While India and China remain the most popular outsourcing destinations, experts have been eying smaller Asia/Pacific countries as potential areas for growth as costs in the two outsourcing powerhouse nations continue to rise.

Vietnam has emerged as a potential landing spot for IT outsourcing operations, although industry experts note that significant challenges remain before companies should consider Vietnam as a reliable host, as they do India and China. A recent article on TechCrunch explored the allure of Vietnam. The article notes that Vietnam and its citizens are well-positioned to provide services to international corporations. Companies that have used Vietnam as an outsourcing location have found workers fluent in English and with “modern IT skills . . . equal to and in some cases exceed what India offers.” Furthermore, low attrition rates keep wages down, whereas in India in particular climbing attrition numbers have pushed the cost of offshoring upwards.

Significant challenges remain, however, before Vietnam can emerge as a true competitor to India and China. Notably, the Heidrick & Struggles Global Talent Index Report placed it 53rd among the top 60 nations—20 spots below China and 18 below India. This is a strong indication that the talent pool is limited in Vietnam, and big companies may find it impossible to fill seats at large-scale IT outsourcing operations. Additionally, the TechCrunch article notes, “the technology industry didn’t take off until relatively recently in Vietnam, so [companies] won’t find support for maintenance and legacy platforms.” However, outsourcing industry leaders expect that time will cure these ills, and within the next decade, Vietnam should emerge as a competitor to China and India for certain offshore services.