If Q1 of 2021 has proven anything, it’s that the future of work is heavily remote and likely to persist in the wake of the pandemic. With a global focus on digitalisation, tech-related resources are heavily in demand, and we will see the rise of a highly educated, tech-savvy, and well-paid minority in the global workforce.
This movement, sustained by financial implications of the pandemic, results in more Singapore firms setting up offshore tech teams to strengthen their IT capabilities and minimize operation cost. But finding and deciding on the best offshoring destination and model can be a difficult process.
In the case of Southeast Asia, Vietnam and Indonesia are tested destinations for affordable and adequate tech talents. Each of them have different advantages/disadvantages, depending on your existing situation.
Let’s walk-through these different factors, and you can be the best judge!
Tech Talent Pool
Vietnam IT Talent Market
In Vietnam, the growth in tech talent population has doubled from less than 300,000 to over 600,000 over the past five years. With a sizable tech talent population, Vietnam has strong potential to become the next tech hub in Southeast Asia.
However, there are still more than 400,000 IT positions open, and this has led to a steady increase of developer salary over the last 3 year at a pace of around 10% increment rate every 18 months.
New IT Graduates vs New IT Openings
Based on Stack Overflow’s data published, Vietnam welcomes around 50,000 fresh IT graduates into the workforce each year, but only 30,000 new job openings.
The net surplus of new IT graduates is good news for employers, since this will slow down the growth of salaries in the foreseeable future.
Indonesia IT Talent Market
The skilled digital labor deficit in 2020 was 1.3 million. Over the last 3 years, the salary of tech talent in Indonesia has more than doubled. This is especially true for senior, managerial, and C-level technical positions.
New Graduates vs New IT Openings
Indonesia graduates about 40,000 to 50,000 new IT graduates per year, but only 20% of them decide to pursue the software developer path. However, the number of open IT positions is projected to grow to 3.8 million by 2030.
This is bad news for tech firms, since the net deficit of new skilled developers vs open positions will further drive up salary expectations.
Developer Salary Rate In Vietnam vs Indonesia
We reviewed many different salary reports in Vietnam and Indonesia, across different sources including headhunting agencies and job boards. However, we found a great data disparity between each report, perhaps because they serve different segments (MNCs vs SMEs vs startups), different cities, or serve their own corporate agenda.
The salary table in this article will only use the salary range spectrum based on averaging across common data in multiple reports. With this in mind, let’s take a closer look at it.
Web Developer Salary Rate In Vietnam Vs Indonesia
As you can see, Vietnamese web developers are at least 12% cheaper when it comes to Junior hires. The wage disparity becomes even more apparent at middle level with developer salary often 20% lower in Vietnam.
However, this trend flipped for senior level as Indonesia Web developers are around 7% less compared to their neighbouring country.
For a common offshore tech team structure of 3 ~ 5 members, businesses tend to go for just one senior developer as team lead and the rest will be at middle levels. Thus, hiring web developers in Vietnam enables a substantial amount of cost saving.
UX/UI & Mobile Developer Salary Rate In Vietnam Vs Indonesia
Both UX/UI and Mobile Developers are approximately 5%~20% more expensive in Indonesia. After all, the country is well-known for tech startup giants that focus on software apps as their main service/product and platform such as Tokopedia and Gojek (now combined as Togo). This puts a huge demand on mobile and UX/UI developers and drives their salary even further.
It is worth mentioning that for senior UX/UI design positions, there is not much difference in developer salary between the two countries.
DevOps & QA Developer Salary Rate In Vietnam Vs Indonesia
Junior/Middle DevOps and QA developers are around 2%~15% cheaper in Vietnam compared to Indonesia thanks to their wide tech labour pool. In contrast, Vietnamese senior developer hires are 2%~5% higher.
For offshoring tech operations, DevOps and QA developers are in lower demand compared to other positions. They are commonly hired as additional members to strengthen and expand the existing offshore team.
If it is purely cost-wise, we believe Indonesia offers a slight advantage for senior level recruitments.
Developer Competency Ranking By Countries
At the end of the day, hiring developers is based on economic reasons. Meaning cost is just one of the crucial metrics to assert the potential of a country for offshoring software development.
Instead, the developers must also have the appropriate skills set and experience that enable them to work on complex projects.
According to the HackerRank survey on developer skills, Vietnam came 23th on world rank and took 2nd in the ASEAN group, only behind Singapore.
In contrast, Indonesia ranked at 40th, lower than Vietnam but higher than Philippines and Malaysia.
The Best Destination To Build Up Your Offshore Tech Team
As mentioned above, when we think about setting up an offshore team, we typically only think of the cost advantage.
In reality, the offshore strategy enables us to get our hands on high quality tech talent that we could not find in the local market. It also works as the first cornerstone of a business venture where you can grow the offshore tech team into an official branch entity for the company in the future.
To ensure businesses make the correct choice, we will highlight 4 important elements for a great offshore destination.
Factor #1 – Political Stability
While Indonesia has several political unrest, Vietnam is regarded as one of the most politically stable countries in the region. This in turn helps to portray a positive image of a nation with longevity and prosperity.
Factor #2 – Economic Prospects
To pursue its growth, Vietnam has diversified its economy to an estunding degree. The government gives full support to the creation of joint projects with foreigners in various fields. For this reason, the country has become a center for technology startups and technology parks in recent years.
On the other hand, Indonesia has a bigger economy thanks to its population. Still, the country shows signs of fatigue in keeping a strong growth rate like Vietnam due to multiple prohibitions on the participation of foreign capital.
When Covid-19 pandemic appeared, Vietnam miraculously emerged even stronger. Unfortunately, the same can’t be said with Indonesia as the country struggled to fight back the pandemic.
Factor #3 – Social Demographics
Vietnam values more on family rather than religion like Indonesia. This had ingrained in them a culture of working hard and taking less days off for special events. Compared to Indonesia’s 20 holidays, Vietnam had 9 less holidays in a year.
Factor #4 – Tech Outlooks
Both countries experienced exponential growth in the IT sector with demand for developers expected to spike up in the next decade.
While Indonesia boasted a bigger population, their tech labor pool is smaller than Vietnam. This hinders the hiring process for skilled developers as recruiters will have to spend more time on finding suitable candidates.
Future Proof Is Important
Given the time and capital investment, you wanna prioritize markets that brim with business opportunities or align with your future expansion plan.
Therefore, countries that can stay ahead of the game and emerge stronger against the next Covid pandemic wave in 2021 should be considered as great destinations for offshoring software development, especially if they got positive marks on those elements listed above.
Seek Professional Advices For Your Offshore Tech Team Expansion
Finding out the salary rate for hiring developers is only half the battle. To succeed in scaling up tech teams overseas, organizations need to inspect the different factors involved in the process (recruiting, human resource, office, etc.) and execute them to near perfection.
In the case of Vietnam, Tech JDI has been fortunate to support many foreign startups and companies in their foray into the market. Our clients are predominantly tech-focused, and cut across various sectors including cybersecurity, e-commerce, fintech, IoT, and more.
If you are interested in learning more about how setting up an offshore tech team in Vietnam can be pain free, please contact us for a quick online meeting.