Singaporean enterprises and startups are keen to enter Vietnam due to its low-cost offshore development team, strong economic fundamentals and a thriving startup ecosystem. These include its favorable demographics, cost competitiveness, pro-foreign investment environment. In fact, Vietnam is one of the most dynamic emerging economies in Southeast Asia, with a population of 100 million and an impressive GDP growth rate of 7% year-by-year since 2009.
While there are opportunities abound, they still require the highest degree of execution and appropriate strategy for companies to establish their local tech teams in Vietnam. Frank Lee, Managing Director at Tech JDI, shared his insights and experience on how to tackle these challenges.
So which operational model works best for you? Well, it depends heavily on your company stage, budget, and resource. But there are four that you should consider:
The model is perfect for Angel/Seed stage companies who need new tech talent to work on their projects remotely but do not have the budget to burn. It is the cheapest option that can get you to the finish line when needed.
However, using freelancers may affect your result due to their skillset limitations and lack of internal insight. Moreover, we advise against choosing freelance when it comes to long term plans as the cost will be ramping up quickly.
Outsourcing part of your software development process to Vietnam is an excellent way for startups to overcome their budget limitations. The model is very cost-effective for short-term projects. As a result, this operational model is suitable for the company in the Angel/Seed stage.
However, be prepared to fight over the timeline, scope, price, as well as a system overhaul later. According to our experience with outsourcing, inflexibility and scalability are the two most significant problems, as the outsource provider is unable to commit to a future-proofed solution for their clients.
Offshore (Service Provider)
The company will contact local vendors to help build the tech team, handle recruitment, HR admin/payroll, and office space. As it is more expensive than outsourcing, we recommend only consider this model when you are venture-backed at the Series A/B+ stage.
Offshoring is well known for its long- term cost-effectiveness with 100% ownership of the team but high upfront investment and ramp-up time. Choosing the right service provider with experience for both Vietnam and Singapore markets is crucial.
When the company is ready for the local market expansion, it is time to incorporate the offshore entity and build a team organically with its own internal corporate admin and business operations (HR/Finance/Office).
Offshore Development Team Structure
Now that you’ve established what kind of operational model you want to build let’s talk about the size of the team. There really isn’t a magical number that fits all as smaller teams are easier to manage but bigger teams are superior when it comes to big-scale projects.
Works best when hiring freelance or outsource. There is little to insignificant value in trying offshore due to admin/communication overheads.
Small software development teams are more productive because it’s easier to coordinate their efforts and recognize individual contributions of their members. Based on our experience in software development, 4-8 people is an ideal size for a team. And if it’s a large software development project, you can divide one group into sub-teams, each with its team lead.
You need to hire a team lead with 4~6 years of experience as the first member. He/she will be the backbone of your new technical team. Depending on the complexity of the project, a group of this size is typically made up of :
- One senior backend engineer (4~6 years of experience) as the team leader
- One senior frontend engineer (4~6 years of experience)
- One backend engineer (3 years of experience)
- One frontend engineer (3 years of experience)
- One mobile developer (3 years of experience)
The first hire should be a technical project manager with eight years of experience or more. Due to the size of this team, you will have to hire even more talent to fill up different roles, including:
- One technical project manager (6~8 years of experience)
- One senior backend engineer (4~6 years of experience)
- One senior frontend engineer (4~6 years of experience)
- Two backend engineer
- One frontend engineer
- 2 mobile developer (iOS/Andriod/ReactNative)
- 1 QA Engineer
- 1 UI/UX Designer
When a team grows to become bigger, the good old Ringelmann effect comes into full force where the individual productivity of team members decreases as group size increases. Such failures result from communication issues, holdbacks, and less engagement.
You’ll need a person to coordinate between these groups. Otherwise, you may face a situation where some of your teams are working on the same task without knowing it, or much worse, on assignments that conflict with each other.
Thus, hiring a VP of Engineering (8+ years) or Country Manager should be your highest priority. Additionally, the team structure will depend on the CTO’s requirements.
Conclusion – There Is No Perfect Offshore Development Team Structure
Sometimes, you may opt to use freelancers or outsourcing due to budget limitations. Later on, you will realize that this structure no longer works for your team.
If you are still unsure, it is recommended that seeking advice from a trusted Venture Studio that specialized in offshore venture and HR services will help you understand the scope and requirements of setting up your local team in Vietnam.
But there are no shortcuts even in building your tech team, everything goes through processes. Once you’ve chosen the operational model and team structure you like, what’s next is to be ready to face any challenges that your team may encounter.