The IT Outsourcing market worldwide is projected to grow annually by 10.99%, reaching a market value of US$777.70 billion by 2028.

While India and China have long been the go-to nations for IT dedicated teams, new players like Vietnam are gaining ground. Companies have various choices based on language, cost, culture, and government support.

In this blog, SECOMM will explore the advantages and disadvantages of outsourcing IT functions to India, China, or Vietnam. This analysis will help companies make informed decisions about which country aligns best with their resources and strategic objectives.

1. Key Considerations for Choosing an IT Outsourcing Partner

Before going further into the main points of the three countries, there are some key points that companies should be aware of when choosing an IT outsourcing partner.

1.1 Balancing Cost And Value

Selecting a partner who can provide both quality and competitive pricing is vital for the company’s campaign success. When assessing cost benefits, look beyond immediate savings. Consider the long-term expenses of communication, travel, staff turnover, and management tasks. These factors can impact your financial outcomes over time. For example, a company outsourcing to a country with low English proficiency may lead to communication challenges. To address this, the company might need to employ a local translator to ensure smooth operations.

1.2 Evaluating The Experience And Expertise Of The Outsourcing Units

A Deloitte study reveals that 59% of companies outsource software development for specialized skills and expertise. It’s important to choose partners known for providing skilled IT professionals and delivering projects akin to yours. Experience in similar projects or industries is a plus, as partners with relevant domain knowledge can offer valuable insights and tailored solutions. For example, in Vietnam, SECOMM is one of many companies proud of its ability to handle big projects globally easily due to its past experiences of working with many big names in the eCommerce industry.

1.3 Communication & Cultural Alignment

Cultural alignment and good communication are important but often ignored in outsourcing partnerships. Your partner should have values, work ethics, and communication methods similar to your company’s. Communication should be transparent and frequent throughout the project. Choosing a partner with staff who speak a language that both parties understand is important to avoid language barriers that could slow down progress.

1.4 Quality Assurance & Security Measures

Quality control is vital for software that’s free of bugs. Your outsourcing partner should follow the best practices in data security and software development. Quality assurance tests should be part of the development process to catch and fix issues early. Security is equally important for outsourced DevOps services. Check their security measures, data protection policies, and compliance with industry standards. They must protect sensitive data according to industry regulations and have clear methods for protecting intellectual property and confidential information.

2. Deep Dive into Each Country 

2.1 China

Outsourcing to China is a strategic choice for many Western companies, largely due to the cost-effective services and access to a highly skilled workforce. China’s e-commerce market is the largest globally, and the country offers a stable economic environment, low corporate taxes, and numerous top-tier seaports. Moreover, China boasts one of the world’s largest and most proficient tech talent pools, adding to its appeal as an outsourcing hub.

A. Why Should You Choose China?

Inexpensive Workforce

Outsourcing IT to China offers clear financial benefits. Chinese developers provide services at competitive rates, which can lead to significant cost savings for businesses. This affordability doesn’t come at the expense of talent, as China has a large pool of skilled developers. The salaries for these developers are generally lower than in the US where Chinese professionals often charge around $50 to $100 an hour, with an average of around $29,840 a year.

Skilled Workforce

Moreover, China is a leading tech hub with one of the largest and most skilled IT dedicated teams in the world. By 2024, the global number of developers is expected to reach 28.7 million, with China contributing significantly to this growth. The country’s developer population is growing at a rate of 6% to 8%. China also prioritizes high-quality education, with 24 of its universities ranked among the top 200 worldwide. The Chinese government is actively launching educational initiatives to enhance technical skills, preparing its citizens for the evolving digital world.

Supportive Government Policies

The government invests in projects and infrastructure to aid these companies and streamline outsourcing. In 2020, China announced a massive $1.4 trillion investment to enhance public digital infrastructure. This investment is a boon for companies considering China for digital outsourcing, as it simplifies the integration of local talent.

B. Issues When Outsourcing To China

Additionally, there are still some issues that companies need to be aware of when contacting the IT dedicated team in China. Firstly, language barriers are significant when outsourcing to China, as not all IT professionals are proficient in English, potentially causing miscommunications and project delays. Cultural variances can also affect how communication is perceived and managed.

Additionally, on the topic of intellectual property, China’s laws may vary from those in other nations, posing a risk to the security of your ideas. Moreover, stringent data privacy and security regulations by the Chinese government can pose operational challenges for foreign IT service providers.

2.2 India

India has consistently been a dominant force in the global IT outsourcing sector, attributed to its extensive talent pool of IT experts and a favorable business ecosystem. The industry is projected to witness a compound annual growth rate (CAGR) of 17.58% between 2024 and 2028, culminating in a projected market value of USD 20.09 billion by 2028.

