- Vietnam’s
information technology sector is experiencing high growth, driven by low
costs and high-quality labor.
- Vietnam
has now become the eighth largest provider of IT services globally.
- The
IT industry is supported by the government with tax and labor incentives,
further propelling its growth.
As
Vietnam moves from low-tech manufacturing to a service-oriented economy, the
country’s information technology (IT) market is increasingly gaining traction,
giving competition to IT firms in China and India. This has partly been
encouraged by the growth of Vietnam as a regional market for domestic
enterprises and global technology vendors.
As
Vietnam adopts Industry 4.0 across all industries, investors should consider
the benefits of locating their IT business to the country.
Most of the industry is foreign-invested, with
multinationals funding projects to build electronic components in the country. At
least 86 percent of total IT revenues in 2017 were derived from hardware.
Five IT industries that are currently trending
To understand such strong growth, and what is
contributing to it, we examine five sub-sectors that show potential and are
currently trending in Vietnam’s IT sector.
·
Fintech
Vietnam’s fintech industry is expected to reach
US$7.8 billion in revenue by 2020. A rising middle class, growing internet
usage, and a young population present a great combination for the fintech
sector to thrive. An estimated 120 companies and brands cover a wide range of
services, from digital payments to wealth management and blockchain.
Blockchain and cryptocurrency is the third segment
in this sector that is increasingly gaining traction. Several companies deal in
cryptocurrency, allowing consumers faster and cheaper transactions. In 2018,
Vietnam held its first-ever international conference on blockchain and its
potential for development in the country.
·
ArtificialIntelligence
The artificial intelligence sector (AI) industry in
Vietnam shows strong potential. While still developing, AI in the country has
followed global trends in application to human resources, education,
healthcare, agriculture, transport, and e-commerce.
A good example of how AI is being used domestically
can be found in Vietnamese IT service Conglomerate Corporation, which has used
AI for smart traffic in Ho Chi Minh City. A telecommunication group has used AI
in endoscopy for their operations in Vietnam. The group is also using AI to
fight cyberattacks and help businesses deal with internal IT security.
·
E-commerce
Vietnam’s e-commerce market could be ranked third
after Indonesia and Thailand by 2025. Vietnam’s e-commerce activity is most
active in Hanoi and Ho Chi Minh City. Sales from
these cities account for 70 percent of the country’s total. This represents a
significant opportunity to penetrate rural markets – rural internet
connectivity is strong, and a majority of the population lives there.
Over the last four years, Vietnam’s internet economy
has attracted over US$1 billion in funding, but customer trust, high
competition, and logistics costs remain challenges for e-commerce companies in
the country.
·
Softwareoutsourcing
Software outsourcing has gained traction over the
last decade in Vietnam. According to a survey by US-based software vendor, 73
percent of organizations will use software outsourcing.
Vietnam has emerged as a cheaper outsourcing
destination compared to traditional markets, such as China and India.
This helped the software industry reach revenues of US$8.8 billion in 2018,
according to a largest services association.
The government is developing high-tech parks and is
offering several incentives to further the industry. For example, Da Nang has developed as a software
outsourcing center, particularly for Japanese businesses.
Still, challenges exist, and Vietnam needs to
develop large scale IT outsourcing to compete with global players. In addition,
more attention will be needed to improve English-speaking skills to cater to
global firms.
·
Education
technology
Vietnam’s education technology (Edtech) has received
investments worth US$55 million in 2018. This investment is largely driven by
Edtech centers’ ability to bridge the gap between traditional education
environments and learning needs inspired by the private sector. Vietnam’s
kindergarten through grade 12 population is a large market with locals spending
up to 40 percent of their disposable income on education.
Strong growth trajectory, supported by government
The government prioritizes investment in IT and incentives investment in this space. IT companies are eligible for a
corporate income tax exemption for up to four years, followed by a 50 percent
tax reduction for up to nine years.
Resolution No 41/NQ-CP lays
out specific preferential policies for the IT sector, including a 50 percent
reduction in personal income tax for workers employed in the IT sector.
The government is also increasingly setting up
high-tech parks around the country. In addition, these parks allow additional
incentives such as land rent exemption for IT businesses inside the parks. Vietnam’s
IT growth is expected to remain intact growing approximately 30 percent a year.
Universities are also churning out highly skilled
graduates coming a long way from a decade ago when investors complained of
re-training newly recruited staff. The government wants to develop one million
IT workers by 2020. Right now, more than 25,000 technical engineers graduate
from universities every year.
Nevertheless, both the government and the private
sector will need to continue to develop the local industry. Its development to
date shows a promising growth trajectory for regional players.
About us: TMA Solutions was established in 1997 to provide quality software outsourcing services to leading companies worldwide. We are one of the largest software outsourcing companies in Vietnam with 2,400 engineers. Our engineering team was selected from a large pool of Vietnam IT resources; they are well-trained and have successfully completed many large and complex projects.
Visit us at: https://www.tmasolutions.com/
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