BMI Vietnam Information Technology Report Q1 2014

Q1 2014
www.businessmonitor.com
VIETNAM
INFORMATION TECHNOLOGY REPORT
INCLUDES 5-YEAR FORECASTS TO 2017
ISSN 2044-9631
Published by:Business Monitor International
Vietnam Information Technology

Report Q1 2014
INCLUDES 5-YEAR FORECASTS TO 2017
Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International
Copy deadline: December 2013
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Vietnam Information Technology Report Q1 2014
CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 9
IT SWOT .................................................................................................................................................. 9
Wireline SWOT ....................................................................................................................................... 11
Political ................................................................................................................................................. 13
Economic ............................................................................................................................................... 14
Business Environment .............................................................................................................................. 15
Industry Forecast .............................................................................................................. 16

Table: Vietnam IT Industry - Historical Data And Forecasts (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Broadband ............................................................................................................................................. 21
Table: Telecoms Sector - Broadband - Historical Data And Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Macroeconomic Forecasts ............................................................................................... 23

Economic Analysis ................................................................................................................................... 23
Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Industry Risk Reward Ratings .......................................................................................... 27

Table: Asia Pacific IT Risk/Reward Ratings - Q1 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Market Overview ............................................................................................................... 31

Hardware ............................................................................................................................................. 31
Software ............................................................................................................................................... 38
Services ................................................................................................................................................ 49
Industry Trends And Developments ................................................................................ 55

Regulatory Development .................................................................................................. 59
Table: Government Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Regulatory News .................................................................................................................................... 62
Competitive Landscape .................................................................................................... 64

International Companies ......................................................................................................................... 64
Table: Samsung Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Table: Intel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Table: Global CyberSoft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Local Companies ................................................................................................................................... 67

Table: Sara Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Company Profile ................................................................................................................ 68

FPT Software .......................................................................................................................................... 68
Table: FPT Group Revenue By Segment (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Table: Profit Before Tax Margin By Segment (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Page 4
Regional Overview ............................................................................................................ 72

Hardware Sales Opportunity Remains ........................................................................................................ 74
Demographic Forecast ..................................................................................................... 76

Demographic Outlook .............................................................................................................................. 76
Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Methodology ...................................................................................................................... 80
Industry Forecast Methodology ................................................................................................................ 80
Sources ................................................................................................................................................ 81
Risk/Reward Rating Methodology ............................................................................................................. 82
Table: It Risk Reward Rating Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Table: Weighting Of Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Page 5
BMI Industry View

BMI View: Vietnam's IT market is a regional outperformer and we expect strong growth to continue over
the medium term. We forecast IT spending will grow at a compound annual growth rate (CAGR) of 14.1%
to 2017, driven by rising incomes, enterprise modernisation and the policy environment put in place by the
government. Significant opportunities remain in the retail market due to relatively low penetration of
devices and services, which vendors will be able to tap as incomes rise. The government is also a significant
factor underpinning our bright outlook as it pursues a range of ICT initiatives and allocates funding to
develop Vietnam's domestic IT industry. These policies include the promotion of Vietnam as an outsourcing
destination, with the services segment expected to expand rapidly. There is also increasing momentum
towards Vietnam becoming a global centre for electronics production as wages rise in China and
manufacturers look to protect margins by moving to Vietnam, where wages are as little as a third of those
in China.
Headline Expenditure Projections
Computer Hardware Sales: VND44,389bn in 2013 to VND68,935bn in 2017, CAGR of +12.5% in

local currency terms. Low penetration of devices and rising incomes will support strong sales growth,
although access to credit continues to be a bottleneck despite partnerships between some retailers and
banks.
Software Sales: VND5,610bn in 2013 to VND10,378bn in 2017, CAGR of +17.5% in local currency
terms. Piracy continues to be a drag on the market, but there are large opportunities in business software
and security solutions for vendors willing to accept narrow margins in a price sensitive market.
IT Services Sales: VND12,083bn in 2013 to VND22,812bn in 2017, CAGR of +18.2% in local currency
terms. Services expected to be the outperforming segment of the IT market as demand grows in several
verticals, including banking, telecoms, energy and government. Additionally, there is a potential boom in
outsourcing from Japanese enterprises to drive outperformance of services segment.
Key Trends & Developments
Vietnam is rapidly emerging as an important location in global supply chains for both IT hardware and
services. The government has created an attractive policy environment, including targets for training skilled
employees from local universities and the use of tax incentives to persuade firms to locate offices in the
country. These policies, combined with low wages and proximity to large markets, means the trend of firms
investing is gathering momentum. The first major investment came from chip manufacturer Intel,
announced in 2006, but other investments have followed from Samsung Electronics, which expects to
produce as much of 40% of its global smartphone and tablets in Vietnam by 2015. Vietnam is also an
Page 7
emerging destination for outsourcing, with multinationals increasingly turning away from China in favour
of lower cost and higher security locations.
While Samsung and Intel's production facilities are primarily geared towards export, there is also significant
interest in the domestic retail hardware market where low PC penetration and forecasts for rising incomes
means there is a solid platform for growth over the medium term. However, a lack of credit has restricted
sales in the past as PCs remain big-ticket purchases for the majority of Vietnamese households. BMI
believes this bottleneck will be less of a problem in the future as retailers such as Vien Thong A,
Dienmay.com, Phong Vu, Hoan Long and Nguyen Kim cut prices and partnered with banks including
HSBC, VietinBank, ANZ and Sacombank to directly offer interest free instalment payment plans from
mid-2013.
Page 8
SWOT
IT SWOT
SWOT Analysis
Strengths
Government policies and funding in place to promote the development of the IT

sector.
Vietnam's gradual integration into the global trade network via its accession into trade
organisations such as ASEAN and WTO, as well as bilateral agreements with Japan
and China.
The domestic IT market is in a rapid growth phase, with trade liberalisation and
growing affordability driving increased adoption among enterprises and consumers.
Expanding local hardware production industry with major international players such
as Samsung and Intel making large investments.
Weaknesses
IT spend per capita is much lower than in neighbouring Thailand, reflecting a much
lower GDP and GDP per capita.
Limited access to credit and budgets restrain spending by SMEs.
Highly cost-sensitive market, with 75% of software provided by lower-cost local

software vendors.
Opportunities
High level of software piracy, although some progress has been made in recent years.
Low PC penetration means there is scope for vendors to tap first-time buyer market
as well as the upgrade/replacement market.
Low-cost tablets are proving popular with consumers, with significant medium-term
sales growth potential as incomes continue to rise.
Vietnam is becoming a popular destination for software development and IT services

outsourcing, with particularly strong growth potential from Japanese enterprises that
are turning away from Chinese based providers.
Page 9
SWOT Analysis - Continued
National IT Plan will drive spending on IT utilisation in areas such as e-government, etaxation and education.
SMEs have much potential to increase spending on basic solutions, including

customer relationship management and security.
The government's drive to create a significant IT services industry over the next 15-20
years - through incentives to create IT clusters - is expected to be a significant factor
shaping the market.
Threats
The implementation of the China-ASEAN free trade agreement means that

established multinationals will face a growing challenge from low-cost Chinese
vendors in the Vietnamese market.
Low-cost tablets from own-brand Chinese vendors a particular threat to low- and
mid-range notebook vendors. Falling prices may further undermine margins and
profitability after steep discounting.
Cyber security issues could undermine confidence in IT solutions and services, with
Big Data and cloud computing vulnerable.
Page 10
Wireline SWOT
SWOT
Strengths
Fixed-line penetration levels and internet user rates are high in major urban centres
such as Ho Chi Minh City, Hanoi, Danang and Haiphong.
Competition exists in fixed-line and internet access markets; VNPT faces competition
from several other state-owned companies and privately owned operators.
High levels of literacy and other demographic factors bode well for strong and
continued demand for wireline services over the next few years.
Weaknesses
Vietnam's fixed-line and internet access markets are dominated by state-controlled

operator VNPT.
Although alternative broadband infrastructures are currently being explored,

broadband growth continues to be highly dependent on DSL.
Low fixed-line penetration rates in rural regions limit the scope for DSL broadband
growth.
Although internet user growth is improving, rural Vietnam still has limited access to
internet infrastructure.
Broadband tariffs remain high, creating a barrier for low-income subscribers to

access.
Opportunities
The privatisation of VNPT could help to bring about increased investment revenue
and the arrival of new skills.
On a national level, broadband penetration rates remain low - this means that the
sector has considerable growth potential.
Significant opportunities exist to develop alternative broadband technologies,

including WiMAX, LTE and fibre; WiMAX and LTE internet services have the potential
to raise the level of internet user penetration in rural parts of Vietnam.
Page 11
SWOT - Continued
Draft Bill of Law on Telecommunication has been put forward for discussion at the
National Assembly Steering Committee. If passed, the bill will allow private
companies to build network infrastructure for the first time and will open up the
telecoms market to foreign investors.
Threats
Fixed-line sector may enter a period of decline, with potentially negative

