Case Experience From India

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1.1.1. Case experience from India

1.1.1.1. Human resources development

Realizing university system of India cannot meet the demand of IT, Indian IT businesses actively established training schools like NIIT, Infosys, Satyam, Silverline and Polaris; especially, Infosys was partially invested by regional financial institution when private banks rejected to launch capital support. Also, government built up technological institutions for each state where IT bachelor and master are educated. Particularly, syllabus of such schools was edited to be suitable for market demand; and students have been required to learn Python, Excel VBA more than COBOL, Word, Power Point which had had been major subjects in training programs of 5 years ago (Nagesh Kumar and K.J. Joseph, 2005).

Besides, preventing brain drain is important of talent pool of India because there are more than 100,000 India experts being approved with the US visa to immigrate to the US, which generates damage of US$ 2 billion per year (Pham Quoc Thai, 2008). Hence, Indian government suggested three solutions: notice of business establishment of repatriate, policies of training fee refund if students immigrate to foreign countries, cooperation with prestige international university to meet domestic education demand.

1.1.1.2. Government support for offshore outsourcing software

Indian government considers offshore outsourcing software one of motives for economic development so they place a heavy emphasis on R&D capabilities. In order to encourage businesses to research and develop software outsourcing, government do not totally support but they partially provide 3/5 R&D budget for software companies. Ministry of Information Technology requires that unless top corporations expenditure 2% of their revenue on R&D, their licenses will be withdrew. Since 1985, government asked foreign IT businesses to contribute 2-5% to R&D fund (Le Net, 2003). In order to boost R&D activities as well as let software companies support each other in experience and human resources, NASSCOM is established to discuss innovations, opportunities and problems of software outsourcing corporations in India.

Furthermore, security of intellectual property is of particular importance to offshore outsourcing software in India. Information Technology Act (Indian Ministry of Law, Justice, and Company Affairs, 2000) claims computer offences such as hacking, counterfeiting, source code tampering, etc. are criminal (Mira Sahney & Eric Syu, 2004). Moreover, Indian government published Copyright Handbook to enhance awareness of Copyright Law to technological community.

1.1.1.3. Active technological integration of businesses

In order to position brands, businesses in India concentrates on upgrading quality and promoting images by software management certificates. India has more companies achieving CMMI than other nations have. Particularly, there are approximately 5,500 software corporations getting ISO 9000 and over 185 companies with CMMI level 4 and 5; and these numbers of India are higher than on such quantity of mature organizations in the US and Europe (Venkat Narayanan, 2007).

1.1.1.4. Software park establishment

Building up key regions such as high-tech zones, software parks is policy for infrastructure of India. Most of states in India have Software Technology Parks of India (STPI), which are ideas of 100% export-oriented program. Nowadays, India expands such a program to Free Trade Zones, Export Process Zones and Special Economic Zones. Businesses in STPIs and high-tech zones have special incentives like free of tax in the first year of operation, free of import tax, permission of 100% foreign-capital companies, provision of high-speed bandwidth, allowance to transfer profit to host countries, etc. (Ministry of Information Technology, 2010).

Sub-conclusion of chapter 1:

In chapter 1, literature review including definitions, classifications and standards of offshore outsourcing software in Vietnam is presented to prepare background for chapter 2 and 3. Four-tier taxonomy of the world’s outsourcing nations is mentioned in order that readers understand criteria and indexes for analysis of current situations of offshore outsourcing software in Vietnam which is referred in chapter 2. Also, determinants of this industry mentioned in chapter 2 are based on A.T.Kearney’s Global Location Index (financial attractiveness, people skills and availability, business environment) discussed in chapter 1. Moreover, the author has general analysis on offshore outsourcing software of case experience from India, the current greatest nation of software outsourcing, and point out the similarities between India and Vietnam to apply such experience to software outsourcing development in Vietnam.

1.2. Current situation of offshore outsourcing software in Vietnam from 2009 to 2013

Based on thresholds to classify offshore outsourcing software into four tiers in taxonomy of Dr. Erran Carmel discussed in chapter 1, the author shall research core products and target markets to prove maturity of offshore outsourcing of Vietnam as well as its revenue and entrepreneurs in this industry for the two remaining threshold.

1.2.1. Core products

Regarding functions of offshore outsourcing software, Vietnam has diversification in core products based on specific requirements of clients. According to Mr. Tran Cong Thanh, CEO of Success Software Services Ltd., core products of offshore outsourcing software of Vietnam are application software for management such as business management software, enterprise resources program, accounting software, customer service management, etc. Such software for corporate clients is ordered for corporate vendors like FPT, TMA, etc. while software used by SMEs clients are outsourced with software SMEs in Vietnam like Success Software (Tran Cong Thanh, 2014).

Regarding delegated stages in offshore software outsourcing service, the more mature Vietnam offshore outsourcing software is, the more stages Vietnam are delegated in entire process of software manufacture of the clients.

Table 2.3: Percentage of delegation for offshore outsourcing software projects in Vietnam from 2009 to 2013

(Unit: Percentage %)

Data entry

Designing

Coding

Testing and Debugging

Upgrading

2009

38%

30%

21%

9%

2%

2010

18%

35%

33%

10%

4%

2011

6%

28%

37%

18%

11%

2012

6%

25%

36%

20%

13%

2013

5%

24%

36%

21%

14%

(Source: Synthesis from ICT News, 2009 – 2013)

When offshore outsourcing software in Vietnam was infant, most contracts of offshore outsourcing in Vietnam were just data input which is the lowest value added in software manufacture process (Nguyen Huu Anh Huy, 2014). However, the percentage of data entry contract considerably reduced from 38% in 2009 to 5% in 2013 because experience and ability of Vietnamese human resources have been significantly improved. Certainly, data input contracts were replaced by projects requiring higher level of technical skills like designing, coding, testing and upgrading. The more delegation Vietnam is in charge in the entire process, the more techniques and skills Vietnamese engineers can gain from client’s software industry. Especially, such increasingly high level requirements of projects brings along higher value added of Vietnam’s software outsourcing to the clients’ entire software manufacture process.

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