 247% more spending than in Vietnam.

Apart from salaries, operating expenses including office space and equipment rentals are often less in Vietnam. For businesses looking to build a qualified development team, these components used together can cause major cost savings.

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

>> Read more: 14 Strategies Help Businesses Reduce Software Development Costs

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 in various programming languages and technologies.

• Young Population: Vietnam has a demographic sweet spot with a sizable young population. World Bank statistics show that nearly 50% of the population falls between the working age (15–64 years old). This results in an ongoing flow of potential tech talent joining 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: In recent years, there has been a notable increase in the number of graduates in Vietnam's IT industry. In 2021, 55,000 students graduated with IT-related degrees, now this number has lately climbed to around 80,000 IT graduates every year. According to a recent industry survey, there are around 530,000 software developers by 2023. This figure is expected to rise in the next years due to the industry's growing demands.

Government Support

The Vietnamese government promotes foreign investment through business-friendly policies and incentives. The government supports Vietnam's IT sector in the following ways:

• National Digital Transformation Agenda: Launched in 2020 with a vision to 2030, this is an important effort that encourages digital innovation in fields including smart cities, healthcare, education, and agriculture. Besides, with the Strategic IT Development Plan (Resolution 58/NQ-CP, 2023), the government also aims to increase the IT sector's current contribution of over 10% to 20% of GDP by 2023.
• Investment Incentives: Vietnam government have many attractive incentives to attract foreign investors in IT sectors, such as tax reductions, simple administrative procedures, and special economic zones with loosened rules. Businesses can thus setup and run their offshore development centers (ODCs) in Vietnam more easily and affordably.
• Government Support for Education: Workforce training and education are now government top priorities. Currently, over 300 universities and institutions in Vietnam offer IT programs, producing around 57,000 IT graduates per year. To improve further, the Ministry of Education and Training (MoET) is rolling out a 10-year plan to develop high-tech talent. This aims to graduate 5,000 engineers and 500 PhDs annually, with 20% specializing in AI and emerging technologies.

Strong Infrastructure

The main cities of Vietnam show modern and strong infrastructure that offers a good basis for running an effective ODC. These are the main benefits:

• Reliable Internet Connectivity: Your ODC team needs fast internet to communicate and collaborate, right? Most major cities in Viet Nam have reliable internet infrastructure and multiple service providers for flexible and scalable access.
• 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 is upgrading infrastructure to meet investor worries about transportation and logistics. In recent years, the government has invested extensively in highways, railways, and major airports, so moving people, equipment, and resources are much convenient and time-saving. 

Cultural Fit

A successful ODC requires cultural alignment in addition to technical expertise. Vietnamese culture does well for the following reasons:

• 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 IT workers are very flexible and quick to pick up new skills. They are dynamic, innovative, and always up to date with the latest demands of the industry. They also fit in well with international teams.
• Clear Communication: Thanks to international integration, English is rather common in Vietnam. Thus, the level of competence among Vietnamese IT experts is always rising. They can clearly interact with foreign teams and help to avoid project misconceptions.
• Collaborative Spirit: Vietnamese culture emphasizes teamwork and collaboration. ODC teams in Vietnam are known for their willingness to work together and achieve shared goals.

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

Phase 1: Research Market

Understanding the local environment is crucial before deciding to set up your ODC in Vietnam. You should make sure that Vietnam has the required knowledge for your project. Besides, check their degree of education, experience, and pay expectations.

Next, check the infrastructure. Reliable internet, data security, and IT support are key to running your ODC smoothly. Make sure the country you choose has everything your team needs to work efficiently.

Finally, research the business environment. Look into government regulations, tax benefits, and economic stability to see how easy it will be to operate in Vietnam. A clear understanding of local policies can save you from unnecessary roadblocks.

In fact, Vietnam is politically stable, has strong economic growth, and offers government support for IT investment, including tax incentives. Vietnam generally allows 100% foreign ownership in the IT sector and has business-friendly policies for tech firms​

Phase 2: Choose a Location

Vietnam has 5 centrally managed municipalities (cities) and 58 provinces. Here, I'll mention the most common destinations for building your ODC.

