Offshore software company in Vietnam

Offshore software company in Vietnam

How much does a programmer cost in Vietnam and what does Uncle Ho have to do with software? The first part of a report on the software industry in Vietnam.

It’s not that different from Switzerland at Axon Active and Orient Software in Ho Chi Minh City on the six-lane road leading from the airport to the city center. There are desks, screens, PCs, and many young people researching tools, discussing in teams, writing code, or holding Skype conference calls with colleagues in Russia, Switzerland, and Scandinavia. Perhaps the workspaces are a bit closer together than in Glattbrugg, perhaps programmers in Ho Chi Minh City are more often barefoot than in Basel, and perhaps there is slightly less casual chatting than in St. Gallen – but otherwise?

Of course, there are differences. At noon, the lights are dimmed, and some of the young programmers and developers take a nap – on their chairs, on the floor, in the meeting room. You encounter sleeping individuals everywhere and at any time during the super-hot Vietnamese summer: taxi and motorbike drivers wait in sleep for customers, who gently wake them when needed, and the beautiful garden restaurants along the main roads are furnished with frequently used hammocks. However, the female programmers at the software companies in Ho Chi Minh City that we visited did not appear sleepy at all (except during lunch) but seemed almost unnaturally focused throughout.

Female programmers? Correct – that is another difference. While not quite half, a significant minority of software engineers in Vietnam are women. Why are Vietnamese women more interested in technical professions than women in Western Europe? For Nhung Nguyen, who as Managing Director of Axon Active Vietnam and founder, head, and owner of her own company Orient Software Development is hardly susceptible to crude party propaganda, there are historical reasons. “Uncle Ho strongly promoted women and enforced the respect of women's rights during the war, as women were responsible for supporting the front. The fact that women study science is something we inherited from the Communist Party. Additionally, mathematics, chemistry, and physics count double in high school and university.” (Uncle Ho is the common reference to the Vietnamese revolutionary leader Ho Chi Minh.)

Much effort to retain people

56,406 young people began training as computer scientists in Vietnam in 2009 across a total of 271 universities and technical schools. So there will be no shortage of “supply” of intellectual resources for software development. However, not only Swiss software companies have noticed this. The big players, including the Indian giants, are all already here. For example, Hewlett-Packard wants to establish a development center in Ho Chi Minh City with around 1,000 people.

Experienced developers, especially those with Java knowledge, have become rare in Ho Chi Minh City and now earn significantly more than they did three years ago, says Markus Baur, CEO of Axon Active Vietnam. An additional problem is that Java is still treated as a stepchild at Vietnamese universities – Java developers therefore earn more than .Net or PHP developers.

Successful recruitment of engineers, as well as the training and education of very young people, is therefore crucial. Applicants must first pass an exam, then go through a technical interview, and are also personally interviewed afterward. Furthermore, companies like Axon and Orient Software offer evening English courses. Axon Active is now also training 10 junior developers at the bachelor level for one year.

To retain people, an employer must offer more than just a reasonable salary. Axon and Orient Software have, for example, a (good – we tried it) staff restaurant, two sports teams for leisure, annual company outings, and teams sometimes go out for a beer in the evenings.

Offshore is not offshore

The reward for this is a relatively low turnover rate and teams that stay together for years and identify with the client due to daily personal contacts. For Baur, this is one of the prerequisites for successful offshore software production. He repeatedly emphasizes that Axon does not offer “normal,” project-based offshore development. The client works with stable teams for years and builds up their own know-how. Moreover, Axon never shifts developers between different teams, as competitors in India often do. With the concept of “Offshore Development Centers,” development in Asia (and thus product innovation) also becomes possible for SMEs in Switzerland, Baur emphasizes.

However, a prerequisite for this is that the Swiss client identifies with their teams just as much as vice versa. Baur has had bad experiences with young and inexperienced Swiss engineers who misinterpreted Asian politeness and began to feel “superior.”

Baur also sees a problem in the fact that there are many small and unprofessional software companies in Vietnam. These “develop software without structures and quality assurance at low prices,” Baur says, and also pay their people relatively poorly. If a Swiss client then has bad experiences with such companies, they quickly claim that offshore development in Vietnam simply does not work.

Numbers – very concrete

A programmer earns between 400 and 1,300 dollars per month in Vietnam, according to Baur. When all mandatory and voluntary social contributions and other costs are added, this doubles to about 800 to 2,600 dollars per month.

As with project-oriented offshore development, there is also a minimum size for the Axon Active concept. Baur believes that a client must form at least a team of four people for at least one year for it to be worthwhile to start.

It is different with the “closer” company Orient Software, from which Axon Active Vietnam was created in 2008 and whose founder is still also the Managing Director of Axon. There, a project can make sense starting from a minimum of 5,000 dollars per month, according to Baur.

“The next location will follow immediately”

Baur and Nhung are obviously successful with Axon Active Vietnam. The growth brake is not the demand from clients, but the ability to find enough qualified people and build teams with them.

That’s why Axon is now taking the next step and will open a second branch in Da Nang in the coming weeks, where there are good universities and the city is also massively promoting the software location. In the not-too-distant future, another 50 engineers will be building software for Axon Active and their Swiss clients there.

Building in Vietnam, reducing in Switzerland?

The crucial question must not be missing in any article about the development location Vietnam: “How many jobs will be lost in Switzerland because of Axon Active?” Baur: “Not a single job will be lost in Switzerland because of us. The opposite is true. We enable new products to be developed in Switzerland. Without us, that would not be possible at all, because developers are lacking everywhere. We are not taking anyone’s job away, because programmers in Switzerland can now develop new products and services with their teams. A Swiss programmer has a much larger and better output with their know-how and a team in Vietnam, and thus also more job satisfaction.”

It is somewhat different for Baur with large, project-oriented offshore developments in India. There, requirements are sent in a package to India, and the software comes back as a package. (Christoph Hugenschmidt)

Read in Part II of “In the Software Factories of Vietnam” how Nhung Nguyen built her software company, why there is still almost no Vietnamese software market, and what strategy the Vietnamese software giant TMA Solutions is pursuing.