September 1, 2014 7:00 am JST

Japan positions Vietnam as software development hub for SE Asia

TOKYO -- Japan is playing a growing role in Vietnam's information technology industry, both as a market for software and as a source of engineers for local software companies seeking to strengthen their edge in Asia.

     Leading Vietnamese software house TMA Solutions is one of the companies looking to score big in Japan. The Japanese market will provide "business opportunities for us because it will keep growing until the 2020 Tokyo Summer Olympics," said Phuong Ngo, director at TMA.

     Unlike most Vietnamese IT companies, TMA develops software primarily for U.S. and European clients. The company hopes to double the ratio of orders from Japan to 20% within three years.

     As part of that push, it will set up a Japanese unit by the end of this year to step up marketing targeting local companies. Ngo said the number of Japanese businesses sending officials to TMA to see its products has tripled over the past year.

Hiring binge     

Fuji Computer Network, a Ho Chi Minh City-based company that has 300 engineers working on software for Japanese clients, established a subsidiary in Japan in May. Meanwhile, Hanoi-based midsize software house Rikkeisoft is so busy that it cannot accept new orders, said CEO Ta Son Tung. The company is considering hiring more employees.

     Truong Gia Bihn, chairman of FPT, Vietnam's biggest software company, said the company will increase the number of engineers for Japanese clients to 10,000 from the current 3,000 over the next five to six years.

     Japanese-affiliated software companies in Vietnam, meanwhile, are hiring more local engineers. In addition to catering to growing local demand among Japanese clients, they want to use Vietnam as a base for developing products targeting other Southeast Asian markets.

     Evolable Asia, which has 400 engineers, hopes to have 5,000 on its payroll by 2017. NTT Data aims to increase the number from 180 to 500 by the same year, and Fujitsu, another Japanese powerhouse, plans an increase to 300 from the current 70, also by 2017.

     NTT Data Vietnam is looking for a stronger regional presence. It develops and provides its L-Series distribution and warehousing solutions software not only for Japanese-affiliated companies based in Vietnam -- such as Sagawa Express Vietnam and Acecook Viet Nam -- but also for Japanese businesses in Thailand.

     The software has attracted a large number of users in Southeast Asia because of its low prices. Its starting price of 3 million yen ($28,634) is less than 20% the amount charged for similar software developed by U.S. and European companies.

     The L-Series "has a full line of applications but is priced lower," said Akira Watanabe, president of NTT Data Vietnam. A Japanese company is even considering using the software in Japan.

High employee turnover     

Software houses in Vietnam are steadily expanding, but they are struggling with high employee turnover. The average employee turnover rate there is estimated at 20%, meaning that, if applying simple arithmetic, a company's entire workforce changes over a five-year span.

     It is "painful" to see engineers "we have fostered by teaching them Japanese and IT skills hired away by other companies," said Sei Kudo, president of Fujitsu Vietnam.

     Software houses are doing everything they can to hold onto their workers.

     Ho Chi Minh City-based TMA has held its turnover rate down to 8% to 9% by paying bonuses to members of teams that produce strong results. For employees who stay at the company for a certain length of time, TMA offers interest-free loans when they buy homes. The mortgage program has been "effective because lending rates in Vietnam are a high 12%," Ngo said.

     FPT and NTT Data have gone so far as to set up offices in Da Nang to avoid high-turnover hubs Ho Chi Minh City and Hanoi. The turnover rate in Da Nang is estimated at below 10% because people there tend to stay in the city.

     N.S. Computer Service, which farmed out software development to FPT's Da Nang office more than two years ago, has seen almost no engineers quit.

Passive attitudes

Vietnamese engineers "are motivated but appear passive" to Japanese, said Takayuki Sakurai, the Japanese general manager at Vitalify Asia, a software company in Ho Chi Minh City.

     He gives an example: If a design for a screen layout shows three icons and the manual only explains how two of them work, a Japanese engineer will ask what to do about the third icon. But Vietnamese engineers will often add the third icon to the screen anyway without asking any questions. They often fail to speculate that maybe the writers of the manual accidentally forgot to mention the role of the third icon.

     Vietnamese tend to leave questions unresolved, Sakurai said, because they do not want to be seen as ignorant or consider it rude to ask basic questions.

     Vietnamese talk about how much they like Japan, but younger people there have a real fascination with South Korean TV shows and fashion. TVs, smartphones and other products made by Samsung Electronics and LG Electronics are popular there, and local software development targeting South Korean companies is expected to increase over the coming years.

     Orders from the U.S. are gradually growing against the backdrop of rising labor costs in India. But paychecks for Vietnamese engineers will inevitably rise.

     The number of Vietnamese studying in Japan is rising, and a large number of engineers there are working hard to develop their Japanese language skills. But the siren call of the West may grow louder for the country's engineers and companies, meaning a shift toward English.

     Faced with this potential threat to their business, Japanese companies have to be careful not to come across as arrogant in doing business in Vietnam. Rather than viewing local companies as entities that can be discarded when cheaper options arise in other countries, Japanese businesses should regard Vietnamese firms as partners and work with them for mutual growth.

(Nikkei)

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