Ho Chi Minh City (HCMC) is the largest commercial hub with the biggest IT talent pool. There are many global tech companies and IT outsourcing firms. It ranks among the top 100 cities worldwide in fintech, edtech, e-commerce, and transportation. Although salaries and office rents are higher, it offers the most convenience and business opportunities.

Hanoi is the capital and second in foreign investment flows. It has strong R&D centers backed by goverment and top universities supplying steady tech talent. Although the work culture here is more traditional, but still flexible enough to meet different customer needs.

Da Nang is a rising tech hub with 10–20% lower salaries and less employee turnover due to lower competition compared to the 2 first. This city has better quality of living, less living expenses, and a cleaner surroundings.

Otherwise, you can consider smaller cities like Can Tho, Hai Phong, and Nha Trang. They have smaller IT communities but are considered by some companies for cost-saving opportunities.

Phase 3: Choose an ODC Model

Fully owned ODC, Managed ODC, and Build-Operate-Transfer ODC are the 3 key models for operating an ODC in Vietnam:

Fully Owned ODC:

A fully owned ODC is like setting up your own company in Vietnam. You will handle everything from hiring and infrastructure to management, security, and more.

With this model, you have full control and responsibilities. You likewise avoid extra service expenses without an intermediary supplier. In return, you must do everything yourself, hence you have to make a large initial cost and follow a more time-consuming procedure.

Managed ODC:

A managed ODC means outsourcing the whole ODC setting up and operation process to a service provider. The provider handles recruitment, office setup, legal compliance, and infrastructure. You can have your ODC team quickly without administrative burdens.

Build-Operate-Transfer (BOT) ODC:

The BOT model is a hybrid approach that an ODC provider builds and runs the ODc for you, then they transfer full ownership and control to your company once everything works smoothly. This approach is quick to start and doesn't require a lot of money up front, and it doesn't lose control.

Phase 4: Legal and Regulatory Compliance

As a foreign business operating in another nation, you always have to follow its legal and regulatory system. You have to register your company, follow labor and tax laws, and of course, gain from government incentives.

Whether you decide to totally outsource your ODC to a service provider or set up your ODC yourself, knowing legal and compliance rules is absolutely essential to operate seamlessly and avoid penalty.

Business registration:

Most foreign companies set up a 100% foreign-owned enterprise (LLC) in Vietnam. The process includes:

• Getting an Investment Registration Certificate.
  
• Applying for an Enterprise Registration Certificate from the Department of Planning and Investment.
  
• Having a registered local address and at least one resident director as a legal representative.

Software and IT businesses have no minimum capital need, and the process follows standard timelines. But, working with a local lawyer or business consultant will help you avoid delays and compliance problems. Otherwise, your business will also need to apply for any required sector-specific licenses and a tax code once registered.

Handle tax and payroll obligations:

Vietnam’s Corporate Income Tax (CIT) is 20%. However, if qualified, IT companies may also be eligible for tax holidays and lower CIT rates. Employees' Personal Income Tax (PIT) withholding, social insurance (17.5%), health insurance (3%), and unemployment insurance (1%), which are all calculated based on salary, must also be handled by employers.

Labor laws:

Vietnam’s labor laws require written employment contracts for any job lasting over a month. Also consider other factors like working hours (max 48 hours per week), overtime limits (up to 200 hours/year) and mandatory benefits.

If you plan to bring foreign managers or specialists to your ODC, make sure to secure the appropriate work permits and visas.

Phase 5: Finding an ODC Partner

As I said, running an ODC on your own is still possible, but working with an ODC service provider can streamline and speed up the process. Of course, you have to choose the right partner. Consider the factors below:

• Expertise in your industry and a proven track record in setting up and managing ODCs.
• Experience in hiring, handling IT teams, infrastructure, and compliance.
• A strong understanding of Vietnam’s IT landscape and regulations is also crucial.
• Flexible and adaptable in different working styles and cultures.
• Transparent and open communication
• Reasonable service pricing.

