In 2000 when Harvey Nash, a British recruitment consultancy firm, began their hunt for an offshore destination for a new software-development business, Vietnam wasn’t an obvious choice. But when their inspection team returned from Hanoi and assessed the options, the Vietnamese capital emerged as the top choice.

“There are many locations other than India that can be leveraged for their capabilities. Vietnam is one of them,” says Paul Smith, Global Managing Director, Outsourcing and Software Development, Harvey Nash. “I see a lot of potential in Vietnamese cities.” 

What was it about Hanoi that attracted Harvey Nash to the city? It was a mix of low wages, improving English-language skills, less frequent job-hopping compared to other offshore destinations, and technical proficiency helped tip the balance in the city’s favor. These were the same reasons that led Global Services to rank Hanoi number 12 among 50 emerging outsourcing destinations in a report that it published in October 2007.

Wages in the city are about a third lower than China’s (programmers earn about one-tenth of what computer programmers make in the U.S.A.), and the staff turnover rate is only about 5 percent. Moreover, with more than half of its population under 30 years of age, Hanoi’s talent pool is deep and rising.
At the same time, the city is a strong base for finance and accounting services, the strong mathematics skills of the population being an asset for this type of work. “In the World Mathematics Olympiad, Vietnam ranked 3rd, whereas the U.K. and India were on 23rd and 28th position respectively,” says Smith.
The city also offers tax holidays to investors, and industrial land here is cheaper than in China, making it favorable destination for investment.

Yet, the city lags behind its global competitors in terms of the quality of telecommunications. However, the Viet Nam Post and Telecommunications in Hanoi is working toward improving this infrastructure — in June last year, it introduced fiber-optic broadband to meet the growing demand for broadband and wireless services.

Moreover, corruption and bureaucracy remain a bit of a problem here. But, the bureaucracy here is less than in the other major offshoring destinations. According to Doing Business 2008 study by the World Bank, today the number of procedures that need to be followed to start a business in Vietnam are 11. This is less than the number of procedures to be followed in China (13), India (13) and the Philippines (15).

HANOI: QUICK TAKE

Currency: VND (US $1 = 16,025 VND)

Key Service Providers: Harvey Nash, IBM, Intel, QSoft Vietnam, SilkPro, Spi Technology, Vietnam Offshore Services, VietSoftware International

Key Processes: Application development and management, finance and accounting, product testing and devel

Languages:  Vietnamese, English, Chinese, French

GDP (official exchange rate): $48.43 billion (2006 est.)