Japan IT Moving From China To Vietnam

my points are: 1)looking for opportunities in vietnam doesn't mean to give up chinese business for MNCs. the key is how to balance company investment.2)low labor cost isn't equal to competitive products. good example is AMD case. AMD's most important fab is in Dresden, Germany, not in singapore or elsewhere. total cost control is very important, I think.

Wow, I think Dan is taking this article a bit too seriously. ;) The article starts by the move of insignificant Japanese software outsourcing which is only $3 billions a year. Also, the nature of Japanese IT outsourcing has been entry level labor driven caused mostly by the layered Japanese IT business hierarchy. Projects are outsourced through several layers of middlemen until the last one with paper thin margin. They are very price sensitive and the works are tedious. It's only nature for them to explore Vietnam.

Moreover, Japan has not fully benefit from outsourcing because of its working culture. An interesting article on Nikki (http://techon.nikkeibp.co.jp/article/TOPCOL/20061102/123071/ ) makes a good point: a 2 hour meeting by 10 Japanese engineers is equal to a month salary of a senior engineer in China. And there are a lot of meaningless 2 hour meetings involving a lot of people in Japan. ;)

Plus, when has business shamed away from money making because of unstable international relationship? China and Japan have only been bad mouthing each other. The potential nuclear confrontation between India and Pakistan have not prevent India to become IT and BPO center in the world.

Oops, I don't mean taking the trend too seriously, just the article. It all comes down to comparative advantage. Even China wants Vietnam to do fine which is a major destination of Chinese PHS and motorcycle export. Trade isn't war but "win/win" story/news doesn't sell. ;)

Mr. Li --

I concur.

Hi Jonathan, read /. as well? ;) (http://it.slashdot.org/article.pl?sid=06/11/07/1926207 )

I think the myth about IT outsourcing is its high tech image. Most of the successful IT outsourcing are not creative cool Web 2.0 projects, they are boring COBOL for enterprise backend. Even today, 50% of the computer codes written every year are still COBOL. In the US, it's almost impossible to find COBOL programmers under 40. In reality, the IT outsourcing is really about finding locations where young college computer graduate willing to work on COBOL codes for cheap. Doing COBOL doesn't require that much creativity; the art of COBOL has been practiced for half century. ;) Personally, I haven't seen good results from outsourcing creative modern projects.

The "creative" requirement for software companies are mainly because the industry operate in the throwing spaghetti on the wall and see what sticks. The analysts love this so much that they are calling Google is successful because it fails so much. (http://money.cnn.com/2006/10/30/magazines/fortune/googlefailure/?postversion=2006110814 )

I guess this is way off topic. Just want to say that IT outsourcing isn't about the latest and the coolest. It's about legacy COBOL which nobody in developed countries would want to do. Consider outsourcing "creativity" is deadly.

Mr. Li --

Though I am certainly not expert in IT outsourcing, I do know that you are correct that much of what is outsourced is basic, fairly repetitive stuff. Yet, that is not true of much of what the high-end Indian companies (Tata, Wipro, etc.) are doing. I am guessing Vietnam is, right now anyway, getting mostly low end stuff. But, from the low comes the high....

Hi Dan and Jonathan,

I don't mean ALL IT outsourcing are of low level skills labor but COBOL coding is certainly a significant cash cow for the Indian IT houses, especially Tata and Wipro. Yes, Wipro and Tata are moving into higher level works such as design and architecting for their clients but this part of business are slow because at this skill level, there is no much cost saving and extreme talent shortage. The same guys are aggressively sought after by all firms Indian or MNC in Indian or US. Or lured by the venture investment to be their own bosses. Do a search on Wipro and Tata's recruitment and COBOL skills still dominate the opportunities in those companies.

It's hard enough to manage a handful of programmers and engineers under one roof for creative projects. Doing outsourcing adds a layer of communication complexity that often time outweigh the advantage of cost saving or team expansion.

Tata and Wipro and other Indian outsourcing powerhouses will start their expansion into America to fill this talent gap because people at this level have been losing jobs because the outsourcing hypes. Now, their old bosses have to pay twice for them to get them from Tata. ;) (http://headlines.sify.com/news/fullstory.php?id=14324438&headline=India~now~exporting~jobs~to~US )

I think there is a misconception that IT is easy because some 17 years old is making millions doing it or the top figures in the field (Gates, Ellison, Jobs, Young, Fallo, Brin) are all college drop out. However, it's harder then it looks. Funding IT creative projects to viable business offers lower payoff then Las Vegas.

I should have separate out East Europe and Russia on the outsourcing as they are taking a different route to industry growth then India or China. Near shore works from West Europe are majority of the development there. Strict labor law in West Europe make most of projects to East Europe a team expansion rather then cost saving. I have seen good works out of East Europe and I think they will move faster to more startups mode because of the higher availability of the high level engineers and the arrival of venture capitals focusing on Europe. It's unlikely we will see build up of large outsourcing firms with tens of thousands of people in East Europe.