a prospect for vietnam software industry - a case of fpt

8/12/2019 A Prospect for Vietnam Software Industry - A Case Of FPT

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A Prospect for Vietnams Software Industry:

A Case of FPT Software

April 2008

Heejin Lee

(Graduate School of International Studies, Yonsei Universit!

Seun"#$on %an"

(&epart'ent of Lo"istics and Infor'ation Sste', Sun"#on"hoe Universit!

Suli' H$an"

(Graduate School of International Studies, Yonsei Universit!

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Abstract

ollo$in" India)s success to *e a 'ajor soft$are product and service provider, 'an

developin" and transitional econo'ies includin" +ietna' ta#e soft$are industr as a strate"ic

one for econo'ic develop'ent -his strate" poses those developin" countries 'an

challen"es for the' to address, and 'an fir's in those countries are stru""lin" to continue

$ith the strate" at the corporate level and survive in the co'petitive $orld soft$are 'ar#et

A'on" those fir's, .- Soft$are, the leadin" +ietna'ese soft$are co'pan, is one of the

fe$ non/Indian co'panies e'er"in" as a si"nificant plaer in the "lo*al soft$are outsourcin"

'ar#et, at least in that of the Asia .acific re"ion -his paper ai's to investi"ate $hat *rou"ht

.- Soft$are a success or this purpose, $e first ea'ine the +ietna')s I1- and soft$are

industr, and identif #e success factors of .- Soft$are

+ietna' has *een sho$in" a hi"h "ro$th in I1- industr $hich is a strate"ic one for its

econo'ic develop'ent In particular, +ietna' has a potential to *e successful in offshore

soft$are outsourcin" -o *e sustaina*le in this co'petitive 'ar#et, +ietna' has to overco'e

so'e $ea#nesses .- Soft$are as the *est achiever so far is a "ood 'odel for +ietna'ese

soft$are co'panies e have found the #e success factors of .- Soft$are)s sustaina*le

develop'ent in "ood 'ana"erial practices, application of international 3ualit standards for

soft$are develop'ent, and hi"hl 'otivated and s#illed $or#forces 4ased on the case stud,

$e discuss the sustaina*ilit of +ietna')s offshore soft$are outsourcin"

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1. Introduction

India)s success in the soft$are industr 'a#es 'an developin" and transitional econo'ies

follo$ the Indian $a that soft$are industr can pla a critical role in econo'ic develop'ent

(5idu'olu and Good'an, 6779 :o*it;sch et al, 20069


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the countr level

Given fierce co'petition in soft$are 'ar#ets, especiall rivalr a'on" offshore

outsourcin" destination countries, $e as# $hether +ietna')s initial success in soft$are

industr is sustaina*le in the future Indian co'panies succeeded not onl *ecause of lo$

la*our costs, *ut also *ecause of their a*ilit to continuousl 'ove up alon" the value chain

of soft$are industr (1ar'el and A"ar$al, 20029 :han et al, 200! -herefore it is $orth

as#in" $hat is re3uired to continue to develop soft$are industr -o ans$er these 3uestions,

$e identif the characteristics of +ietna')s soft$are industr develop'ent and ea'ine the

case of .- Soft$are to identif its success factors

or this research, $e collected secondar data throu"h the Internet, and then pri'ar data

throu"h intervie$s or the latter, t$o of the authors visited Hanoi and Ho 1hi


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and consolidatin" securit and defense (Lai, 200@!

4efore 678@, the teleco''unication sector had 'ana"ed s'all net$or#s $ith *ac#$ard

technolo" so as to have poor service 3ualit B$in" to the refor' polic, ho$ever, the

teleco''unication sector has defined a strate" for renovation, shiftin" fro' the su*sidi;ed

'echanis' to a 'ar#et oriented 'echanis' (Lai, 200@! After five ears refor' process fro'

678 to 6772, the teleco''unication sector had launched the JAccelerationK strate" for the

period *et$een 677 and 2000 (Lai, 200@!

-he Govern'ent of +ietna' resolution 5o >7 (677! on I1- develop'ent and .!

-he #e 'easures for soft$are industr develop'ent in +ietna' include a favora*le

invest'ent environ'ent, 'ar#et epansion, hu'an resource develop'ent, copri"ht

protection, and a sound teleco''unication infrastructure (&oun", 200>! -he result is that the

teleco''unication net$or# had *een co'pletel di"itali;ed and auto'ated -he 'ar#et had

*een developed $ith ne$ services and epanded the services to the rural areas (Lai, 200@!

