As an outsourcing location, Vietnam is about 10 years behind India. It has attracted attention because its education systems are good, but its graduates lack adequate English proficiency. Telecommunications, power and buildings need improvement, and uncertainty about the region's stability remains.

But that hasn't stopped outsourcers from setting up shop in the country or some adventurous U.S.-based clients from outsourcing their operations there.

QualityLogic Inc., a software quality testing company in Moorpark, Calif., began outsourcing the development of specialized software for printers and fax machines in August 2002 to Global Cybersoft Inc. (GCS), a San Jose firm with operations in Ho Chi Minh City.

The first challenges that QualityLogic faced included the 14-hour time difference and language barriers. To solve both problems, employees communicate chat and e-mail. "The English skills of the engineers, while they may be good in written form, are sometimes difficult to work with in spoken form," says James Mater, QualityLogic's president. "Overall, the Vietnamese staff is young and eager to learn. We find chat sessions are really good."

But Vietnam faces other hurdles. By 2005, the Vietnamese government wants to employ 50,000 IT workers and become part of the World Trade Organization. To reach those goals, "they'll have to get their act together," says Heinz Platten, vice president for offshore business development at GCS. "They have to modernize the banking system, infrastructure, phone system. Once they're part of the WTO, it will probably be easier to attract business."

The country's progress wasn't helped by the SARS epidemic. "Vietnam was one of the early SARS-affected countries. We canceled two scheduled trips to Vietnam. That actually set us back about one to two months in one of our initiatives," says Mater. "We were able to continue our work through electronic and voice communications ... but there's really no substitute for some personal meetings."

Still, companies that can manage to work in a "country in progress" will enjoy lower labor costs than in India or China. GCS, for instance, pays programmers in Vietnam $3,600 to $6,000 annually. But team leaders and program managers earn 10% to 20% more, comparable to wages in India, because they require more experience with U.S. clients and better English skills.

"It's best to work with them on a project basis with good specifications," Mater says. "We struggled some to direct people on a day-to-day basis ourselves. Work through a project manager there." Project managers work at the offshore location but communicate daily with U.S. clients to make sure that instructions are interpreted correctly and that business plans are packaged into specific tasks for the offshore team. "It's worth paying for," says Mater.

Collett is a freelance writer in Sterling, Va. Contact her at

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Copyright © 2003 IDG Communications, Inc.

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