"The Number 1 Favorite Partner in the Hearts of Japanese Businesses" The Japanese IT outsourcing market is worth approximately US$30 billion. With a growth rate of 9-10% per year, it is projected to reach around US$50 billion by 2028 and US$60 billion by 2030. Currently, the revenue of Vietnamese IT businesses in this market is only nearly US$3 billion (approximately 10%). While growth rates previously consistently reached 30%, they have recently been around 10% per year. The Vietnam Software and IT Services Association (VINASA) and its member businesses are aiming to bring the annual growth rate of Vietnamese IT businesses in Japan back to 20-30%. This goal is achievable given the increasing demand for cooperation from Japanese partners and the relatively good preparation of Vietnamese IT businesses for their "Japan expansion" journey.

Mr. An Ngoc Thao, Deputy Secretary General of VINASA. Photo: Provided by the subject.

Mr. An Ngoc Thao, Deputy Secretary General of VINASA, summarized: “The IT development cooperation between Vietnam and Japan began more than two decades ago, right when Vietnam's software industry was formed. In 2002, when VINASA was just established, Japanese partners came to discuss cooperation. By 2014, Vietnamese IT businesses had become important partners of Japan, ranking second (after China) in terms of scale and being the number one preferred partner among Japanese businesses.” Going back in time, when not many Vietnamese businesses were aware of the potential and opportunities in "the land of cherry blossoms," VINASA took the lead in "exploring the path," cooperating with Japanese government agencies, associations, businesses, and universities to learn diverse knowledge and experience, from training programs to good policies supporting IT businesses, from work culture to specific operations of a Japanese company such as sales, human resources, and technology... This is a valuable resource that helps Vietnamese IT businesses confidently explore the Japanese market. To date, VINASA has established partnerships with approximately 30 Japanese IT-related organizations/associations (typically IPA – the IT Promotion Agency, JISA – the Japan Information Technology Services Industry Association, and specialized associations focusing on embedded software, computers, etc.), along with many major trade partners (JETRO – the Japan Trade Promotion Organization, AJC – the ASEAN-Japan Centre, etc.), and several local governments (Kanagawa, Yokohama, Osaka, Fukuoka, etc.). On August 6th, VINASA will collaborate with JETRO and JISA to organize the 11th Vietnam IT Day in Japan, under the patronage of the Ministry of Information and Communications , to convey the message: Vietnam is ready to be a comprehensive IT partner to support Japan's sustainable digital economic development; Vietnamese IT businesses are committed to working alongside Japanese businesses. "In recent years, the Japanese economy has faced many difficulties after the Covid-19 pandemic, with the yen depreciating by 30%, while the profit margin for Vietnamese businesses implementing IT projects for Japanese partners only fluctuates between 20-30% of total revenue, meaning there is a risk of no profit. However, most Vietnamese IT businesses have never considered abandoning the Japanese market and partners, but have always stood by, shared, and worked together to find solutions to overcome difficulties," Mr. Thao emphasized. “Vietnamese IT businesses will no longer just focus on simple tasks, but will work with Japanese partners to improve competitiveness, contribute to socio-economic development, and further enhance their advantage as the ‘top choice of Japanese businesses.’ Through Vietnam IT Day 2024, VINASA and Vietnamese businesses hope that Japanese partners will continue to ‘stand shoulder to shoulder’ to elevate Vietnam-Japan IT cooperation to a new level, worthy of the comprehensive strategic partnership between the two countries,” the Deputy Secretary General of VINASA further shared.

Vietnamese IT companies are ready to work alongside Japanese partners to find solutions to overcome challenges. Photo: VINASA

Two major opportunities for cooperation : Previously, IT cooperation between Japanese and Vietnamese businesses was purely about project delivery and acceptance or human resource dispatch (Vietnamese businesses prepared personnel, transferred them to Japanese businesses for use and management, and returned them after the project ended). Now, most Vietnamese IT businesses have increased in scale, upgraded their management skills, and their workforce is consistently ranked among the top in international rankings. Furthermore, they possess the ability to anticipate new technological trends such as AI (artificial intelligence) and big data, enabling them to even provide IT system transformation consulting services for Japanese businesses. Some Vietnamese IT companies even have products specifically designed for the Japanese market. “In the past, it was difficult to find Vietnamese IT companies with 300 or 500 employees, but now we have companies with tens of thousands of employees, around 15 IT companies with more than 1,000 employees, nearly 30 companies with 500-1,000 employees, about 100 companies with 200-500 employees, and hundreds of companies with around 100 employees. Vietnamese IT companies partnering with Japanese companies are all close to 100 employees. The scale of Vietnamese IT companies is large enough to meet the basic digital transformation needs of Japanese businesses. As for skill level, Vietnamese IT companies previously mainly had developers and testers, but now they also have system architects who can work with Japanese companies to research and develop, modernize entire existing systems, and develop new models,” Mr. Thao enthusiastically informed. Vietnamese IT businesses are currently enjoying many favorable conditions to accelerate their growth in Japan. It is estimated that approximately 84,000 IT professionals graduate annually from 168 universities and 520 vocational colleges and schools (according to data from the Ministry of Information and Communications). The training programs of many universities closely align with the actual needs of Japanese businesses. Furthermore, Japanese language proficiency is no longer a major issue; many IT engineers communicate effectively in Japanese.