+ietna')s I1- 'ar#et in 200D reached the a'ount of US 828 'illion, 207C up as t$ice

as the avera"e "ro$th rate of Asia .acific countries, in $hich "ro$th rate of hard$are $as

6D@C and that of soft$areservice $as >6>C Althou"h the "ro$th rate is not as hi"h as

200>, this $as still a re'ar#a*le "ro$th rate in the contet that "lo*al I1- spendin" increased

* C per ear (H1A, 200@!

Table +. Vietnam ICT )ar,et -)illion S/0

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Year Soft$areService Hard$are -otal Gro$th rate

2000 D0 2D0 00 /

2006 @0 280 >0 6C

2002 D 2D >00 6@C

200 60D >60 D6D 288C

200> 6>0 D>D @8D 0C

200D 678 @0 828 207C

Source H1A (200@!

-he 'onetar value of soft$areservice industr $as US 2D0 'illion in 200D, in $hich

US 680 'illion ca'e fro' do'estic 'ar#et (@66C! and US 0 'illion fro' outsourcin",

>C up co'parin" to 200> (-a*le D! Soft$are outsourcin" increased * DDDC, and

do'estic soft$areservice increased * >>C in $hich there $as a "reat contri*ution of

ne$l/e'er"in" Mdi"ital content industr) In 200D, online "a'es service increased stron"l

-he leadin" fir' in this 'ar#et, +ina"a'e reached over the threshold of US D 'illion per

ear +alue added services on cell phones also increased 3uic#l -he leadin" co'pan in this

'ar#et, +AS1, had the turnover of US 7 'illion per ear in 200D (H1A, 200@!

Table . Vietnam ICT Industry Value -million S/0

Year Soft$areService Hard$are -otal

&o'estic 'ar#et Butsourcin"=port -otal

2002 @D 20 8D DD0 @D

200 70 0 620 00 820

200> 62D >D 60 @0 70

200D 680 0 2D0 66D0 6>00

Source H1A (200@!

-he fast "ro$th rate of the Internet and teleco''unication in +ietna' has continued

durin" the period *et$een 200D and 200@ or 62 'onths, the Internet su*scri*ers had

increased * up to 80C

Table 2. 3rowt" rate of subscribers and users


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D200@ ,D>6,000 62,762,000

D200D 6,877,000 ,68D,000

D200> 6,62>,000 >,66,000

D200 >D0,000 6,07,000

Source H1A (200@!

&.( Vietnams Software Industry

-he develop'ent of I1- Industr, especiall soft$are industr, has *een seen as one of the

shortest $as to the +ietna')s industriali;ation and 'oderni;ation "oals, and 'a#es an

i'portant contri*ution to the national securit6(&oun", 200>!

In 2 'illion

-he value earned fro' the local 'ar#et accounted for US 28D 'illion (+I5ASA, 200!

Table 4. Vietnams software industry turno!er forecasted -on a!era$e0

1&irective 5o D81-/- on Bcto*er 6, 2000 of the 1entral 1o''ittee of +ietna'

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&o'estic turnover =port turnover -otal turnover ?e'ar#

(esti'ated!Year +alue

(@C

200@ 267 0C 606 D0C 26 DC

200 28D 0C 6> >DC >2 >C

2008 6 0C 26 >DC D8> D6C

2007 >@ 2DC 07 >DC 2 2C

2060 D7 2DC >2 >0C 6066 60C

Source +I5ASA (+ietna' Soft$are Association! 4rochure (200!

It $as in 677 that +ietna' first eported soft$are (Hon", 200D! Since then, the 3uantit

of soft$are eport has increased re'ar#a*l ear * ear +ietna'ese fir's are loo#in" for

'ar#ets for soft$are eport in USA, =U, and %apan -he value of soft$are eport is still

'odest, reachin" a*out US 6> 'illion in 200 (+I5ASA, 200!

Up to the ear 200D, there $ere a*out 2,D00 co'panies re"istered to run *usiness in the

soft$are sector, @00 of $hich $ere in operation, attractin" over 6,D00 people directl 'a#in"soft$are -he annual avera"e "ro$th rate of the enterprise nu'*er is a*out 0C Hanoi and

Ho 1hi 6C and D0C, respectivel (Hon", 200D! (-a*le 8!

Table 5. T"e 'stimated %umber of Software 'nterprises in Vietnam -&660

=sti'ation for soft$are enterprises

Location -he nu'*er .ercenta"e

Hanoi 280 >6C

Ho 1hi 0 D0C

Bther provinces @0 7C

hole countr @80 600C

Source Hon" (200D!

