Introduction

Vietnam has become one of the most preferred technology and innovation destinations for international organizations seeking to outsource for skilled technology professionals. It has a cheap labor force, and an extremely talented workforce who are young and capable of handling the rising economic growth of the country. Many large cities such as Hanoi, Ho Chi Minh City, and Da Nang have many chances to develop cooperation and develop technologies.

This blog aims to discuss why we should set up a tech team in Vietnam, how to integrate the team effectively and some important factors that should be taken into consideration by businesses. As a startup or an enterprise company comprising of multiple years of experience or as a new-generation technology firm, it is paramount to understand Vietnam’s technology landscape for new possibilities to thrive in the digital age.

The Rise of Vietnam in the Global IT Outsourcing Market

Vietnam has established itself as a significant player in the global IT outsourcing market, driven by its robust economic growth and a young, tech-savvy workforce. According to Statia projections, the revenue in this market is set to reach US$694.80m in 2024, with a compound annual growth rate (CAGR) of 12.23% from 2024 to 2029, resulting in a market volume of approximately $1.24 billion by 2029.

The Southeast Asia Startup Talent Report 2023 highlights Vietnam's position as a tech talent hub, noting that the country produces a new generation of engineers and programmers thanks to significant investments in STEM education. With over 530,000 IT engineers and around 50,000 IT graduates annually, Vietnam is well-equipped to meet the demands of the global tech market.

Popular Vietnam Technology Services

Therefore the Vietnam IT outsourcing market has the reputation of offering numerous technology services that meet every client’s needs internationally. These services, together with Vietnam’s recent shift to being branded as a country for quality delivery and creativity, have placed Vietnam among the best places to consider when outsourcing your IT services. These include:

• Web Development: Web design and development, customer relation management, and electronic commerce.
• Mobile App Development: Native iOS and Android applications, hybrid mobile applications, and applications for multiple platforms’ maintenance.
• Software Development: Application software, software as a service solution, software solutions hosted on the cloud.
• UI/UX Design: Web usability and design strategies for creating better digital products for consumers.
• DevOps Services: The unification of cloud infrastructure, continuous integration and continuous development pipelines, and deployment.
• QA and Testing: Overview of manual and automated testing as the methods of software quality assurance.

Read more: Vietnam IT outsourcing market: Opportunities and challenges in the digital age

Why Build a Tech Team in Vietnam?

Building a tech team in Vietnam presents numerous advantages that make it an attractive option for businesses looking to enhance their technological capabilities. Here are some key reasons why Vietnam stands out as a prime destination for tech talent.

Cost-effectiveness Compared to Other Outsourcing Destinations

One of the most compelling reasons to build a tech team in Vietnam is its cost-effectiveness. Labor costs in Vietnam are significantly lower than those in developed countries, such as the United States and Singapore. According to a report from VnEconomy, the average salary for software developers in Vietnam in 2024 is estimated to range from $1,100 to $3,000 per month, dsepending on experience and skill level. In contrast, similar roles in the U.S. command salaries between $7,000 and $12,000 per month.

This cost advantage allows companies to access high-quality talent without incurring exorbitant expenses, making it feasible to scale operations efficiently. Moreover, the cost of living in Vietnam is much lower compared to Western countries. This economic edge enables businesses to maintain high-quality standards while achieving substantial savings on salaries, office space, and operational expenses. As reported by CIO magazine, outsourcing service providers in Vietnam are capable of charging up to 90% less than their counterparts in the United States; and about 30%-50% less than other outsourcing nations such as India and China.

High-quality Tech Talent with Strong Technical and Language Skills

Vietnam has secured the 7th position in Kearney’s 2023 Global Service Location Index. The IT sector is projected to exceed $3 billion in revenue by 2025, with a compound annual growth rate (CAGR) of approximately 12.25% until 2029 in the IT outsourcing segment.

• Education: This achievement is driven by significant strides in education, particularly in STEM (Science, Technology, Engineering, and Mathematics) fields. The nation produces around 57,000 IT graduates annually from over 300 universities and educational institutions specializing in IT, such as Hanoi University of Science and Technology and Vietnam National University. This influx of graduates contributes to a growing pool of skilled professionals capable of meeting the demands of the rapidly evolving tech industry.
• Proficiency: Another advantage of Vietnamese IT talent is that their professionals possess strong English language skills, which greatly enhance their ability to communicate with international teams. According to a 2023 report by the British Council, approximately 80% of Vietnamese workers in the IT sector have a good command of English, which is increasingly recognized as a valuable asset in the global market.
• Adaptability: Additionally, the younger workforce in Vietnam, with an average age of around 28 years, demonstrates a high level of adaptability to international project management methodologies. This flexibility facilitates effective collaboration within diverse teams and positions Vietnamese tech professionals to thrive in global environments.

The combination of language proficiency and a youthful, adaptable workforce makes Vietnam an attractive destination for companies seeking to optimize their software development efforts.

