Thursday, July 10, 2014
Opportunities, challenges for Vietnam's software industry
Vietnam has reaped many successes in developing the software industry, but to expand the market of software products, it must pay more attention to human resources and product development, and appropriate support policies must also be put in place to support software businesses, a local paper said.
Failing to compete with large groups of the US, Japan, the Republic of Korea and Germany such as Fujitsu, Hitachi and Samsung, which are governing the development of the global hardware industry, Vietnamese businesses have chosen to concentrate on software development, the Ministry of Industry and Trade's Vietnam Economic News reported.
The industry is an area where Vietnam has comparative advantages in terms of human resources and labour costs.
The State has promulgated some policies which provide support for software business development. For example, software businesses are offered an exemption from the corporate income tax for four years, personal income tax preferences offered to those who directly participate in software production, and value added tax (VAT) preferences applied to software products.
The number of software businesses has considerably increased. In 2000, Vietnam had a mere 25 software companies but now the number has increased to 3,877 companies with more than 55,000 employees.
Notably, many domestic software businesses have rapidly grown up and become capable to join competition in the home and foreign markets. Examples include the Corporation for Financing and Promoting Technology (FPT), the Tinh Van Technologies Joint Stock Company and TMA Solutions.
In 2013, FPT won bid packages for export of software solutions worth tens of millions US dollars, and now the corporation is pursuing bid packages worth hundreds of millions of US dollars. Its name is present in the list of the top 100 global service providers announced by Global Services (India) and NeoGroup (USA). TMA Solutions, with 1,500 employees and six overseas branches, has attracted customers including hi-tech companies from 25 countries.
Software development has brought in big economic benefits to many countries. In India for example, the software industry has created annual revenue of over 100 billion USD, contributing eight percent to the country’s gross domestic product (GDP).
In Vietnam, the software sector has achieved impressive growth. The country has moved ahead of India to become the second largest software exporter to Japan and stand among the top 10 software exporters in the world.
There are opportunities for Vietnam to escape outsourcing and realize the dream of creating made-in-Vietnam software products. Some domestic software businesses are boosting investment in research and development to create new products and technologies which can dominate the market. Creating their own products can bring domestic software businesses much higher revenue compared with doing the outsourcing jobs for foreign companies.
However, manpower shortages have become a challenge for domestic software businesses. They are lacking experienced engineers who are capable to master modern technologies and have good foreign language skills. FPT Management Board Chairman Truong Gia Binh said that the corporation planned to recruit more than 1,000 new employees annually but in fact it usually lacked about 300 workers.
Vietnamese software companies have limited equity capital and their access to capital sources such as the state budget, official development assistance (ODA), investment funds and financial companies remains difficult. The state support for human resources development in the field of information technology has failed to attract highly qualified human resources. Software industrial parks have yet to attract investors.
Many domestic software businesses are yet to have long-term investment strategies for product and market development. Statistics from the Ho Chi Minh City Computer Association show that just about 27 percent of software businesses have spent 10-20 percent of their total expenditure on marketing and market development; and just about 33 percent have invested in human resources development and scientific research.
Although experts predicted that there would be lots of opportunities for the domestic software industry in 2014 as well as ensuing years, it has to cope with increasingly fierce competition and meet growing market demand. To create its own advantages and catch up with developed countries, the Vietnamese software sector must hurry up in surmounting all mentioned above limitations.