Outsourcing to Vietnam may seem like a dangerous undertaking to many Americans, like heading up the Mekong in search of Col. Kurtz in Apocalypse Now. But it is a different world today with Vietnam becoming a member of the WTO earlier this year.

Business is booming in Vietnam and many Vietnamese-Americans passionately promote their homeland. Last week, the Vietnamese Strategic Ventures Network or VSVN hosted the VSVN Technology Business Conference 2007 last week in Palo Alto, California.

As you might expect, the audience was mostly Vietnamese-American. I am sure there were several profit-seeking capitalists among them. But I was also impressed by the dedication, concern and love expressed for their home country.  

I moderated a six-person panel discussion there about Software Outsourcing to Vietnam that included vendors and also U.S. executives that shared their experiences outsourcing to Vietnam.

We discussed the pros and cons of outsourcing to Vietnam, from low rates and an eager and motivated work force to the challenges faced with poorly spoken English and cultural differences.  For example, does “yes” mean, yes I heard you say something, yes I understand, or yes I will do what you asked!?

One panelist, Dave Klug from Alcatel-Lucent uses a practice of following up every conference call with a written description of what was discussed and agreed to.  He even recommends using instant messaging during conference calls to repeat major points in writing to ensure better understanding during the discussion.

In another panel discussion, Professor AnnaLee Saxenian from U.C. Berkeley used Vietnam as yet another example of the “brain circulation” phenomenon described in her new book The New Argonauts.  Brain circulation has replaced the old “brain drain” problem that many developing countries experienced in the 1960s and into the 1990s. The best and brightest left their homeland (or escaped as is the case with many Vietnamese in the late 70s and early 80s) and went to the U.S and other western countries to be educated.  Then they stayed and many became very successful, delivering little or no value to the old country.

India, Taiwan and China are the countries sited in her book. Engineers and scientists are returning to these countries and starting ventures that reach across multiple national borders.  The Vietnamese Diaspora and the recent return is now another example.

To read more about the conference check out this San Jose Mercury News published a review of the conference Vietnam: The New ‘Gold Rush’ after the first day of the conference August 3, 2007. It covers more of the political and business strides that Vietnam has recently accomplished.

In general the positives of outsourcing to Vietnam outweigh the negatives and they are competing well against more well known outsourcing destinations of India and China.

Would you consider outsourcing your software development to Vietnam?  Why or why not?

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The Wall Street Journal published the article, Vietnam Wins Attention
As New Outsourcing Hub (subscription required) that describes the increasing interest in Vietnam as an outsourcing destination. Among those flocking to Vietnam are many large companies including Intel, Microsoft and Sony.

Rates in Vietnam are lower than other more well-known destinations, such as India. Vietnam even competes well with China, with a young and enthusiastic work force. Ho Chi Minh City (formerly Saigon) is considered one of the best non-Indian cities for outsourcing.

Most Vietnamese companies are employing Vietnamese Americans for sales, marketing and business strategy positions. In some cases, returning Vietnamese help to minimize the lack of fluent spoken English ability in young Vietnamese programmers and other workers.

If you don’t have a WSJ subscription to access the article, you can read a copy here on the NeoIT website.

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There is an interesting news article about Intel investing in the $500 million Vietnam outsourcing company FPT. Also investing is Texas Pacific Group. Vivek Paul, is now a partner with TPG, but was former executive of India outsourcing giant Wipro. 

Vivek Paul will be an advisor to FPT and is in a good position to make introductions for FTP to many Indian outsourcing companies. Is this a sign that U.S. investors are betting on Vietnam to take on the overflow of outsourcing work that can no longer be handled cost effectively by India? 

The FPT client list is dominated by Japanese companies. This investment also be a sign that Vietnam is ready to start courting U.S. clients directly and bypassing India altogether. 

Although a $500 million outsourcing company may be too big for your needs, I think this news item shows Vietnam is entering the main stream of outsourcing destinations. Perhaps it is time for you to consider Vietnam for your IT outsourcing and offshore software development too.    

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