The IT industry: challenges are still ahead

Although it grows fast over the past 10 years, the information technology (IT) industry still encounters scattered development and its productivity remains modest. Vietnamese IT businesses in general are still less competitive. An appropriate long-term development strategy, development of specialized businesses, support industry development and workforce quality improvement are important for promoting the IT industry.

Tran Quy Nam from the IT Department of the Ministry of Information and Communications said that the Vietnamese IT industry grew 20-25 percent per year over the past 10 year and that it grew 18-20 percent per annum even in time of global financial crisis and economic recession in 2008 and 2009. Meanwhile, almost all other economic sectors in Vietnam just grew 6-11 percent per year, he said. The Vietnamese IT market is expected to reach more than US$7.5 billion in revenue in 2010, Nam added.

Vietnam’s hardware revenue has reached US$4.69 billion, which is eight times that in 2000, while the country’s software revenue has increased from US$58 million in 2000 to US$880 million. The number of people working in the software industry has increased 15 times compared to 2000.

Being small in size, finance and productivity, Vietnamese IT companies in general are less competitive and still encounter many difficulties in carving a market niche. While they make up a major contribution to the IT industry, computer electronics and hardware have a low added value and are mainly made up with product assembly. The vast majority of parts and components used for assembly are imported. Although Vietnam is a top-ten software outsourcing destination in he world it not yet attracts world leading software groups’ investment in production and R&D (research and development) in the country. North America and Japan are still major markets of Vietnamese software outsourcers. Among more than 1,000 software companies in Vietnam, only 10 have over 1,000 employees and the remainder just have 150-200 employees each.

Vietnam not yet has notable digital content products that carry its own brands, such as online games, search tools, websites, etc. In the country, few IT businesses are specialized in digital content, while many businesses run mixed operation as they provide software, telecommunications and Internet services at the same time. IT services of Vietnamese businesses in general remain poor in quality. About 10,000 businesses have registered to provide IT services in Vietnam but only 3,000 of which really operate.

Tran Quy Nam from the IT Department of the Ministry of Information and Communications said that human resource is integral for competitiveness improvement. Vietnamese engineers’ average productivity is only US$13,000 per capita per year, which is 45 percent of that in India and 65 percent of that in China, he said. Here in Vietnam, investment in marketing, R&D and manpower is still needed, Nam said. The Ho Chi Minh City Computer Association (HCA)’s statistics indicate that of all software businesses in Vietnam, only 27 percent invest in marketing and 33 percent use 5-10 percent of their revenue for spending on training and R&D. Nam said that Vietnam needs to early form highly specialized businesses that develop and provide open-source software products and services, support industry products and important IT products, and that priority should be given to provision of products and services for health, education, environmental, land administration, agriculture, transportation and state administration industries. Digital content products need to be developed, while ways need to be found to sell products/services to Southeast Asia, Eastern Europe, South America and the Oceania.

FPT Information System Corporation general director Duong Dung Trieu said that lack of long-term projects and customers, skilled workforce and professional administration processes is a major challenge for Vietnamese IT businesses. Developing software while at the same time providing software services and constructing a domestic software market that functions as a motivation for approaching customer’s core software to be competitive with foreign rivals are important, he said.

Trieu said that it is important to improve the value of the Vietnamese software business community through bettering customer’s values related to programming, project consultancy, design and administration, and business process outsourcing (BPO). To do that it is necessary to promote the role of domestic EPC (engineering, procurement, construction) partners, strengthen technology transfer, issue policies that pave the way for software purchase, improve workforce administration and training, increase software and software service construction price norms, issue legal documents on public-private partnership and promote software and software service export. – VEN

Tags: Vietnam IT industry, Vietnam IT sector

Posted by VBN on Oct 5 2010. Filed under Technology. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry