Without question, COVID-19 is a black swan event that has shaken the business landscape across the globe. It has caused billions of dollars to leak away as startups desperately try to get through the day while maintaining their service and products for customers.

Thus, many startups have to make their own sacrifices by shutting down parts of operations and laying off staff members. These actions might sound logical at first, however, once they are executed, it will expose companies to high risks of losing existing customers for failing to deliver the promised results.

So the bottom line is finding the appropriate strategy to let tech startups save costs while still maintaining peak performance. In other words, cutting down on more expensive redundant headcounts and having a more economically viable offshore team to help support your operations.

According to a recent study, the average annual savings of offshore software project costs vs onshoring is about US$56,000 per project. This is a significant reduction, and very valuable for startups.

But why Vietnam? Does it have any cost advantages compared to other popular offshore destinations? And how will offshoring to Vietnam help you save more money than onshoring in Singapore?

The answer lies within the tech labour force that enables Vietnam to surpass others when it comes to saving costs.

Also Read: How Vietnam is accelerating fintech growth

Quick economy recovery with booming talent

Did you know that Vietnam is one of the 30 countries that have zero cases of COVID-19 death? They are also among the first nations in ASEAN to reopen, allowing businesses to resume. Simply put, Vietnam has done well to fight back the outbreak compared to its peers and other developed nations.

This means the country is already starting to recover ahead of others, especially for offshoring which already gets people back to work. In the landscape where everyone has to cut down their operation due to the distancing practices while still trying to meet the customer’s demand, having the capability to keep going without being disrupted is valuable.

Additionally, the country’s GDP growth record is brimming with an average six per cent rate, which is fastest compared to other famous offshoring destinations in ASEAN such as Indonesia, Thailand, Malaysia, and more. As a result, the Vietnamese market also holds much more potential in the near future.

On the other hand, Vietnam is also well known for its breeding ground of technical talent where young engineers, software developers, and entrepreneurs arise. Eddie Thai, general partner at 500 Startups Vietnam, expected Vietnam to be ranked in the top three countries with the highest number of engineers by 2024. As a result, Vietnam provides lots of leeway for offshore tech startups to find and hire the right talent.

From the standpoint of recruitment, having a wide talent pool will save time (and therefore costs) of scaling operations. Recruitment efforts allow businesses to access more candidates and have a higher chance of getting suitable talents for the roles they are hiring for, in a shorter period of time, hence, decreasing the overall time/cost significantly. With better recruitment efficiency, tech startups can better focus on other core business activities.

Affordable and reliable workforce

Shortage of skilled talent is one of the common reasons for sky-high onshore labour costs. In fact, firms often offshore to Southeast Asian countries to take advantage of their human resources.  Still, compared to other competing players, Vietnam is standing in the spotlight due to its lower salaries but a dependable workforce.

The Vietnamese government understands how important foreign investments are to its economic growth more than anyone. Thus, the country has put a lot of work into keeping its currency competitive to allow a fast-growing economy led by exchange rate-sensitive exports.

Also Read: Why 2020 is the year for tech startups in Vietnam

The “fortunate” side effect is that Vietnamese labour costs are approximately 10 per cent to 50 per cent lower than its neighbours such as Indonesia and Singapore, approximately five per cent cheaper than the Philippines when it comes to fresh developer:



Labour Cost per Country (US$/Year)
Vietnam Indonesia Philippines Singapore
Developer 7,200 – 12,400 17,581 -24,658 8,300 – 12,426  38,000 – 84,500
Senior Developer 12,400 – 24,000 24,658 -30,970 12,426 – 14,620 50,500 – 84,500

Figure 2: Labour cost comparison chart (Sources 1, 2, 3, 4)

As shown in the table above, the low labour costs in Vietnam indicate that it is the better offshoring destination for tech companies and startups to save costs. Even when comparing with its neighbouring countries, Vietnam still presents a noticeable difference in the cost range. 

Moreover, Singapore has always been one of Vietnam’s largest foreign investors, with US$49 billion worth of projects in 2018. There has always been a positive relationship between the two countries, where investors are encouraged to venture into various sectors such as startups, software development, Industry 4.0, manufacturing, and offshoring.

Therefore, building an offshore IT team and accessing the labor market in Vietnam is much easier for Singapore companies and startups.

Also Read: As a startup investor, here is why we aim to focus more on Vietnam in 2021

By observing a 30 per cent yearly increase of IT growth in Vietnam at a relatively lower turnover rate and higher stability compared to Thailand or Malaysia, offshoring software development to Vietnam seems like a given.

Time is now

Now, rather than asking yourself, “Why do firms outsource or offshore?” try questioning this: “Why do firms outsource or offshore to Vietnam?”

While our list of reasons for offshoring software development to Vietnam will help businesses understand the opportunity present by the market, it is crucial for you to take action immediately before things get more chaotic from COVID-19. 

However, instead of venturing into it blindly, it is recommended to consult a trusted offshoring service provider for detailed legal information and market insight.

After all, modern problems require modern solutions! 

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