A Growing Ecosystem of Startups and Innovation Hubs

Vietnam's startup ecosystem is rapidly evolving, supported by numerous incubators and accelerators that foster innovation. Cities like Ho Chi Minh City (HCMC) and Hanoi are home to thriving communities where entrepreneurs can collaborate and innovate. The government has been proactive in supporting startups through funding initiatives and tax incentives, further enhancing this ecosystem's growth potential.

For instance, the Vietnam National Innovation Center (NIC) was established to support startups and promote innovation across various sectors. This center provides resources such as mentorship programs, networking opportunities, and access to funding for emerging tech companies. As a result, Vietnam's tech landscape is becoming increasingly vibrant and competitive.

Government Support for the IT Sector and Education

The Vietnamese government plays a crucial role in fostering technological innovation and supporting the IT sector. Initiatives include significant investments in educational programs focused on technology and partnerships with private companies aimed at enhancing workforce skills. For example, the government has introduced policies that provide tax benefits for technology companies and incentives for foreign firms establishing operations in Vietnam.

Additionally, favorable international trade agreements facilitate foreign investment in Vietnam’s tech landscape. These agreements not only enhance trade relations but also create a conducive environment for businesses looking to tap into the growing Vietnamese market

Steps to Successfully Build Your Tech Team in Vietnam

Building a successful tech team in Vietnam requires careful planning and strategic execution. Here are the essential steps to ensure your team is structured effectively and integrated seamlessly into your global operations.

Defining Your Tech Team’s Structure and Objectives

The first step in building your tech team is to clearly define the team's structure based on your business objectives. This involves identifying the specific roles necessary for your projects, such as software developers, data analysts, product managers, and quality assurance specialists.

• Assess Project Needs: Evaluate the scope of your projects to determine how many team members you need and what expertise they should possess. For instance, a startup focused on mobile app development may require a mix of front-end and back-end developers, while a data analytics project might necessitate data scientists and analysts.
• Establish Clear Objectives: Align the team's goals with your broader organizational strategy. This alignment ensures that everyone understands their role in achieving overall business objectives. For example, if your goal is to launch a new product within six months, your team structure should facilitate rapid development cycles and agile methodologies.
• Consider Team Composition: A balanced team typically includes a mix of experienced professionals and junior developers. This combination not only helps manage costs given that junior developers command lower salaries but also fosters mentorship opportunities that can accelerate skill development within the team. According to industry insights, hiring junior developers alongside experienced ones can enhance productivity while maintaining budget efficiency.

Partnering with Local Recruitment Agencies or Outsourcing Providers

Collaborating with local recruitment agencies or outsourcing firms can significantly streamline the hiring process. These organizations have extensive networks within the Vietnamese job market and can help identify suitable candidates more efficiently than if you were searching independently.

• Utilize Local Expertise: Recruitment agencies understand local market trends, salary benchmarks, and candidate availability. They can provide valuable insights into the best practices for attracting talent in Vietnam's competitive tech landscape.
• Speed Up Hiring: By leveraging these agencies, you can expedite the hiring process, allowing you to focus on other critical aspects of your business while ensuring that you find qualified candidates quickly. Many agencies also offer services like pre-screening candidates, which saves time during the selection process.

Implementing Competitive Compensation Packages

To attract top talent in Vietnam's competitive job market, it’s essential to offer competitive compensation packages that reflect both local standards and global benchmarks.

• Benchmark Salaries: While salaries in Vietnam are generally lower than in Western countries, they should still be appealing enough to attract skilled professionals who may have multiple job offers. For instance, offering salaries that are 20% above average can significantly boost your chances of securing top talent. According to the Vietnam IT Market Report 2024 – 2025, TopDev indicates that the average salary for software developers in Vietnam ranges from $1,200 to $2,500 per month, depending on experience.

• Incorporate Benefits: According to the Southeast Asia Startup Talent Trends Report 2024 by Glints, flexible work arrangements, including hybrid models, are becoming a top strategy for startups in the region to retain talent. The report indicates that approximately 45% of Southeast Asian startups are implementing these flexible work options to enhance employee satisfaction and retention. This trend reflects a growing demand for work-life balance among employees and is expected to continue into 2024.

Read more: Southeast Asia Startup Talent Trends Report 2024

Ensuring Effective Onboarding and Integration into the Global Team

Once you have hired your team members, effective onboarding is critical for their integration into your global operations. This process should encompass several key elements:

• Training on Company Culture including company's values, mission, and culture.
• Familiarization with Tools and Processes such as project management software, communication platforms
• Clear Communication of Expectationsregarding performance metrics, project timelines, and collaboration practices.

By following these steps, defining your tech team's structure and objectives, partnering with local recruitment agencies, implementing competitive compensation packages, and ensuring effective onboarding, you can successfully build a high-performing tech team in Vietnam that aligns with your business goals and drives innovation in a rapidly evolving digital landscape.

