Needs Unmet

Needs Unmet

August 9, 2015

Vietnam’s burgeoning software outsourcing industry is being restrained by a lack of specialised skills among local software engineers.

Needs Unmet

Of the three key areas in Vietnam’s high-tech industry (hardware, software, and semiconductors), the software industry is, perhaps, the most vibrant at the moment. Looking externally, Vietnamese companies in the industry are gradually integrating into the international production chain and competing with other countries in the region. Given that India, a major player in the field, is moving into higher segments, Vietnam can benefit a great deal as more software outsourcing contracts with a low level of complexity are secured by local companies. The country also holds certain advantages compared to China, such as lower labor costs and a better relationship with Japan; an important information technology (IT) partner. The software outsourcing market in Vietnam is also larger in scale than in the Philippines. All of these factors explain the surging demand for software development jobs.

High-quality engineers with three or more years of experience and possessing advanced English or Japanese language skills remain the most sought-after in the industry. Companies, though, are still struggling to engage enough employees to meet their needs. One particular weakness of Vietnamese software workers is their lack of specialized skills and limited foreign language skills, even though they are highly regarded for their intelligence, capacity to work in high-intensity environments, high level of commitment, and low cost. In many cases, local software workers also lack soft skills such as communication skills, teamwork and, especially, problem-solving. Due to the shortfall in such skills the supply of highly-qualified software engineers remains low compared to the growing demand.

Vietnam’s HR landscape is changing, with IT no longer the priority career for many young people as it was five years ago. One key factor is a perception among young people that business administration, auditing, or banking and finance jobs are more prestigious and higher-paying. Long periods of study followed by low salaries, excessive working hours, and intense pressure eventually make IT students decide that this is not the career they will seek upon graduation.

Despite such negative assessments of the IT profession, however, companies don’t hesitate to offer good salaries and welfare schemes to skilled workers. Many foreign companies, especially new ones to the market, are now offering salaries 30-50% higher than the market standard for high-quality employees. The Vietnam 2014 Salary Survey carried out by Mercer, a leading global provider of salary surveys, and its representative in Vietnam, Talentnet, identified that the hi-tech industry saw the highest salary increases last year (at 11.4%). But even if companies can offer higher salaries the priorities for job seekers have changed somewhat. Salary was previously the prime factor when they considered an IT career in general and one in software in particular. Now they are also focusing on other factors such as whether they still view IT as their passion or purpose in life. As such, the market has recorded a decline in job-hopping.

Facing a shrinking pool of IT workers, companies also turn to universities in the hunt for promising graduates. More and more cooperation that focuses on training and recruiting between these companies and local universities have been witnessed in recent years. Normally companies will provide training courses for new hires, to help them quickly become used to the work. In this orientation stage, though, training programs mainly focus on professional skills but not foreign language skills or soft skills.
When the ASEAN Economic Community (AEC) takes shape at the end of this year demand for IT workers will become stronger. And it is expected that the free flow of labor that results will be more beneficial for employers than for employees in Vietnam. As demand still exceeds supply for IT workers in the local market, companies in Vietnam can hire overseas IT workers, who are thought to be more experienced and skilled than their local counterparts. These companies will, however, face a number of challenges in the recruitment process, in particular the risk of increasing labor costs. This is because policies for foreign workers are undoubtedly different from those for local employees. For this reason, companies should engage HR consulting firms to stay abreast of the latest information regarding international and local labor markets and improve their chances of engaging foreign workers.

Given the fact that demand for software workers in Vietnam remains strong while the number of local IT workers capable of working abroad is still modest, a “brain drain” seems unlikely. But local employees will face tougher competition for jobs right on their home turf when the AEC comes into being. This is why preparations need to be taken seriously. For example, IT workers must better equip themselves with professional knowledge, not to mention foreign language skills and soft skills. Although the AEC will present more opportunities for Vietnam’s IT industry it is not a sustainable solution to the labor shortage. In the long run, training and recruiting local software workers and reducing any dependency on external hiring should be seen as the priority, as it not only creates jobs for local people but also ensures the independence and stability of Vietnam’s IT industry in the face of regional integration.

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