Bffshore soft$are develop'ent in the I1- $orld is the ter' used to descri*e the *usiness

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of outsourcin" soft$are pro"ra''in" and en"ineerin" services to contractors or $holl/

o$ned facilities located in forei"n countries $ith lo$er la*or costs 1urrentl, India is the

lar"est provider of such services -he 'ar#et is rapidl "ro$in" so that it is esti'ated to *e$orth US 26 *illion in 2008 $ith co'parison to US 60 *illion in 200 (Source I-AA9

3uoted fro' 1ar'el and -jia, 200D! ! In addition, +ietna'ese scientists are ver stron" in the fields of applied sciences such

as 'athe'atics and phsics, and the +ietna')s education sste' continues to produce hi"hl

3ualified "raduates (International I- Services, 2002!

Secondl, another *enefit of outsourcin" to +ietna' is socio/political sta*ilit Althou"h

still considered oppressive * $estern standards, +ietna' has proven to *e *oth sta*le and

secure and is $idel reco"ni;ed as Mle"iti'ate) * the $orld)s 'ajor trade nations 1linton

ad'inistration too# steps to nor'ali;e relations $ith +ietna', si"nin" a s$eepin" trade

a"ree'ent in 2000, and relativel positive relations $ith nei"h*orin" countries have also *een

pro'oted, particularl in the $a#e of recent concerns re"ardin" Indian projects *ein"

i'pacted * tensions $ith .a#istan (1ar'el and A"ar$al, 2002!, and further tensions on the

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:orean peninsula (Gallau"her and Stoller, 200>!

-hirdl, havin" local representatives that can effectivel operate across cultures can *e a

#e to the success of "lo*al projects such as offshore outsourcin" (1ar'el and A"ar$al,

20069 Adler, 20069 1o$ard, 200! +ietna')s painful past has ielded a resource $hich is

no$ helpin" to revitali;e the nation)s econo'9 that is, the +ietna'ese diaspora, #no$n as

Viet Kieu !

Lastl, it is $orth 'entionin" the +ietna'ese culture, $hich is rich in traditional values

or instance, loalt and custo'er service are valued 'uch 'ore than in other offshore

locals -here is also a fa'iliarit $ith =uropean and estern cultures as a result of the rench

rule in the earl part of the centur and the US influence 1atholicis' is also prevalent as the

second lar"est reli"ion in the countr (International I- Services, 2002!

In su', +ietna' has the four advanta"es for soft$are industr9 lo$ costs, sta*ilit,

overseas +ietna'ese, and national culture All these factors 'a#e +ietna' an attractive

destination for offshore I1- outsourcin" In the net section, $e are "oin" to ea'ine ho$ an

individual soft$are co'pan can levera"e these vinta"e points for their o$n *usiness

(. FPT Software

.- Soft$are, a su*sidiar of .- 1orporation (inancin" and .ro'otin" -echnolo"!, is

one of the fastest "ro$in" soft$are outsourcin" co'panies in +ietna' (+iet5a'5et 4rid"e200! (-a*le 7! It started as a soft$are division of .- 1orporation in 6787, and launched

soft$are outsourcin" *usiness in 6777 (.- Soft$are 200a!

Table 7. T"e corporate profile of FPT Software

1orporate 5a'e .- Soft$are %oint Stoc# 1o'pan (A su*sidiar of .- 1orporation!

Head3uarters HI-1 4uildin", Nuan -hu, 1au Gla, Hanoi, +ietna'

Su*sidiaries .- Soft$are %apan Ltd

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.- Soft$are Asia .acific .te Ltd

='ploees 6800 (as of


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Fi$ure &. 8e!enue by )ar,et of FPT Software

Source .- Soft$are (200a!

+ietna' is rapidl e'er"in" as the third 'ost popular destination for %apanese I1-

*usinesses in soft$are outsourcin" after 1hina and India (Nikkei Computer, 200! (i"ure !

-he +ietna' Soft$are Association (+I5ASA! forecasts +ietna')s eport of soft$are

products to %apan could reach a*out US D0 'illion * 2060 (Asia Times, 200@! .-

Soft$are has "ained a foothold in %apan $hich is a lar"e, sta*le and profita*le 'ar#et $orth

around US *illion annuall (


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Source %apan)s >@ *illion &on" (US >72 'illion! fro' 27D6 *illion &on" a ear

earlier (?euters 200! Li#e$ise, the revenue and the staff of .- Soft$are are * and lar"e

dou*led ear after ear It is 'ainl the result of hi"h 3ualit of .- Soft$are)s products and

services alon" $ith the international standards9 na'el, the


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.- Soft$are provides services such as soft$are develop'ent and 'aintenance, =?.

i'ple'entation, 3ualit assurance test, 'i"ration to


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services and hi"h 3ualit s#illed $or#force, *oth of $hich are orchestrated * "ood