Key Considerations for Building a Tech Team in Vietnam

When considering building a tech team in Vietnam, several key factors must be taken into account. These considerations will help businesses navigate the complexities of hiring and managing talent in this rapidly evolving market.

Hiring Models: Outsourcing vs. Setting Up Your Own Team

One of the first decisions companies must make is whether to outsource their IT needs or establish their own internal teams within Vietnam. Each model has its advantages and disadvantages:

• Outsourcing: Outsourcing includes approaches like Onshore, Nearshore, and Offshore outsourcing. Onshore provides easier communication and compliance, Nearshore balances cost-efficiency with manageable time zones, while Offshore, such as in Vietnam, offers lower costs and access to skilled talent. This model provides flexibility, enabling companies to quickly scale and access specialized skills without the overhead of maintaining full-time staff. For instance, many companies utilize the Team as a Service (TaaS) model, which allows them to access specialized skills on demand while minimizing long-term commitments. Additionally, IT staff augmentation is a flexible outsourcing option, where external developers are integrated into existing teams to fill specific skill gaps or boost capacity for critical projects.
• Setting Up Your Own Team: Establishing an internal team offers greater control over project management and team dynamics. This model is ideal for companies that require consistent collaboration and integration with their existing operations. However, it often involves higher initial costs related to recruitment, office setup, and compliance with local labor laws. Businesses that choose this route must be prepared to invest time and resources into building a cohesive team that aligns with their corporate culture.

Ultimately, the choice between outsourcing and building an internal team should align with the company's long-term strategic goals and project requirements.

Legal and Regulatory Framework: Labor Laws and Compliance

Understanding Vietnam's labor laws is crucial for compliance when building a tech team. Companies must familiarize themselves with regulations concerning:

• Employment Contracts: Vietnamese labor law mandates that employment contracts be in writing and include specific terms regarding salary, working hours, and job responsibilities.
• Work Permits for Foreign Staff: If your team includes foreign employees, obtaining the necessary work permits is essential. The process can be complex, requiring documentation such as proof of employment and qualifications.
• Legal Considerations: Companies should also be aware of regulations regarding employee benefits, termination procedures, and workplace safety standards. Non-compliance can lead to legal challenges and financial penalties.
• Insurance and Tax: Employers in Vietnam are required to contribute to social insurance for their employees, which includes health, unemployment, and retirement insurance. The contribution rates are 10.5% from employees and 23.5% from employers based on the employee's monthly salary. Additionally, foreign employees must have health insurance if they hold labor contracts longer than three months.

Infrastructure and Office Setup: Co-working Spaces vs. Dedicated Offices

Deciding on the right office space is another critical factor in establishing a tech team in Vietnam. Businesses typically have two main options:

• Co-working Spaces: These are flexible and cost-effective, making them ideal for startups and small businesses. They provide shared resources and foster collaboration but may lack privacy and a distinct brand identity.
• Dedicated Offices: Offering greater control over the work environment and tailored branding, dedicated offices are better suited for larger teams or projects requiring confidentiality. However, they come with higher costs for rent and maintenance.
• Remote Work: Increasingly popular, remote work reduces overhead and offers flexibility for employees. It’s especially appealing for tech teams but demands robust communication tools and clear strategies to ensure productivity.

Challenges in Hiring and Retaining Talent: Competition and Cultural Adaptation

While talent is abundant in Vietnam, competition among companies can be fierce. To attract and retain top talent, businesses must develop effective strategies:

• Attracting Talent: The National Strategy for Talent Attraction, approved by Prime Minister Pham Minh Chinh, aims to attract and retain skilled professionals in key sectors such as science, technology, education, and healthcare by 2030, with a vision extending to 2050. This strategy emphasizes the importance of drawing Vietnamese professionals from abroad back to the country, enhancing the local workforce with their expertise and experience.
• Retaining Talent: To retain skilled workers, companies are encouraged to foster a supportive work environment that values employee well-being. This includes implementing policies that respect individual contributions and providing clear pathways for career advancement. A focus on creating a collaborative culture can help maintain high employee morale and reduce turnover rates.
• Cultural Adaptation: Understanding local cultural nuances is vital for integrating international talent into Vietnamese teams. For example, Vietnamese professionals often value teamwork and respect for hierarchy. Organizations can facilitate smoother integration by promoting open communication and recognizing the importance of building personal relationships in the workplace.

Read more: IT Outsourcing Market: Comprehensive Size, Trends, and Growth Forecast (2025-2029)

Conclusion

Vietnam offers a unique combination of skilled talent, cost advantages, and an innovative environment that makes it an ideal destination for building a tech team. By leveraging these opportunities, such as government support for technology initiatives, businesses can drive success while scaling operations effectively within this competitive global market.

In conclusion, establishing a tech team in Vietnam not only provides access to high-quality resources but also positions companies strategically within one of Southeast Asia's most dynamic economies. With careful planning around recruitment models, compensation strategies, compliance considerations, and cultural integration practices, organizations can unlock significant potential within this burgeoning tech landscape.