consequences for DSL growth.
As the market for mobile data services grows, this could have potentially negative
consequences for the growth of fixed broadband services.
VTV's dominance in the pay-TV sector is holding back market development.
Page 12
Political
SWOT Analysis
Strengths
The Communist Party of Vietnam remains committed to market-oriented reforms and

we do not expect major shifts in policy direction over the next five years. The oneparty system is generally conducive to short-term political stability.
Relations with the US have witnessed a marked improvement, and Washington sees
Hanoi as a potential geopolitical ally in South East Asia.
Weaknesses
Corruption among government officials poses a major threat to the legitimacy of the
ruling Communist Party.
There is increasing (albeit still limited) public dissatisfaction with the leadership's tight
control over political dissent.
Opportunities
The government recognises the threat corruption poses to its legitimacy, and has
acted to clamp down on graft among party officials.
Vietnam has allowed legislators to become more vocal in criticising government

policies. This is opening up opportunities for more checks and balances within the
one-party system.
Threats
Macroeconomic instabilities continue to weigh on public acceptance of the one-party

system, and street demonstrations to protest economic conditions could develop into
a full-on challenge of undemocractic rule.
Although strong domestic control will ensure little change to Vietnam's political scene
in the next few years, over the longer term, the one-party-state will probably be
unsustainable.
Relations with China have deteriorated over recent years due to Beijing's more
assertive stance over disputed islands in the South China Sea and domestic criticism
of a large Chinese investment into a bauxite mining project in the central highlands,
which could potentially cause wide-scale environmental damage.
Page 13
Economic
SWOT Analysis
Strengths
Vietnam has been one of the fastest-growing economies in Asia in recent years, with
GDP growth averaging 7.1% annually between 2000 and 2012.
The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 20.7% in 2012.
Weaknesses
Vietnam still suffers from substantial trade and fiscal deficits, leaving the economy
vulnerable to global economic uncertainties. The fiscal deficit is dominated by
substantial spending on social subsidies that could be difficult to withdraw.
The heavily-managed and weak currency reduces incentives to improve quality of

exports, and also keeps import costs high, contributing to inflationary pressures.
Opportunities
WTO membership and the upcoming ASEAN AEC in 2015 should give Vietnam
greater access to both foreign markets and capital, while making Vietnamese
enterprises stronger through increased competition.
The government will in spite of the current macroeconomic woes, continue to move
forward with market reforms, including privatisation of state-owned enterprises, and
liberalising the banking sector.
Urbanisation will continue to be a long-term growth driver. The UN forecasts the

urban population rising from 29% of the population to more than 50% by the early
2040s.
Threats
Inflation and deficit concerns have caused some investors to re-assess their hitherto
upbeat view of Vietnam. If the government focuses too much on stimulating growth
and fails to root out inflationary pressure, it risks prolonging macroeconomic
instability, which could lead to a potential crisis.
Prolonged macroeconomic instability could prompt the authorities to put reforms on

hold as they struggle to stabilise the economy.
Page 14
Business Environment
SWOT Analysis
Strengths
Vietnam has a large, skilled and low-cost workforce, which has made the country
attractive to foreign investors.
Vietnam's location - its proximity to China and South East Asia, and its good sea links
- makes it a good base for foreign companies to export to the rest of Asia, and
beyond.
Weaknesses
Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate to
cope with the country's economic growth and links with the outside world.
Vietnam remains one of the world's most corrupt countries. According to

Transparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123
out of 176 countries.
Opportunities
Vietnam is increasingly attracting investment from key Asian economies, such as

Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech
skills and know-how.
Vietnam is pressing ahead with the privatisation of state-owned enterprises and the
liberalisation of the banking sector. This should offer foreign investors new entry
points.
Threats
Ongoing trade disputes with the US, and the general threat of American
protectionism, which will remain a concern.
Labour unrest remains a lingering threat. A failure by the authorities to boost skills
levels could leave Vietnam a second-rate economy for an indefinite period.
Page 15
Industry Forecast
Table: Vietnam IT Industry - Historical Data And Forecasts (VNDbn)
2010
2011
2012
2013f
2014f
2015f
2016f
2017f
IT Market Value
36,898
45,404
52,773
62,082
70,836
80,399
90,746
102,126
o/w Hardware
27,305
33,372
38,261
44,389
49,939
55,877
62,161
68,935
- PC
22,117
27,098
31,374
36,754
41,350
46,378
51,594
57,216
- Servers
2,457
3,003
3,443
3,995
4,495
5,029
5,594
6,204
o/w Software
3,051
3,868
4,630
5,610
6,593
7,708
8,961
10,378
o/w Services
6,542
8,165
9,882
12,083
14,303
16,814
19,624
22,812
1.86
1.79
1.79
1.87
1.90
1.92
1.93
1.93
IT Market, % of
GDP
f = BMI forecast. Source: BMI.
BMI forecasts Vietnam will be one of the fastest growing IT markets in APAC over the medium term,
albeit from a low base, but the IT sector will account for a growing share of GDP over the duration of our
five-year forecast to 2017. We expect the IT market in Vietnam will expand to VND62,082bn in 2013, an
increase of 17.6% from VND52,773bn in 2012. We expect strong growth to continue over the medium,
term with a CAGR of 14.1% from 2013 to 2017, with the value of the market reaching VND102,126bn in
2017. There will be a double-digit CAGR for all three segments of the market. However, we expect
software and services growth to outperform hardware and account for an increasing share of the total
market over the five years to 2017.
The major trends driving this strong growth include increases in PC penetration - driven by the supply of
cheaper hardware from Chinese vendors and a new generation of devices running Windows 8. Supporting
this trend will be moves by retailers to partner with banks in credit provision for PC purchases,
improvements in network infrastructure and rising real incomes. Government spending and policy will also
add to growth, through procurement initiatives, investments in hi-tech industrial parks and policies designed
to boost the sector such as improvements to IT education and security certification schemes for firms.
Despite global economic headwinds presenting a risk, Vietnam's software development and outsourcing
services firms are positioned to benefit from large foreign enterprises seeking lower cost locations over the
medium term.
Page 16
2013 Outlook
Despite a small downward revision by BMI to its

macroeconomic outlook for Vietnam in 2013
Industry Trends - IT Market

2010-2017
conditions remain supportive of IT market

expansion. We forecast real GDP growth will pick
up to 5.3% in 2013 from 5.2% in 2012, however it
should be noted that the forecast for 2013 has been
revised down from 7% since the Q213 update. There
was a small drag on retail spending in H113 due to
limited access to credit, however partnerships
between banks and retailers have returned the market
to faster growth from mid-2013. Government
spending is expected to increase by 6.2% in real
terms, again up from 2012, and further, we expect IT
spending growth to outpace overall government
spending due to the policy goal of developing the
sector. This is evidenced by the Ministry of
f = BMI forecast. Source: BMI.
Information and Communication's August 2013