'ana"e'ent practices 4ein" the fast/"ro$in" lar"est soft$are co'pan in +ietna', .-

Soft$are creates reputation and trust a'on" its custo'ers and investors (Puen, 200!

irstl, the 3ualit is represented * its co'pliances $ith international standard certificates

As .- Soft$are specialists "et 'ore than 00 international certificates of first/rate I1-

co'panies includin" H., I4


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enrolled in 200 1ourses are offered in *oth =n"lish and %apanese, and the Universit is

cooperatin" $ith 'ajor private fir's and universities, includin" I4


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*arriers and stren"thenin" service 3ualities -hus, $e can contend that .- soft$are)s success

depends 'ainl on the t$o factors, 3ualit control fro' co'plin" international 3ualit

certificates on the one hand, and s#illed and 'otivated $or#force on the other, *oth of $hichare orchestrated * 3ualit 'ana"e'ent practices

. Concludin$ 8emar,s

hat are the strate"ies that the +ietna'ese soft$are industr and individual co'panies in it

should ta#e for future sustaina*ilit in the 'ar#etR Since +ietna' satisfies so'e *asic

re3uire'ents for *eco'in" a co'petitive soft$are eport countr, it is i'portant to *uild up

trust $ith clients * i'provin" the 3ualit of services, lo$erin" the level of concerns so'e

clients have on the 3ualit, and 'ovin" up alon" the "lo*al value chain Ho$ever +ietna' is

still a developin" countr $here infrastructure and do'estic 'ust *e *uilt and fortified -his

deficienc can 'a#e its current and potential clients hesitate to start *usiness in +ietna'

If $e see the case of .- Soft$are, it is successful not onl *ecause it provides service at

lo$er costs, *ut also *ecause it has successfull *uilt trust $ith its clients -o overco'e the

pro*le' of lo$ service 3ualit, the co'pan offers internal trainin" courses for technical and

lan"ua"e s#ills, and 'eets international standard 3ualit sste's in ter's of *oth 3ualit and

protection of intellectual propert ri"ht

Pualit is considered as one of the 'ost i'portant factors of successfull 'ana"ed soft$are

co'pan, especiall in offshore outsourcin" *usiness, and can *e esta*lished * co'pan)s

capa*ilit and perfor'ance (5"uen et al, 200@! hat is re3uired for sustaina*le

develop'ent in soft$are *usiness is to 'eet the international standards of the "lo*al 'ar#et

-here have alread *een various trials in +ietna' to 'a#e itself an active participant in the

"lo*al soft$are 'ar#et -he "overn'ent of +ietna' has *een trin" to inte"rate +ietna' into

the $orld econo' throu"h joinin" *ilateral a"ree'ents and -B (-a, 200@!

So'e of +ietna'ese soft$are co'panies have achieved the 1


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socialist political sste', +ietna' has *eco'e a startlin" participant $ith its stron"

co'petitiveness in soft$are industr -he "overn'ent of +ietna' sees soft$are eport as a

"ood opportunit for its econo'ic develop'ent, and is providin" various incentives to attractforei"n fir's and construct a favoura*le environ'ent for soft$are industr

Ho$ever, one 'i"ht *e concerned a*out sustaina*le develop'ent of the +ietna'ese soft$are

industr 1o'petition $ill "et 'ore intense, as soft$are 'ar#et is also seen as an opportunit

to other developin" countries -o re'ain fir' in the "lo*al 'ar#et, +ietna'ese soft$are

co'panies should enhance the 3ualit level of its service and see# innovation, not just relin"

on its lo$ cost and lar"e pool of oun" $or#force In this perspective, this report su""ests ho$

+ietna'ese soft$are co'panies can overco'e their li'itations and *e a 'ajor plaer in the

"lo*al soft$are 'ar#et * ea'inin" the case of .- Soft$are Pualit 'ana"e'ent of .-

Soft$are can *e a "ood 'odel for other +ietna'ese soft$are co'panies $hich $ould li#e to

epand their *usinesses and $or# $ith *i" 'ultinational hi"h/tech fir's

-he li'itation of the current paper is that the findin"s co'e fro' onl one success case so

that further stud is re3uired to investi"ate other success cases found in +ietna', and to find

co''onalities a'on" the' -hen such findin"s $ill help us to understand the factors re3uired

to *e sustaina*le for soft$are *usiness not onl in +ietna', *ut also in other developin"

countries

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perspective The Electronic Journal on Information Systems in Developin Countries, 20

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4alisacan, Arsenio ! 6/62

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technolo" $or#,


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a prospect for vietnam software industry - a case of fpt

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