>> Read more: A Complete Guide to Hire an Offshore Development Team

Phase 6: Setup Office Space and Infrastructure

Office space and infrastructure can affects your ODC operation and your team's productivity. So, try to prepare carefully. I recommend you to follow this checklist for better preparation

Office space: 

Office rental prices in Vietnam vary by city and location. Here’s a general cost range for the three main tech hubs:

• Ho Chi Minh City (HCMC): $15–$60 per m² per month
  
• Hanoi: $12–$55 per m² per month
  
• Da Nang: $8–$35 per m² per month

For a 100–150 m² office (enough for 15–30 employees), monthly rent typically ranges from $1,500 to $6,000, depending on the city and location.

Utilities:

Some other office setup costs, including:

• Electricity, water, Internet, and other utilities
  
• Furniture and office equipment (desks, chairs, meeting rooms).
  
• Computers, networking equipment, and software licenses.
  
• Office maintenance fees
  

IT infrastructure:

• Computers, hardware
  
• Secure data storage solutions to protect sensitive information.
  
• Fast communication tools (Slack, Microsoft Teams, Zoom).
  
• Efficient project management platforms (Jira, Trello, ClickUp) for tracking tasks and workflows.

Phase 7: Hiring IT Talents

You can skip this step if you contract out your ODC to a service provider. If not, you must have effective hiring processes, competitive pay, and strong staff retention policies because there is high competition for skilled coders.

You should use recruitment channels that popular in Viet Nam like VietnamWorks, ITviec, TopDev, and LinkedIn. Or, partnering with local universities can also be a great way to recruit fresh graduates, as Vietnam’s leading tech schools produce thousands of IT professionals every year.

For specialized or senior roles, you should connect with IT recruitment agencies or headhunters cause experienced developers who aren't actively looking for work can not be found easily on general platforms.

Finally, prepare a thorough hiring process, including technical tests and interviews. This will help you in identifying applicants who speak English fluently, fit your corporate culture, and possess the skills you need.

>> Read more:

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• 5 Steps To Hire Node.js Developers Successfully
• 5 Steps To Successfully Hire A Dedicated Java Developer

Phase 8: Implement, Manage, and Scale Your ODC

Once everything is set up, the focus now is running your ODC smoothly and making it develop in the right path. To manage an offshore development team, you need strong leadership and well-defined procedures.

Firstly, define team roles so everyone knows their responsibilities. Particularly if teams operate across time zones, use project management tools and communication channels to keep teams linked. If you’re using a Managed ODC or BOT model, you need a clear agreement on project expectations, reporting, and performance goals.

Next, maintain daily management to keep your ODC productive over time, guarantee the team remains in line with corporate goals, and help pinpoint areas needing improvement.

Security should be always a top priority. Set up data security policies, access restrictions, and frequent audits to keep private information safe. Staying updated on Vietnam’s labor laws and tax regulations will also prevent compliance issues.

As your ODC gets stable, you can extend your team by recruiting new developers. If you're using the BOT model, this is the phase where the provider gives over full control of the ODC to your organization.

Relia Software - A Vietnam Offshore Development Center Service Provider

Relia Software helps businesses set up and manage Offshore Development Centers (ODCs) in Vietnam. As an experienced software development outsourcing company, we provide end-to-end ODC services, handling everything from market research and legal setup to recruitment, infrastructure, and daily operations.

With over 10 years of experience building successful ODCs for global clients, our team will guide you through every step to ensure a smooth and efficient setup. You are expanding your development team? Or setting up a dedicated offshore unit? With any specific needs, we’ll always have a solution that fits your business.

Final Thoughts

Setting up an ODC in Vietnam takes careful planning and ongoing management, but the benefits are worth it. By following this guide, you’ll gain insights into the Vietnamese tech market, legal requirements, hiring strategies, and infrastructure setup—all essential to building a successful offshore team.

>>> Follow and Contact Relia Software for more information!