proposal to allocate at least 2% of the state budget to boosting the IT sector each year.
BMI expects strong sales in the retail PC market to continue through 2013, following a small dip in H113
as retailers moved to partner with banks and ensure credit is available for big ticket purchases. The market
will gain additional momentum from the impact of new vendors entering the market and existing vendors
releasing new models, including Android tablets and Microsoft Windows 8 based tablets, hybrids/
convertibles and ultrabooks. Most recently, the influx of low-priced Chinese own-brand tablets has
deepened the market and vendors in the notebook category have been lowering prices to compete with this
influx, which has helped make devices more affordable and boosted sales.
Government spending and PC subsidy programmes will be supportive of the PC market in 2013 as the
government continues to roll-out IT modernisation programmes. The government has been spending heavily
on IT, with around 50% of this going to hardware in recent years. It has also spent heavily on licensing
software used by government agencies, but in 2013 the Ho Chi Minh City government is beginning a push
to increase the utilisation of open-source software, which could be replicated elsewhere.
Page 17
Another area of the market performing strongly in 2013 is the outsourcing services market. Several pieces
of research have shown that Vietnam is now the first choice for Japanese enterprises looking to outsource
functions, primarily based on the cost advantages offered. The majority of Japan's corporate outsourcing is
still directed to China in terms of value, but software and business process outsourcing has significant cost
advantages in Vietnam, as well as a friendly business environment. This could see rapid growth as firms
shift from China to Vietnam and the potential for international demand from elsewhere could sustain the
boom.
Drivers
Government policies and funding are an important part of the sector's development in Vietnam. Policies
include promoting the use of IT by government agencies, citizens and enterprises - as well as promoting the
development of local industry, particularly in software and outsourcing services.
Examples of policies include plans to modernise IT in government agencies and the customs department, as
well as the Tax Administration Modernisation Plan for 2008-2013. A number of government ministries and
organisations, including the Ministry of Education and Training, have also started to promote the roll-out of
cloud services. The government has also promoted the IT industry through policy and incentives to grow hitech parks, both for the construction of IT hardware, but increasingly software and IT services.
A specific IT development initiative is the government's drive to grow the IT services industry over the next
15-20 years. The cost of outsourcing in Vietnam was estimated in 2013 research to be as much as 30%
lower than in China, a fact which Japanese firms were especially aware of. The momentum that could be
garnered from Japanese enterprises shifting business process and software development outsourcing to
Vietnam could see medium term increases from European and North American demand.
However growth will depend on government progress on various business environment issues, including
copyright protection and combating cyber security threats. Further progress in combating software piracy,
which is still reported to be at higher levels than in China, India and Thailand, despite some progress in
recent years, is required. It is also taking steps to increase the penetration of information security
certification by distributing funds to enterprises. In August 2013 it was reported that the government was
investing US$42mn in the creation of the National Centre for Network Security Technology. The
government is also updating the Law on Information Security, which closed for public comment in July
2013, as it looks to improve the cyber security environment including combating attacks originating in
Vietnam.
Page 18
Improvements to supporting infrastructure are also driving IT market development. Telecoms operators are
investing in the expansion of both wireline and wireless broadband network infrastructure to rural areas, as
well as upgrading capacity of urban infrastructure and improving backbone networks. Additionally,
telecoms operators such as Viettel are emerging as significant distribution channels for notebooks as
vendors seek tie-ups. In a country where PC penetration remains low, particularly in rural areas,
government digital divide programmes to boost internet and digital utility in rural areas underpin
addressable market growth and open PC ownership to a growing number of rural inhabitants.
Tariff reductions, particularly the ASEAN ones, have contributed to lower prices and are boosting PC sales.
However, the new China-ASEAN free trade agreement offers both opportunities and challenges to vendors,
given the growing presence of low-cost Chinese vendors in the Vietnamese market. Reports from Q113
indicate that international vendors have suffered in particular against the supply of cheap own-brand
Chinese tablets. Local dealers are promoting the devices because of the margins available, but even with
this mark-up they are proving a big-hit and hurting sales of traditional notebooks.
Segments
In Vietnam the government is a key IT spending vertical and accounts for around 30% of total Vietnamese
IT spending, with high levels of investment in hardware. Spending has continued to grow both at central
and regional government level. Most recently in April 2013 the Ho-Chi Minh City authority announced
plans to spend VND300bn (US$14.3mn) on developing e-government capacity. It will also focus on
replacing out of date hardware and improving network security in 2013. An additional feature is the
authority's intention to work with local small and medium IT enterprises where possible, rather than
immediately turning to large IT vendors. Spending in 2013 is a marked increase over the 2005-2012 period
when the city authority carried out 1,012 projects with a total spend of VND665bn.
Large Vietnamese companies are the most likely to buy packaged software from multinationals, which have
only around 25% of the local software market. In the large corporate sector, growing demand for digital
infrastructure projects in segments such as banking, telecoms and energy has attracted global IT services
leaders, such as IBM, to invest in Vietnam. Foreign investment, particularly by Japanese companies, in call
centres and other areas will help to grow the market. The banking and finance sector is a promising area for
database software and one where foreign companies have done well. Spending opportunities in the finance
segment will be driven by regulatory compliance, due to regulations such as Basel II, HIPPA and the
Sarbanes-Oxley Act, and quite likely by new regulations introduced in the wake of the global financial
crisis.
Page 19
Smaller enterprises have a lower penetration of enterprise software, including ERP and security software,
but due to price sensitivity favour local solutions. The SME market is an area of the market in which
vendors can achieve growth as SME awareness of the benefits of IT utilisation increase, encouraged by
government initiatives to modernise firms and improve international competitiveness. However, vendors
will have to face the challenge of enterprises that are constrained by low budgets and lack of access to
credit. Companies are looking for software that will help boost performance and operational efficiency.
Promising SME verticals include discrete manufacturing and consumer packaged goods, as well as hotels
and property management. The solution areas with most demand currently include security software and
key applications such as CRM, ERP and HR management.
An increasing number of Vietnamese companies have shown an interest in and willingness to use cloud
services, although the market is only in the early stages of development. In the short term weaknesses in
telecoms infrastructure - in terms of reach and capacity - will limit cloud service adoption, but this barrier
will erode over the medium term. The government has also got involved in encouraging the development of
this business model in Vietnam and new cloud computing offerings and increased competition in this
segment should fuel further demand from end-users to utilise this technology.
Summary
Overall, the hardware market is anticipated to grow from VND44,389bn in 2013 to VND68,935bn in 2017,
with computer sales rising from VND36,754bn to VND57,216bn over the same period. Software spending
should rise from VND5,610bn to VND10,378bn and IT services from VND12,083bn to VND22,812bn over
the forecast period.
Page 20
Broadband
Table: Telecoms Sector - Broadband - Historical Data And Forecasts
2010
No. of internet users ('000)
2011 2012e
2013f
2014f
2015f
2016f
2017f
26,905 31,159 31,470 32,100 32,742 33,397 34,064 34,746
No. of internet users/100 inhabitants

No. of fixed broadband internet subscribers ('000)
30.6
35.1
35.1
35.4
35.8
36.1
36.5
36.9
3,644
4,085
4,775
4,966
5,115
5,218
5,322
5,428
4.1
4.6
5.3
5.5
5.6
5.6
5.7
5.8
No. of fixed broadband internet subscribers/100

inhabitants
e/f = BMI estimate/forecast. Source: BMI, VNNIC
According to data provided by the Vietnam Internet

Network Information Centre (VNNIC), there were
Industry Trends - Broadband

Sector
31.3mn internet users in Vietnam at the end of

November 2012, up from 30.6mn in 2011. Vietnam's
2010-2017
internet sector continued to exhibit slower growth in

2012, continuing on from the trend seen in 2011.
The average monthly growth rate for 2011 was
1.1%, which was lower than the growth average in
2010 (1.4%). The first 11 months of 2012 saw even
weaker growth, with an average m-o-m growth rate
of just 0.2%. Given that the number of 3G
subscriptions has surged in the past year, it is
possible that the VNNIC does not take into account
mobile internet users in its definition.
Fixed internet services are experiencing muted
e/f = BMI estimate/forecast. Source: BMI, VNNIC
growth due to the higher cost of ownership as

consumers need to purchase personal computers,
namely desktops and notebooks. There has been no explanation for the sudden decline in subscriber growth,
but market saturation is likely to play a significant role. We now expect 32.1mn internet subscribers in
Vietnam at the end of 2013, a penetration rate of 35.4%. We expect this number to increase to 34.7mn by
end-2017, a 36.9% penetration rate.
Page 21
Although the internet user penetration rate is expected to be approaching saturation in major cities and
towns, rural Vietnam remains comparatively untapped as a result of consumers' lower purchasing power.
However, expansion into these areas is costly and the return on investment is not as attractive. Mobile
internet services are a more efficient way to capture customers in rural areas.
Vietnam's fixed broadband subscriber market grew by 22.8% in 2010, which was a significant slowdown
from 44.8% in the preceding year. The market registered growth rates of 150.3% in 2007 and 58.3% in
2008, but the higher growth momentum could be attributed to a low-base effect.
Like the overall internet sector, Vietnam's broadband industry is experiencing a slowdown. There were
4.3mn broadband subscribers at the end of November 2012, up by 8.0% y-o-y. The average monthly growth
rate in the first 11 months of 2012 was 0.5%, down from the 1.0% in the whole of 2011. This was due to the
contractions in the months ended June 2012, September and November 2012. We have raised our
broadband forecasts this quarter, however, in light of strong growth reported in the ministry's subscriber
figures. According to MIC, there was a surge in broadband subscribers in end-2012, and, by end-March
2013, there were 4.8mn subscribers in the country.
Although Vietnamese telecoms companies continue to deploy broadband services such as fibre-to-the-x,
affordability and coverage remain key concerns in the emerging market. Furthermore, demand for
traditional fixed broadband services is increasingly under threat from mobile alternatives due to a lower cost
structure. While we believe there will be limited growth potential for the fixed broadband industry in
Vietnam in the near future, we retain an optimistic view in light of Vietnam's growing affluence and
expanding middle class. While next-generation mobile technologies LTE and WiMAX could cannibalise
demand for fixed broadband solutions, companies could generate consumer interest by introducing
bandwidth-intensive services such as IPTV or target businesses by offering bundled packages such as cloud
solutions.
We expect the growth rate of the Vietnamese broadband market to decline in the next few years as
consumers opt for mobile alternatives. That said, declining prices of products and services should help the
sector to grow by an average of 2.0% between 2013 to 2017 to bring the total number of fixed broadband
subscribers in Vietnam to 5.8mn by 2017.
Page 22
Macroeconomic Forecasts
Economic Analysis
BMI View: Although we expect the Vietnamese economy to record yet another quarter of sub-par growth in
Q413, we are beginning to see potential for upside surprises to domestic demand over the coming quarters.
Recent data on foreign direct investment inflows, remittances, passenger car sales, and property market
launches, suggests to us that domestic demand is on a nascent recovery, setting the stage for stronger 2014
growth.
The general consensus is expecting the Vietnamese economy to suffer yet another quarter of sub-par growth
mainly due to subdued external demand and the lack of progress on banking sector reforms. This is closely
in line with our view that real GDP growth will come in at just 5.3% in 2013, a slight improvement from
5.2% in 2012. Looking ahead to 2014, however, evidence of improving macroeconomic fundamentals in
Vietnam (especially with regards to the outlook for domestic demand) suggests to us the balance of risks to
our growth forecast of 6.0% is gradually tilting towards the upside.
Robust Remittances Could Boost Domestic Demand