Clients within India’s IT outsourcing market demand cost-effective, high-caliber services. They seek partnerships with firms that offer comprehensive services, including software development, maintenance, and support, and value providers with industry-specific experience who can deliver solutions tailored to their precise needs. Additionally, India is ideal for businesses seeking experienced developers with strong communication skills for complex projects.

A. Why Should You Choose India?

Cost-Effective

Local outsourcing providers efficiently manage the entire process, including procurement, installation, and testing, ensuring a cost-effective and seamless experience. For example, establishing a website or developing a mobile application can be expensive, but outsourcing to India can reduce these costs by nearly 50%.

Furthermore, India’s lower living costs result in more affordable labor compared to countries like the United States. To illustrate, the average yearly salary for an IT employee based on Glassdoor in India is around $20,464, starkly contrasting the U.S. average of $109,829.

Large Labour Pool

The country’s diverse population contributes to a workforce that includes programmers, scientists, financial experts, MBAs, journalists, and virtual assistants with exceptional skills.

India’s government-funded higher education system is the third-largest globally, after the US and China. According to Statistica, India has over 6.5 million graduates each year, significantly more than the Philippines, which is a major competitor in the BPO and outsourcing sector.

B. Issues When Outsourcing To India

Communication

While Indians are proficient in English, the accent may sometimes lead to misunderstandings in verbal communication. It’s advisable to conduct most communication in writing, through emails and chats, to reduce miscommunication risks and maintain a written record for reference if needed.

Privacy And Security Legislation

In software development and IT, the risk of intellectual property (IP) being copied is significant. Without proper safeguards, there’s no guarantee of protection, as projects might be resold.

To protect your interests, it’s wise to sign an NDA with your outsourcing partner. Be careful with IP issues and consider getting legal advice for big projects with substantial financial stakes.

2.3 Vietnam 

Vietnam has gained prominence in the IT outsourcing industry over the last ten years. It’s now a significant force globally, with a focus on software development, digital content, and BPO. The growth of Vietnam’s IT outsourcing sector is attributed to its youthful, talented workforce, competitive labor costs, and supportive government policies. Plus, its strategic position in Southeast Asia adds to its appeal as an outsourcing hub for regional and international businesses.

A. Why Should You Choose Vietnam?

Cost-Effectiveness

Outsourcing to Vietnam offers a key benefit: access to skilled tech talent at affordable rates. Vietnam, located in one of the world’s most cost-effective regions, has leveraged this to become the 6th top destination for software development. In 2022, Vietnam was rated 99.6/100 for low manufacturing costs by US NEWS and is among the lowest in Asia.

This results in significantly reduced IT outsourcing costs compared to other countries. For instance, the average annual income for a developer in Vietnam is approximately $7, 173, which is the lowest among the three. This represents a cost reduction of up to 94% compared to the US, 65% compared to India, and 76% compared to China.

Qualified IT Human Resources

Vietnam’s pool of highly educated and tech-savvy young professionals, many of whom have studied or worked abroad, makes it an attractive destination for outsourcing. Additionally, Vietnam offers technical training in various programming languages through its universities and technical schools, producing around 400,000 IT engineering graduates and 50,000 IT students annually.

Overall, Vietnam is well-equipped to meet the skilled workforce demands of employers seeking outsourcing opportunities, with a lower turnover rate compared to other countries in the field. Companies in Vietnam experience an IT-related turnover rate of less than 5%, making it an appealing choice for businesses.

Capable Of Working With The Giants

Major multinational companies and tech giants, including Intel and Microsoft, have established a strong presence in Vietnam by outsourcing software development and IT support services. Additionally, other firms like IBM, Cisco, and Bayer are also expanding their IT roles in Vietnam.

The involvement of these esteemed organizations serves as a testament to Vietnam’s adeptness in managing substantial outsourced or offshore software development initiatives, despite its status as a relatively small emerging nation in contrast to larger, more developed counterparts such as India and China.

3. Choosing the Right Partner!

Overall, China’s large, albeit aging, labor force and developed infrastructure are offset by rising costs and regulatory concerns. While India shines with its vast, young talent pool, cost-effectiveness, and robust infrastructure, making it a strong contender for scalability and quality. Finally, Vietnam emerges as a compelling choice with its youthful, tech-savvy workforce, competitive costs, and rapidly improving infrastructure.

Read more: IT Outsourcing in Vietnam: Benefits and Challenges

SECOMM stands out with over a decade of experience for organizations seeking a reliable IT-dedicated team in Vietnam. Engaging with SECOMM means your IT projects are in the hands of exceptional talent, driving innovation and advancing your business objectives. To explore a partnership with SECOMM, reach out or dial the hotline at (+84) 28 7108 9908 for a collaboration that can elevate your IT capabilities.