Why Vietnam Is The #1 Destination For Offshore Software Development (2025 updated)

When people think of Vietnam, they’re often met with the visual of bustling cities, idyllic mountain landscapes and sun drenched beaches. Or, perhaps, reminded of the nations war-torn history.

Very rarely do they see the country for what it has become: a thriving technology hub and Vietnam Is The #1 Destination For Offshore Software Development.

Forbes calls Vietnam a “small but mighty powerhouse” with “a highly adaptive approach to work and tech”, and its firm success as a newly-introduced member of the World Trade Organisation only serves to echo this sentiment. The 2023 A.T. Kearney Global Services Location Index™ places Vietnam seventh in Asia for outsourcing. The country hosts significant technology companies, affirming its role as an important global digital hub. This recognition drives Vietnam to continuously improve its workforce skills. 

01. Advantages to Make Vietnam a Great Place for IT Outsourcing

From education to culture to government, here’s why Vietnam should always be the first choice for your offshore software development.

1.1 High-skilled Workforce:

Vietnam's emphasis on STEM education has cultivated a robust pipeline of tech talent, with many IT professionals well-versed in English and global business practices. The country enjoys a youthful demographic, with over half of its population under 35, fostering a dynamic workforce that fuels the burgeoning IT sector. Vietnam also boasts one of the lowest unemployment rates globally.

Annually, the nation graduates approximately 400,000 IT engineers from over 150 institutions. The tech industry in Vietnam has expanded significantly, with around 70,000 digital tech firms reported in 2022, marking a substantial year-on-year growth. Many of these firms are transitioning to higher value manufacturing processes, signaling a maturing market.

Vietnam's IT talent has gained international acclaim, consistently ranking high in global coding and development skills assessments. According to a report from DataAI & APPMagic, Vietnam ranks 4th globally, with 4.2 billion downloads of apps created by Vietnamese developers.

The country’s strategic position in the tech world is further endorsed by significant investments from major technology corporations like Qualcomm and Intel, who invest in both talent and research initiatives. The stability of the IT workforce and the proliferation of outsourcing firms enhance Vietnam’s attractiveness as a prime destination for IT services.

1.2 Cost-Effectiveness:

Vietnam offers competitive pricing for software development services compared to other popular outsourcing destinations like India or Eastern Europe. This cost advantage does not come at the expense of quality, making it an attractive option for budget-conscious businesses.

Vietnam offers an enticing value proposition for IT outsourcing, boasting significantly lower hourly rates for software developers compared to other popular outsourcing destinations.

According to CIO magazine, companies outsourcing to Vietnam could see savings of up to 90% in software development costs compared to those in the United States. Further research indicates that costs in Vietnam are about 50% less than in India, making Vietnam one of the most economically advantageous options for software outsourcing globally. Vietnamese IT firms are recognized for their ability to deliver superior IT solutions at competitive prices, providing outstanding value for businesses in search of dependable and quality IT outsourcing services.

1.3 Experience with Multinational Companies:

Vietnam has a proven track record of handling complex projects for large, multinational companies. This experience builds trust and showcases the capability of Vietnamese firms to handle large-scale, sophisticated projects.

The economic environment in Vietnam is characterized by rapid growth, with the digital economy alone surging 19% to reach US$30 billion in 2023. Such growth is projected to continue, making Vietnam an attractive destination for technology investments. Furthermore, the country's electronics industry, pivotal to its manufacturing sector, has seen major multinational corporations like LG and Apple relocate part of their production here, taking advantage of the competitive costs and strategic location within Asian supply chains.

Vietnam's ability to attract and sustain foreign investment is also evidenced by its impressive FDI inflows, which reached US$36.6 billion in 2023, a 132% increase from the previous year. This growth reflects Vietnam's increasing appeal as a high-tech hub within Southeast Asia, supported by its strategic economic policies and stable political environment.

1.4 Cultural Compatibility:

Research on the personality traits of Southeast Asia reveals that Vietnamese professionals are distinguished by their exceptional work ethic, being highly diligent, dutiful, and responsible. These cultural traits are pivotal for fostering productive team dynamics and are essential for successful remote collaborations.