Vietnam - Unrequited Transfers, US$mn
Source: BMI, Asian Development Bank
Page 23
Remittances: According to estimates published by the World Bank, the Vietnamese economy is on track to
record a bumper year for remittance inflows. The country is expected to receive US$10.6bn in remittances
from Vietnamese citizens working abroad, a robust 6.5% increase from 2012. Crucially, we believe that
remittance inflows will remain strong over the coming quarters as macroeconomic conditions in Vietnam
continue to improve. Growing confidence in the stability of the Vietnamese dong should also help to
encourage Vietnamese workers abroad, to a certain extent, to remit a larger share of their earnings back
home. We believe that this will help to boost domestic demand while providing support for the currency.
Foreign Direct Investment: Total foreign direct investment (FDI) inflows are also set to surpass the
government's full-year target of US$13bn, after data released by the Ministry of Planning and Investment
showed that inflows surged by 19.5% year-on-year (y-o-y) growth over the first eight months of the year.
The strong reading chimes with our view that the country's solid long-term growth story should continue to
attract foreign investors over the coming years.
Automobile Sales: We are witnessing signs of a robust recovery in automobile sales, a sign that pent-up
domestic demand is beginning to rebound. According to the Vietnam Automobile Manufacturers
Association (VAMA), September vehicle sales of its members surged by 20.6% year-on-year (y-o-y),
exceeding our already bullish forecast of 12.5% for the year (see 'Bullish On CV Sales In The Medium To
Long Term', October 14 2013).
Page 24
Developers Eyeing Property Market Rebound

Vietnam - Real Estate Index
Source: BMI, Blooomberg
Property Market: Meanwhile, we see increasing evidence that the Vietnamese property market may have
bottomed out (see 'Early Signs Of A Recovery, But No Property Market Boom In Sight', August 14 2013).
According to a quarterly report published by real estate agency CBRE Vietnam, the number of new
launches surged by 12% y-o-y in Q313. Anecdotal evidence from the local media suggests to us that
demand for real estate following the sharp decline in prices since 2011 may be recovering. To be sure, we
maintain our view that we are unlikely to see a property market boom given the healthy pipeline of new
units that will come online in 2014. Nonetheless, we acknowledge that consumer confidence is recovering
and we could potentially see some upside surprises to domestic demand in 2014.
Expenditure Breakdown
Private Consumption: We expect private consumption to grow at a relatively resilient pace of 5.0% in
2014. However, we note that the risk of further bankruptcies among SMEs could potentially lead to
widespread job losses, especially in export-driven sectors. Uncertainties over the outlook for employment
could, in turn, prompt households to cut back on spending.
Page 25
Gross Fixed Capital Formation: We foresee a pickup in private sector investment growth in 2014, partly
led by increased foreign direct investment inflows. We believe lending rates will gradually ease over the
coming months as the effect of recent rate cuts by the SBV begins to kick in. We are also seeing evidence
that credit conditions are improving. Accordingly, we expect gross fixed capital formation growth to
accelerate slightly from 4.1% in 2013 to 4.8% in 2014.
Public Spending: We expect total public spending to remain relatively resilient in 2014, expanding at a
respectable pace of 6.1%. However, there is limited room for the government to increase spending further
owing to concerns over the need to finance a potential bailout of ailing state-owned commercial banks.
Net Exports: Net exports remain the biggest downside risk to our outlook for the Vietnamese economy,
although we expect external demand to pick up in 2014. Vietnam's trade account has fallen back into
deficits in recent months, but we see the case for a substantial pickup in external demand on the back of a
rebound in regional growth over the coming quarters. Accordingly, we still expect exports to expand at a
moderate pace of 5.9% in 2014.
Table: Vietnam - Economic Activity
2010
2011
2012
2013f
2014f
2015f
2016f
2017f
2,157,829
2,779,880
3,245,419
3,657,621
4,117,487
4,631,499
5,203,774
5,841,949
Nominal GDP, US
$bn 3
112.9
134.6
155.5
175
200.2
227.8
257.4
291.4
Real GDP growth,

% change y-o-y 3
6.4
6.2
5.2
5.3
6.9
1,267
1,497
1,712
1,909
2,163
2,439
2,733
3,068
89
89.9
90.8
91.7
92.5
93.4
94.2
95
Industrial
production index,
% y-o-y, ave 1,5
14.1
10.9
7.6
8.7
9.6
9.9
9.8
Unemployment,
% of labour force,
eop 2,6
4.3
3.6
3.2
3.7
3.5
3.5
3.6
3.5
Nominal GDP,
VNDbn 3
GDP per capita,

US$ 3
Population, mn
Notes: f BMI forecasts. 1 at 1994 prices; 2 Urban Area Only. Sources: 3 Asian Development Bank, General Statistics
Office; 4 World Bank/UN/BMI; 5 General Statistics Office; 6 General Statistics Office/BMI.
Page 26
Industry Risk Reward Ratings