Many business opportunities await Vietnamese IT companies in Japan. Photo: VINASA

“Two major business development opportunities in the Japanese market await Vietnamese IT companies,” shared the Deputy Secretary General of VINASA. The first opportunity is the modernization of Japan's long-standing systems. In the 1970s and 80s, some major Japanese industries such as manufacturing, finance, and retail were ahead of the world . However, precisely because of their enormous scale, their subsequent modernization process lagged far behind other countries, failing to meet development requirements and create a competitive advantage. For example, Japan's banking system is worth trillions of USD; even a small change affects many agencies, businesses, and individuals, so managers have to consider very carefully and for a long time before deciding to make changes. For example, in the manufacturing sector, Japanese businesses have completed the digitization and automation of production processes, but they haven't yet reached the next step in the digital transformation process: optimizing the entire system and applying new technologies (such as big data, AI, etc.) to create new production models and products, thereby enhancing adaptability and competitiveness. Vietnamese businesses can collaborate and research new technological solutions for this promising market. A second opportunity lies in combining digital transformation with green transformation, aiming for sustainable development (ESG). The Japanese government aims to achieve Net Zero (zero net emissions) by 2050, with a commitment to significant reductions by 2035. Japanese businesses, especially manufacturing companies, are grappling with numerous challenges related to green and sustainable development standards, such as modernizing production systems to protect the environment; Applying technology to optimize internal business management systems (in terms of people, machinery, equipment, energy, etc.) in line with ESG standards is a significant market for Vietnamese IT businesses. However, the Deputy Secretary General of VINASA noted several major issues that Vietnamese businesses need to address if they want to successfully conquer the Japanese market. First, regarding infrastructure : 80% of the revenue in the Japanese IT outsourcing market belongs to Chinese companies. Besides their high level of expertise, Chinese companies also possess extensive physical infrastructure (offices, equipment, and a comprehensive business ecosystem) and technological infrastructure. Meanwhile, Vietnamese IT businesses are not yet adequately prepared to handle large projects from Japanese companies. Few Vietnamese IT companies have their own buildings with dedicated facilities and production centers employing thousands of people. “Most Vietnamese IT outsourcing companies haven’t participated in sufficiently large-scale projects. For example, Japanese games are often aimed at serving millions of people, while Vietnamese game projects are much smaller in scale; Vietnamese IT companies’ manufacturing solutions haven’t been deployed on a scale of hundreds of factories globally, employing hundreds of thousands of workers. Hopefully, in the future, large companies can collaborate with smaller businesses in Vietnam to solve larger problems and confidently take on larger projects from international partners,” Mr. Thao commented. On the other hand, Vietnamese IT companies have highly skilled technology but lack in-depth knowledge of specific domains, such as finance and insurance. To overcome this limitation, VINASA is encouraging Vietnamese IT companies to cooperate with Japanese companies so that Japanese experts in diverse industries/fields can work on R&D alongside Vietnamese technology experts. Simultaneously, Vietnamese outsourcing businesses are encouraged to cooperate with Vietnamese businesses that already have products and solutions in specialized fields such as fintech, agritech , and e-commerce, on their journey to "Go Global." In reality, the linkages among Vietnamese IT businesses are quite loose, and large-scale business alliances have not yet been formed to take on large projects and then divide the work to benefit all parties: Large businesses act as general contractors, developing infrastructure, providing tools and databases, etc.; medium-sized businesses handle system design; Smaller businesses take on the tasks of software development, testing, etc. “The crucial issue now is the willingness of business leaders to ‘play big.’ Many heads of outsourcing companies are still complacent with a steady stream of orders and stable revenue, failing to consider the need to grow stronger, aiming for higher goals – a responsibility to serve the country and contribute to affirming Vietnam’s position on the international stage,” Deputy Secretary General An Ngoc Thao reflected. Playing the role of a “bridge” between Vietnam and Japan, in addition to a series of small-scale exchange programs and events, VINASA organizes three major programs annually that can help Vietnamese IT businesses expand into Japan.

Photo: VINASA

Japan ICT Day in Vietnam brings Japanese businesses to Vietnam. Besides traditional activities like exhibitions, conferences, and business networking, VINASA aims to design "Company tours" – visits to businesses with capabilities and solutions in specific specialized fields, helping Japanese businesses connect deeply with Vietnamese businesses according to their scale and industry requirements. Japan ICT Week in Japan brings Vietnamese businesses to participate in Japanese events. Every year, around 30-40 Vietnamese businesses are present at the Vietnam Pavillon exhibition area within the framework of this event. This is a "prime location" for Japanese businesses to find outsourcing partners; a good channel for Vietnamese IT businesses to secure regular orders annually. Vietnam IT Day in Japan – in collaboration with businesses/organizations from both Vietnam and Japan, organizes a large-scale, well-organized event in Japan, telling stories about the capabilities and solutions of Vietnamese IT businesses ready to meet the digital transformation needs of Japan.