The strong sense of loyalty and dedication among Vietnamese software developers enhances stability and continuity within teams, boosting productivity, facilitating the sharing of knowledge, and strengthening professional relationships. This cultural backdrop, when combined with the technical expertise of Vietnamese developers, positions them as invaluable assets for companies seeking dedicated and dependable team members for remote software development projects. These attributes make Vietnam an attractive option for businesses looking to outsource software development efficiently and effectively.

1.5 Socioeconomic Stability & Covid19 Resilience

Investing in a nation characterized by socio-economic stability can significantly enhance the success of businesses ranging from startups to multinational corporations. Political stability is crucial as any turbulence can disrupt outsourcing activities, leading to increased costs, delays, and suboptimal results. For instance, disruptions like the Russian invasion severely impacted Ukraine's thriving tech sector, notably causing significant internet outages that affected business operations severely.

Vietnam, as stated by the UK government, stands out as “one of the more stable countries in Southeast Asia,” with effective control over domestic conflicts. It has shown a remarkable upward movement in the Global Peace Index, climbing from 50th in 2021 to 44th in 2022. Economically, Vietnam boasts one of the highest GDP growth rates in the region at 13.67% in 2022 and has demonstrated strong resilience to the global impacts of Covid-19. As of December 2022, Vietnam effectively managed the pandemic with high vaccination rates and maintained open borders for international visitors.

During the challenges of food and energy crises and rising inflation in 2022, Vietnam maintained an inflation rate between 3% and 4%. This rate is notably lower than many of its global counterparts, highlighting the country's economic stability and resilience amidst global economic uncertainties. This stable economic environment makes Vietnam an attractive destination for investors seeking reliable growth and stability in Southeast Asia.

1.6 Vietnam’s Continuous Effort to Protect Intellectual Property

Vietnam has increased its ranking in the International IP Index 2023. The country's score rose from 38.72 percent in 2022 to 40.74 percent in 2023, according to the intellectual property (IP) index published by the US Chamber of Commerce Global Innovation Policy Center (GIPC). Vietnam has jumped up a notch to 40th position in the International IP Index 2023.

In recent years, information technology has become one of the key economic sectors in Vietnam and the government has been investing a great deal in education to stimulate the growth of the sector, specifically Stem (science, technology, engineering, math’s) education. Vietnam has been praised for making great efforts to align its IP Laws with EU FTA and CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) in compliance with existing agreements. “Strengthen the protection of copyright online as well as improve the technological protection measure and digital rights management environment.”, according to the drafted IP Law. This has increased the confidence of businesses choosing Vietnam as an outsource destination as the laws and government of Vietnam fully protects businesses intellectual property rights.

1.7 Quality of Talent:

Employers may perceive the quality of talent in Vietnam as being higher for certain technological roles, influenced by the educational system's focus on STEM fields and the availability of advanced technical training.

1.8 Industry Specialization:

Vietnam has developed particular strengths in certain areas of technology, such as software development and electronics manufacturing, which require specific skills that are in high demand.

02. Challenges of software outsourcing in Vietnam

Despite numerous advantages, here are some drawbacks of software outsourcing in Vietnam:

2.1 Time difference

A shared challenge in offshore development is the timezone barrier. Vietnam, at GMT+7, is 11 hours ahead of the US and 7 hours ahead of the UK. This can hinder real-time collaboration in agile development. Clients can consider a project-based model for reduced interaction or establish effective communication and reporting methods with developers to address the timezone gap.

2.2 English is not a native language

English is not a native language in Vietnam, and communication in English with Vietnamese IT providers might not always be flawless. Despite English being used in business for many years, it's a key challenge when outsourcing IT to Vietnam. To tackle this, IT companies encourage English learning and practice. Clients should assess communication skills, particularly in project leads, and prioritize vendors with strong experience working with international clients.

2.3 Market Demand and Supply:

Vietnam's tech industry has been growing rapidly, with significant investments in tech education and infrastructure. The demand for skilled IT professionals often outstrips supply, which can drive up rates.

Summary

According to Global Software Outsourcing Reports, Vietnam is in the top 5 best software outsource destination. As IT outsourcing is becoming a common choice of worldwide tech firms, Vietnam can be one of the go-to destinations with the effective cost while mitigating the risk of complicated cyber attacks.

If you want to learn more about the nuances of software development, give Groove Technology a call. We’re always happy to advise and contribute to your decision-making process!