BMI's Asia Pacific IT Risk/Reward Ratings (RRR) compares the potential of a selection of the region's
markets over our forecast period through to 2017. Our Q114 ratings reflect our consideration of the political
and economic risks, as well as the risks associated specifically with IT intellectual property (IP) rights
protection and the implementation of state spending projects.
There were three changes in the aggregate scores of countries in our ratings table as we have updated our
macroeconomic and industry data, although this resulted in only one change in our rankings compared to
the previous quarter. South Korea displaced Singapore at the top of our table to take first position this
quarter following an upgrade to its country rewards score. China's industry rewards rating was downgraded
this quarter but this was not sufficient to move the country from the fifth position on our table. Sri Lanka's
score in that category was upgraded this quarter but the country remained rooted to the bottom of our table.
There were no changes to the aggregate scores of the other nine countries on our table. Despite the changes
to South Korea, Sri Lanka and China's scores, the average regional score was unchanged at 54.9.
South Korea registered an aggregate score of 72.2, compared to 71.0 in the previous quarter, owing to a 5pt
increase to its country rewards score. Economic activity in the country picked up in H113, with real GDP
growth of 1.1% quarter-on-quarter (q-o-q) during Q213 from a revised 0.8% q-o-q in Q113. Private and
government consumption were the main drivers of growth, expanding 1.0% and 2.4%, up from a -0.4% and
1.2% in the previous quarter. This performance had a positive effect on our country rewards rating, which
incorporates key macro indicators such as GDP per capita and unemployment in assessing the attractiveness
of the IT market.
There was no change to Singapore's aggregate score, although it dropped to second position on our table on
the back of the upgrade to South Korea's score. Singapore is one of only two countries with the maximum
score of 100 in the country rewards category. The country's heavy reliance on technological innovations to
attract businesses and drive economic growth due to limited land capital and a lack of natural resources
makes it an attractive market for a wide range of IT solutions, including advanced corporate solutions and
consumer mobility solutions. Singapore scores slightly below average in the industry rewards categories
owing to the relatively small size of its market.
Hong Kong is the other country with a maximum score of 100 in the country rewards category, although
this could only earn it the third position on our table owing to weak industry rewards and industry risk
scores. Hong Kong, like Singapore, is held back by a small market size in the industry rewards category
Page 27
while a strong Chinese influence on the country is a drag on its industry risk rating. However, Hong Kong
remains a prime financial hub, with strong demand for IT solutions that help companies to reduce operating
costs and improve operational efficiency when carrying out transactions, particularly cross-border trade.
Australia remains in fourth position with an aggregate score of 68.0. The continued delay to the proposed
National Broadband Network, which will vastly improve broadband coverage and speeds throughout the
country, thereby providing a boost to the IT sector, poses a downside risk to our outlook. BMI notes that the
project could see further disruption after the entire board of state-owned NBN Co reportedly offered to
resign following the general elections in September 2013, which brought the Liberal-National coalition
(LNC) to power. The new Communications Minister Malcolm Turnbull is proposing an alternative NBN
plan proposed to replace the previously proposed fibre-to-the-home (FTTH) technology with fibre-to-thenode (FTTN). The new government intends to rely on less of fibre and more on the existing copper
networks to save costs and time. We believe that this is a short-term solution that could materially impact
developments in the IT industry.
China also remains in fifth position despite a 1.5pt decrease to its aggregate score. This further narrowed the
gap with Malaysia to just 0.1pt. Malaysia is in sixth position with a score of 57.2. We downgraded China's
industry rewards score to 73.3 this quarter from 76.7 in our previous update to reflect the likely impact of a
slow down on economic growth on demand for IT services. However, the country's score in this category
remains the highest in the region owing to its large population and rising income levels. We retain the view
that China will shift its economy away from infrastructure investment and towards consumer services,
creating opportunities for the IT sector. There is no change to Malaysia score this quarter, although
continued investments in cloud technology poses an upside risk to our outlook.
There is a 10-15pts gap between Malaysia in sixth position and India, Indonesia, Thailand, Philippines and
Vietnam in that order from seventh to 11th. Although these countries have considerably larger populations
than some countries ahead of them on our table, they are held back by weak country rewards scores which
reflect lower GDP per capita and rate of urbanisation, as well as higher rates of unemployment. Among
these countries, Indonesia has the highest country rewards score of 35, compared to the regional average of
49.6, while India and Vietnam recorded joint the lowest score of 15.
That said, India's IT market houses some of the world's largest players - Wipro, Tata Consultancy and
Infosys - and we note that companies in the country are becoming more receptive to engaging the services
of professional IT firms to reduce cost and focus on their core competency. The Philippines is a wellestablished player in the business process outsourcing (BPO) industry but there are signs that the country is
Page 28
trying to move towards high-value services. Thailand's ICT industry is looking increasingly brighter with
the National Broadcasting and Telecommunications Commission able to implement changes, while
Vietnam has pledged to invest US$8.5bn in its ICT sector in the next 10 years. The government is also
looking to attract US$5bn worth of foreign investments in the IT sector by 2015, according to Avaya. In
April 2013, construction for the Danang Hi-Tech Park, which costs US$278mn and follow the same model
as the US' Silicon Valley and Taiwan's Hsinchui Science Park, was started. The project is expected to house
about 100 businesses, create 25,000 jobs and generate revenue of US$3bn.
Sri Lanka remained in 12th position with an aggregate score of 35.0 compared to 35.2 in the previous
quarter. We upgraded the country's industry rewards score to reflect improvements in fixed and wireless
broadband networks and investments cloud services. However, the country continues to lag behind its peers
on all for categories of our ratings table. On a positive note, recently-released GDP figures for Q213 showed
headline economic growth surging to 6.8% year-on-year (y-o-y), up from the 6.0% rate witnessed in the
first quarter, and beating consensus expectations for a 6.1% expansion (according to the Bloomberg
survey). Overall, Sri Lanka's economy grew by 6.3% y-o-y in H113, which is approximately in line with
our full-year real GDP growth forecast of 6.4%. This development bodes well for the IT sector, which
should see sustained demand for corporate and consumer IT solutions throughout 2014.
Page 29
Table: Asia Pacific IT Risk/Reward Ratings - Q1 2014
Risks
Rewards
Country
Industry rewards Country rewards Industry risks Country risks IT rating
Rank
Previous rank
South Korea
70.0
80.0
75.0
65.4
72.2
Singapore
56.7
100.0
70.0
74.4
72.1
Hong Kong
55.0
100.0
45.0
77.7
68.9
Australia
60.0
95.0
45.0
66.9
68.0
China
73.3
35.0
45.0
55.1
57.3
Malaysia
60.0
55.0
35.0
67.7
57.2
India
66.7
15.0
45.0
50.9
48.6
Indonesia
53.3
35.0
35.0
51.4
46.3
Thailand
56.7
20.0
35.0
62.9
46.2
Philippines
51.7
30.0
42.5
50.9
45.1
10
10
Vietnam
51.7
15.0
35.0
53.7
41.1
11
11
Sri Lanka
41.7
15.0
35.0
50.9
36.0
12
12
Average
58.1
49.6
45.2
60.7
54.9
Scores out of 100, with 100 highest. The IT Risk/Reward Rating comprises two sub-ratings 'Rewards' and 'Risks'. Scores
are weighted as follows: 'Rewards': 70%, of which Industry Rewards 65% and Country Rewards 35%; 'Risks': 30%, of
which Industry Risks 40% and Country Risks 60%. The 'Rewards' rating evaluates the size and growth potential of an IT
market in any given state, and country's broader economic/socio-demographic characteristics that impact the industry's
development; the 'Risks' rating evaluates industry specific dangers and those emanating from the state's political/
economic profile, based on BMI's proprietary Country Risk Ratings that could affect the realisation of anticipated returns.
Source: BMI
Page 30
Market Overview
Hardware
The hardware market in Vietnam remained buoyant as demand strengthened in the retail sector in
mid-2013, supplementing strong demand from the enterprise and public sectors. BMI forecasts Vietnam's
computer hardware market value will increase by 16% in local currency terms in 2013 to reach a value of
VND44,389bn (US$2.124bn). This fast rate of growth will be driven by rising incomes, economic
confidence and trends within the IT market - with the main growth driver being the availability of
affordable tablets and notebooks.
The Vietnamese hardware market continued to grow in 2012 despite tighter credit conditions
constraining consumer purchases of big ticket items and economic uncertainty dampening business
confidence. Research firm IDC estimated that PC shipments reached 638,000 in Q412, up 20.5% quarteron-quarter (q-o-q) and 3.4% year-on-year (y-o-y). This represents slower growth compared to that reported
by Vietnam's General Statistics Office (GSO) for retail sales as across economic sectors. According to the
GSO, the value of retail sales rose by 16% in 2012 to VND 2.324trn (US$110.7bn). Economic uncertainty
and income distribution means that big ticket PC purchases are not growing as fast as other areas of
spending in Vietnam.
Strong economic performance in Vietnam in 2013 will be supportive of an expanding first-time buyer
market and upgrade momentum in the retail market. This is supported by the latest market data with IDC
estimating total sales of 500,000 units in Q113, an increase of 13.1% y-o-y. Local retail chain Vien Thong
A stated that demand strengthened further in mid-2013, with back to school purchases booming as
purchasing power rises in Vietnam. Other retailers such as Dienmay.com, Phong Vu, Hoan Long and
Nguyen Kim also reported positive growth in PC sales. The segment has also been boosted by retailers
partnering with HSBC, VietinBank, ANZ and Sacombank to launch interest-free payment plans.
Government spending has remained supportive of the IT hardware market through initiatives in sectors such
as education and healthcare. It is also providing credit programs to raise household PC penetration in rural
areas, which is estimated to still be below 10%, compared with 50% in higher income urban areas. The most
potential being in rural areas where penetration is lower, however for the time-being Hanoi and Ho Chi
Minh City are thought to account for around 85% of notebook sales.
While improved access to credit is a short-term factor boosting sales, a longer-term trend is the spread of
network infrastructure, including fixed and wireless broadband, which is boosting demand for devices for
Page 31
both productivity and content consumption. Telecoms operators such as Viettel are also emerging as
significant distribution channels for notebooks as vendors seek tie-ups.
Form Factors
There is considerable potential in Vietnam as PC ownership is still relatively limited. The latest data from
the regulator, the MIC show a base of 5.5mn installed PCs at the end of 2011, equal to individual
penetration rate of 6.1%. Household PC penetration is still low in Vietnam, at 16% in 2011, and is estimated
to be around 20% for the country as a whole by H113. This creates a sizeable opportunity for vendors in
terms of the first-time buyer market. However, with GDP per capita expected to be US$1,909 in 2013 and
forecast to reach US$3,068 by 2017, the mass market is geared towards the value end of the spectrum.
Furthermore, with a large number of first-time buyers, consumer choice in terms of form factors is
uncertain. While productivity devices such as desktops and notebooks will remain popular for education and
enterprise purchasers, the availability of cheap tablets from China could see large numbers of consumers
move straight to tablets and have little or no experience with more traditional form factors.
In 2013 sales in the retail market are continuing to increase in the desktop, notebook and tablet segments.
Tablet growth is to be expected, coming from a low base and considering the increased availability of low
cost devices from OEMs. However the desktop and notebook market is also faring well, with IDC data for
Q113 showing 13.1% y-o-y unit growth to 500,000 shipments. The latest data from retailers up to August
2013 indicates demand for notebooks remains strong, with consumers opting for notebooks in the
VND8-10mn range, particularly university students requiring more advanced functionality. However they
also reported that demand for low cost VND3-5mn tablets was strong.
We believe low PC penetration is the key to continued growth momentum but migrations to Microsoft's
Windows 8 operating system are also boosting sales. In 2012 retailers claimed that many businesses and
consumers were waiting for the October release of the new OS before investing in an upgrade. The final
months of 2012 saw the release by of Windows 8 RT tablets from Acer, Asus and other vendors, priced at
around US$600. However these tablets are facing stiff competition from low priced Chinese tablet imports,
predominantly running Google's Android OS. Local press reports have stated that the very low price tablets
are selling well and being pushed by dealers who are able to secure high margins on the devices and still
undercut the international vendors.
Page 32
Hardware Market (VNDbn)

2010-2017
f = BMI forecast. Source: BMI
Although sales of desktops are still increasing in Vietnam, with only slow growth, they account for a
declining share of the PC market. We estimate desktops accounted for fewer than 30% of units sold in 2012,
down from above 70% five years previously. There could be a boost to the desktop market from Windows
upgrades from 2013 to 2015 as Microsoft support for Windows XP is withdrawn from 2014, however the
extent to which consumers replace desktops rather than shifting to notebooks and tablets is uncertain.
Windows XP still accounted for 44.3% of Vietnamese PC browsing traffic in August 2013 according to data
from Statcounter, illustrating the size of the potential upgrade market. However, two factors limit the
potential boost to desktop sales. First is the competition from mobile computing, as consumers and
enterprises will likely shift towards greater usage of notebooks and tablets when upgrading. A second factor
is the prevalence of pirated software in Vietnam, meaning the loss of Microsoft support is less of a push
factor.
Although sales of desktops will only see minor effects from the launch of Windows 8, the impact on the
wider market will be more significant. The release of the new OS introduced touch functionality to a wide
Page 33
range of vendors, deepening the tablet market by providing competition for Apple and vendors producing
Android devices.
Despite being a global leader in the tablet market, Apple - unsurprisingly given its premium price
orientation - has had limited success in Vietnam where its devices are not affordable for the vast majority of
the population. However the proliferation of affordable tablets running Android and the entry to the market
of vendors producing Windows 8 devices is already seeing tablet sales increase rapidly. In early 2013,
reports of an influx of own-brand Chinese made tablets indicate growth at the low value end, but we also
expect price competition between international vendors to boost sales of mid-range tablets in Vietnam.
A victim of the surge in tablet sales will be the notebook market - especially netbooks. Netbooks saw a
steep decline in popularity in 2011, with a number of leading vendors, such as former netbook segment
leader Sony, withdrawing models from the market. Netbooks initially suffered under competition from
lower priced notebooks, however tablets are now squeezing them further.
With tablets making gains at the low end of the market the notebook category is becoming a primarily midrange device category in Vietnam as vendors are unable to compete against own brand Chinese tablets on
price. Although notebook sales are being cannibalised by tablets, with PC penetration low in Vietnam, a
large number of first time buyers are still opting for the functionality of notebooks. This has helped sustain
unit growth, in contrast to developed markets where consumers are more likely to opt of tablets as
supplementary devices to their existing desktops and notebooks.
The release of Windows 8 has also spurred the creation of hybrid devices, which will have little impact in
2013 in Vietnam as early examples are priced as premium products. However price competition will reduce
the cost to consumers and hybrids could be an interesting growth area over the medium term. Windows has
a traditional strength in productivity use cases and software, with the OS being central to the enterprise
market and Microsoft's Office Suite ubiquitous. There is therefore an opportunity for vendors to leverage
this strength over rival iOS and Android devices by designing tablets with strong productivity functionality
alongside the passive media consumption features. Early examples have been hybrid devices such as
Microsoft's own Surface (RT & Pro), Hewlett-Packard's Envy and Lenovo's Yoga and Helix.
Although design innovation has some way to go and prices of hybrids will need to decline, the multi-use
device has scope to capture a share of the tablet market by offering a stronger value proposition to
consumers while not compromising on user experience. Such devices, along with ultra-slim notebooks are
already regaining share of sales from tablets in more developed Asia markets in H113, for instance in South
Korea, and we believe the same phenomenon could affect Vietnam as prices decline over the medium term.
Page 34
Another device category that is evolving is the ultrabook - a category of slim-line, high-spec devices with
long battery life that use Intel processors. Initial uptake after launch in 2012 was slow due to the high price
of devices, meaning limited applicability in a low income market such as Vietnam. In 2012 brands such as
HP, Asus, Acer, Sony, Lenovo and Samsung launched ultrabooks in Vietnam. However they failed to see
success in terms of unit sales due to high prices. Local press have reported that prices of low end ultrabooks
have declined in early 2013, from around VND15mn in 2012 to VND10mn which could see unit sales
grow. Local producer CMC has moved into the ultrabook market in November 2012 with low-end models.
Mid-range ultrabooks are reported to be retailing for VND20-30mn while premium models are priced over
VND30mn. The cheaper models are using lower power Intel i3 chips rather than i5 and i7 chips. Even after
these price cuts ultrabooks will be significantly more expensive than low end tablets.
APAC Household PC Penetration (%)

2011
Source: World Economic Forum Global Information Technology Report 2013
Vendor Performance
The latest data from IDC show that multinational brands dominated the Vietnamese PC market in Q412.
Asus was reported to be the top vendor by unit market share, with 17.8% of sales, with its position boosted
Page 35
by aggressive promotions and strong channel support. Fellow Taiwanese vendor Acer was estimated to be
second with a share of 10.2%, ahead of HP on 9.1% and Lenovo with 6.2%. However these vendors have
differing strategies. For instance, Lenovo is expanding its range of low-end notebooks to better compete
with Asus and Acer in the mass market, while HP has been successful in the enterprise market but is seeing
its consumer share of sales decline.
The Vietnamese PC market is surprisingly competitive, with most of the major laptop vendor players
having below a 10% local market share. Other multinational vendors, including Dell, Toshiba and
Samsung, have enjoyed strong growth in the market. Samsung is considered a threat as it aims to leverage
its distribution network and strong brand recognition from the smartphone and TV market into a 10% share
of the Vietnamese notebook PC market.
In 2013, vendors are hoping that upgrades to PC devices based on Microsoft's new Windows 8 operating
system will spur a new cycle of procurements. The final quarter of 2012 saw the release of a number of
tablets based on Windows 8 on the Vietnamese market. Acer released two Windows 8 tablets, the Inconia
Tab W700 and W511, while fellow Taiwanese leader Asus introduced its Asus Vivo Tab. The devices were
not cheap, with prices for the products being set at more than US$600.
Volumes have benefited from retailers cutting prices and cooperating with banks to offer credit to boost
sales in mid-2013. For instance Dienmay.com cut prices for notebooks from Dell, Sony and HP, as well as
enabling consumers to test and return or exchange products within 10 days. Meanwhile Nguyen Kim cut
prices on HP, Toshiba, Acer, Asus and Sony notebooks, as well as offering free accessories worth up to
VND2mn. The most important strategy for boosting sales of products from international vendors has been
cooperation with banks such as HSBC, VietinBank, ANZ and Sacombank to make interest-free credit
available.
As already noted, Asus has benefited from efforts to strengthen its distribution channel. In 2011 Asus
launched a new partnership with local company FPT Distribution, which has a nationwide network of 400
dealers. FPT, a member of FPT Trading Group, will distribute Asus products, with Asus planning to
introduce the full range of its new products in Vietnam during Q211. FTP also distributes a portfolio of
other leading PC brands, including Dell, Lenovo and Acer. Asus, which first entered the Vietnamese market
only three years ago, is also focusing on service as a competitive differentiator. FTP will provide warranty
services for Asus laptops at its four new service centres in Hanoi, Ho Chi Minh City, Danang and Can Tho.
Asus opened service centres across Vietnam in 2011.
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While foreign vendors dominate sales of notebook, local manufacturers have a strong position in the, albeit
declining, desktop market. Vietnam's top five computer companies, as selected by the Ho Chi Minh City
Computer Association in 2011, were FTP, CMS, Robo, Viettronics Tan Binh and the Khai Tri
Technology Trading Co. The total turnover of these top five companies was around VND1tn in 2011 (US
$48.1mn), down 25% from the previous year.
Vietnamese vendors have sought to compensate for declining desktop sales by an expansion into the laptop
and tablet segments. However, the tablet market remains controlled by major foreign brands, such as Apple,
Samsung and Acer. Tablets made by domestic vendors, such as FTP and CMS, have not proven a hit with
local distributors and have claimed less than 1% of the market. However, Viettel Group has announced that
it plans to enter the tablet market with a device expected to retail at around US$190.
In November 2012 local press reported dealers were pushing cheap tablets from China as a result of the
margins they could generate on the devices. It has been reported that wholesale dealers are able to sell the
tablets for double the market price in China in Vietnam. Examples include the Hipad Mid A13 and Ondan
V971, as well as other own-brand Chinese manufacturers such as Teclast and Ampe - as well as counterfeits
of foreign products.
As in many other markets, telecoms carriers have also emerged as a significant channel option for PC
vendors. Dell has launched a partnership with Viettel, which will distribute Dell PCs. Viettel has a
substantial presence in rural areas, which have big PC market growth potential, as PC penetration is
currently low. Dell has also partnered with local retail leader The Gioi Di Dong to sell both online and
through the company's 40 retail outlets.
HP's Vietnam market sales have been boosted by government and education sector projects. HP was ranked
by market research firm AC Nielsen as the leading laptop and PC market brand in Vietnam in 2010,
however its performance has declined as a result of underperformance in the consumer market. HP was also
the leader in the printer segment. Vendors continued to roll-out new models during the economic slowdown,
with the popularity of the small form factor netbooks a significant focus.
The reduction of import tariffs from January 2009 was a key moment in the evolution of the Vietnamese
market that encouraged multinational vendors to focus on more imports of high-end devices. Sony
announced that it was starting to sell its VAIO notebook in Vietnam, as it started to shift to importing for
domestic sales. Sony already has 180 distributors nationwide. Working with its partner DigiWorld Corp,
Page 37
Dell launched a campaign to target the local consumer segment, which is fuelling much of the current
growth.
Vietnam PC Installed Base

2008-2011
Source: MIC
Software
BMI expects software sales to continue to grow rapidly in Vietnam and increase to VND5,610bn in 2013,
up 21.2% from 2012. We expect strong growth will be maintained over the medium term with CAGR of
17.5% for 2013-2017. We estimate software spending comprised 8.8% of total Vietnamese IT spending in
2012, a figure which will increase to 10.2% by 2017 - when total sales will reach VND10,378bn. We expect
steady growth in demand for licensed software from government, enterprise and household segments.
The Vietnamese software market is cost-sensitive, with around 75% of the market served by lower-cost
local software vendors, as well as there being a high level of pirated software. Local software dominates the
market for government and SME segments. However, larger Vietnamese companies are more likely to buy
higher-priced software from multinationals, which have around 25% of the market. Vietnamese customers
are demanding a higher level of support for software compared with a few years previously.
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Growing PC penetration, as well as new technologies and business models, including 3G mobile and
WiMAX, and industry trends such as software-as-a-service (SaaS) and open source will provide areas of
Vietnamese software market growth going forward. Most demand remains for on-premises subscription
models, due to the greater perceived security and degree of control. However, as internet infrastructure
improves in Vietnam, there should be more demand for alternative models such as SaaS and other cloud
computing services.
The economic slowdown and the fall in demand for manufactured goods represented a challenge for
vendors as enterprises were tempted to focus more on the bottom line. Many companies, particularly trading
companies, cut back on non-essential systems upgrades in the face of cash-flow shortages. Smaller
enterprises will be a growth opportunity due to growing awareness. Companies are looking for software that
will help boost performance and operational efficiency. Promising segments include discrete manufacturing,
consumer packaged goods and hotels and property management.
The government is a significant software-purchasing segment in Vietnam and accounts for about 30% of
total IT spending. The 7,000 government agencies offer considerable opportunities at national provincial
and municipal levels. A particular area of opportunity is tax agencies of all administrative tiers as
governments look to increase the efficiency of tax collection. The Vietnamese government's drive to
implement e-government will be another driver in this segment.
Business Software
In 2012 and the first half of 2013 vendors reported continued robust sales of ERP solutions, despite the
uncertain economic situation. There is still a lot of potential for Vietnamese enterprises to increase spending
on basic solutions, including CRM and security.
A number of Vietnamese companies embarked on large-scale ERP implementations as part of their longterm growth strategy. In August 2012, Hoang Anh Gia Lai Group (HAGL) launched a VND100bn ERP
system as it sought to unify corporate governance. The solution was adopted for the company's four
business sectors of minerals, energy, forestry and real estate, with over 400 staff members. HAGL said it
would also consider applying the ERP solution at 20 affiliates. Imexpharm Pharmaceuticals Co. spent US
$41mn in August 2012 in installing an ERP system at its headquarters in Dong Thap, two factories in Dong
Thap and Binh Duong, as well as a distribution centre and sales branch in Ho Chi Minh City. Other
Vietnamese enterprises spending big on ERP solutions in 2012 have included Binh Minh Plastics, which
invested VND10bn in ERP, while Licogi 16 Co. has spent US$800,000 on an SAP ERP solution.
Page 39
In July 2013 FPT signed a contract to upgrade the Oracle ERP system, deploying additional Oracle
Business Intelligence Applications, for Vietnam Dairy Products (Vinamilk). The project is reported to be
worth VND15bn and includes software licences, hardware infrastructure, consultation and implementation
services.
Vendors should also look to areas such as CRM and business intelligence, where faster growth is possible,
due to untapped potential in key segments such as CRM, ERP and human resource management. Data
analytics and database software is likely to be a growing area and account for a larger portion of software
budgets. The banking and finance sector is a promising area for database software and one where foreign
companies have done well.
Government support for ICT development should provide a framework for growing utilisation of software
in both public and private sectors. However, while the ERP market is strong, the market for CRM software
remains small, largely due to a lack of awareness about it among Vietnamese businesses. It is estimated that
only 10% of Vietnamese businesses have used CRM, which is far fewer than in other countries.
Over BMI's five-year forecast period to 2017, the Vietnamese enterprise software market will offer
opportunities in many sectors. While management software remains at less than 10% of the total software
market, basic applications such as enterprise resource planning (ERP) and accounting are finding increasing
popularity with the business market. There is a growing emphasis on cost efficiency as enterprises look to
enhance productivity through automating these and other functions.
Cloud enterprise SaaS adoption is expected to accelerate over the next few years, after pilots scheme were
deemed to have been successful. An increasing number of Vietnamese companies have shown an interest in
and willingness to use cloud services. The government has also become involved in encouraging the
development of this business model in Vietnam, and in 2010 reached an agreement with Microsoft to
cooperate on research. Given the focus on many businesses of controlling costs, the pay-on-demand SaaS
model should grow in popularity and spread beyond the initial core application area of CRM.
New cloud computing offerings and increased competition in this segment should fuel further demand from
end-users to utilise this technology. In addition to cost savings, businesses will look to boost efficiency and
improve their response to customers in order to satisfy their needs. Large businesses are most likely to put
IT applications such as mail, phone systems and document management into the cloud. However, enterprise
applications that require a high level of customisation, or those that are subject to regulatory or datasensitivity constraints, are more likely to stay on premise.
Page 40
Banking and finance, oil and gas, aviation and telecoms are forecast to be some of the biggest spending
software segments over BMI's five-year forecast period and are among the best opportunities for foreign
vendors. These segments offer the most potential for customised solutions, as well as off-the-shelf packaged
software. Banks are looking to take their services to the next level in response to the demands of a rapidly
growing economy and are investing in more advanced and flexible platforms for core banking processes.
The mid-sized Asia Commercial Bank was among those to implement a new core-banking solution in
H110, having designated technology as a core pillar of its growth strategy.
Spending opportunities in the finance segment will be driven by regulatory compliance, due to regulations
such as Basel II, HIPPA and the Sarbanes-Oxley Act, as well as potential new regulations introduced in the
wake of the global financial crisis. Mobile operators are investing in new OSS (operating support systems)
to reduce costs and support delivery of new services.
Security Software
Cyber security issues are becoming more prevalent in Vietnam as a result of greater threats and increased
awareness from enterprises, government and consumers. The government is taking steps to address the
problem, which should boost spending. In August 2013 the government announced it was investing US
$42mn in the creation of the National Centre for Network Security Technology. The centre will be managed
by the Ministry of Public Security, the Government Secrecy Committee and the Ministry of Industry and
Trade. The government also update the Law on Information Security, which closed for public comment in
July 2013, as it looks to improve the cyber security environment including combating attacks originating in
Vietnam.
In March 2013 the Vietnamese government's draft law on digital information security stated that there
would be stronger support for domestic firms producing information security products. The Vietnam
Computer Emergency Response Team (VNCERT) stated that in order to ensure information security and
protect national digital sovereignty domestic products should achieve a 50% share of the market. VNCERT
called for tax incentives for domestic firms to assist them in a competitive global marketplace against
vendors such as Symnatec, Kaspesky, McAfee, Trend Micro, Bit Defender and Aviram.
A survey by internet security company Bkav in April 2013 estimated that the losses incurred by viruses ran
to VND8trn annually in 2012. This was calculated by the disruption to work caused by the presence of
viruses. The survey also highlighted an increase in attacks of company websites in Vietnam, with 425 in
March 2013, nine originating from Vietnam and 416 from foreign countries. This level of disruption is
Page 41
generating renewed interest in security software and solutions, however vendors will face the same
challenges of price sensitivity and piracy as elsewhere in the software market.
BKAV, along with CMC, the most prominent domestic cyber security firm in Vietnam, reported that less
than 50% of computers in Vietnam have anti-virus installed in H113. Despite the scale of the opportunity
from low penetration BKAV stated that the market is less dynamic than 3-4 years previously when a large
number of international vendors moved into the market. This was attributed to the reluctance of local
enterprises and consumers to spend on copyrighted software, preferring free software or no protection.
Software Market Value (VNDbn)

2010-2017
Migrations to the Windows 8 operating system have proved sluggish in Vietnam in 2013, unsurprising
given the price sensitivity of consumers, but it has the potential to make a positive impact on the business
software market in 2013, and in the next two years. Business caution and the fact that the pre-launch
publicity for Windows 8 was more low-key than for its predecessor Windows 7 means initial uptake was
limited. An additional factor is the greater longevity of hardware in recent years, and the strength of
Windows 7 meaning the push factor for upgrades in the short term is limited. However, there will be a
Page 42
medium term impact through a deepening of the tablet market and innovation in form factors as Microsoft
introduced touchscreen capabilities to Windows 8. The final quarter of 2012 saw the release of a new wave
of Windows 8 tablets and notebooks.
Another medium term factor that should drive upgrades is the fact that a large portion of the installed
computer base in Vietnam that still uses the Windows XP operating system. As support for Windows XP
will be withdrawn in 2014, this should provide an impetus to upgrade. The latest Statcounter data show that
XP still accounted for 44.3% of PC browsing traffic in Vietnam in August 2013, narrowly ahead of
Windows 7 on 42.6% and far ahead of Windows 8 with a 4.7% of browsing traffic. Many businesses that
declined to upgrade from XP to Vista or Windows 7 may now go straight to Windows 8. Microsoft will still
offer reduced support for XP until 2015, but hardware manufacturers started to wind down their support in
2013. This will be a key factor that should drive business upgrade.
In spring 2012, Microsoft targeted the consumer segment with a major 'Buying Microsoft computers'
campaign, which offered various gifts to customers purchasing computers with legitimate Windows 7
versions installed. The promotion ran from February through April in big cities across Vietnam, including
Hanoi, Ho Chi Minh City, Danang, Hailphong and Can Tho.
Microsoft is dominant in the operating system segment but faces a challenge from Chinese vendor
KingSoft. The economic downturn may have added to the forces driving interest in open source software.
The economic downturn has led businesses and customers to look more closely at open office-type open
source software, due to its perceived lower cost and access to codes, as well as free services, such as Google
Docs, which are funded by advertising. However, a key issue and precondition for the more widespread
adoption of open source will be the development of a support infrastructure. Given the current economic
climate, IT directors will need to justify any upgrade in terms of cost savings.
Open Source
The global economic downturn may have added to the forces driving interest in open-source software due to
its perceived lower cost and access to codes. The economic downturn has led businesses and customers to
look more closely at open-office-type open-source software, as well as free services such as Google Docs,
which are funded by advertising. Once again, a key issue and precondition for the more widespread
adoption of open source will be the development of a support infrastructure.
Ho-Chi Minh City (HCMC) plans to spend VND31bn to use open source software in 2013, primarily for the
city's state agencies. To put this figure in perspective HCMC will spend VND240bn on software licenses
Page 43
for state agencies and VND800bn on licences for business and social organisations in 2013. However
HCMC plans to continue shifting spending towards cheaper open source alternatives. In order to rival major
international software firms, open source implementers in Vietnam are creating alliances to be able to
compete on scale in terms of finance and labour.
Piracy
Vietnam's software market is developing but piracy remains a drag on the market at 80% in 2012, according
to a press release from the BSA. While high, the piracy rate of 81% in 2011 did represent a drop of 4pps
compared with the 85% seen in 2010 and 95% as recently as 2007. This has at least enabled Vietnam to
escape the list of the top 10 countries for software copyright infringement. However the piracy rate remains
above that of neighbouring markets such as India, Thailand and China.
In March 2013 the Copyright Office of Vietnam reported that software piracy was continuing to decline, but
remains a serious issue. The software piracy rate has declined from 90% to 80% from 2004 to 2011, with a
4pps decline from 2010 to 2011 alone. The government states that it has signed copyright agreements with a
range of software firms, but private enterprises remain copyright infringers, particularly computer trading
firms. In 2012, inspectors discovered 10 computer sales agents of leading brands such as HP, Dell, Lenovo
and Acer installing pirated software products. According to estimates, the value of the seized software
products was around VND1bn.
In January 2013 local authorities reported that piracy rates were as high at firms with foreign investment as
domestic firms, including those that were wholly foreign owned. Looking ahead, Vietnam is targeting a
software piracy rate of 55% - the regional average for South East Asia.
In June 2013 inspectors from the Ministry of Culture Sports And Tourism, High-tech Crime Polic and
General Department of Anti-Crime Policy raided two PC retailers/exporters and found large numbers of
PCs with illegal software pre-loaded. The most common illegally installed software was Microsoft
Windows 7 and Microsoft Office, while software such as Adobe Photoshop, AutoCAD and Symnatec's
antivirus were also found on devices. The total value of illegal software was estimated at VND7bn (US
$33,000).
The government has also moved to tighten enforcement of copyright regulations. Decree 47.2007.NP-CP,
which became effective in 2009, allows for a penalty of up to VND500mn (around US$28,000) for
instances of software piracy. In 2010, it was announced that Bach Khoa Internet Security Centre (or BKIS)
Page 44
and Lac Viet Computer Joint Stock Co had become the first Vietnamese firms to join the Business Software
Alliance, a global software industry association that focuses on copyright issues.
In November 2011, the government provided a boost to legal software usage by signing an extension of a
deal with Microsoft to purchase licensed software for government organisations. The original 2007
agreement had covered all 63 provincial authorities, 24 ministries and enterprises where the state has a stake
of over 50%.
Vietnam PC Browsing Traffic By OS (%)

August 2013
Source: Statcounter
Page 45
APAC Piracy Rate (%)*

2011
*those responding that they always, mostly, occasionally, or rarely use pirated software. Source: BSA Global Piracy
Survey 2011.
Vendor Performance
Local companies have a particularly strong position in the government and SME segments, while foreign
and larger Vietnamese corporations are more likely to consider more expensive software from
multinationals. Some larger Vietnamese software companies such as Hai Hoa have enjoyed some successes
with foreign companies. However, other local companies have reported that it is sometimes a challenge for
them to meet even government requirements. Software piracy is an issue for both domestic and
multinational companies. Lac Viet Company, vendor of popular dictionary software, has estimated annual
losses to piracy of around VND58bn.
The government's plans to expand the local software industry, and develop a number of new software bases,
as well as two new software businesses with revenues of more than US$200mn, could potentially have an
impact on the local software competitive landscape. The Ministry of Information and Communications
(MOCI), which developed the plans, has also called for the localisation of some open source software
products for use in state agencies.
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Vietnam has about 150 domestic software companies, including 19 joint ventures, according to US
Commercial Service data. Major IT spending verticals, such as banking and finance, oil and gas, aviation
and telecoms, are among the best opportunities for foreign vendors. The government supports the
development of a local software industry and the Vietnam Software Association has forecast growth for the
software industry of around 20% in 2010, although this would be only 30% of that achieved in the preeconomic slowdown period of 2005-2008.
Many local companies target export markets. The Vietnamese Corporation of Financing and Promoting
Technologies (FPT Software), one of Vietnam's largest software exporters, said that it had set itself a
growth target of 20% for 2010, thanks to the recovery of the American and Australian markets. Other local
software firms such as VietSoftware International and Run Systems were targeting rates growth of
200-250% and 30-40% in 2010 respectively.
The Vietnamese enterprise software market is competitive with local companies having a significant share
of the market. Major global players such as SAP, Oracle, IBM and Microsoft have a local presence but
face competition from cheaper local rivals such as CMC Joint Stock Corporation (CMC), MISA, FAST
and Exact Software, as well as from Chinese rivals. Similarly in the security software segment, US
suppliers Symantec and McAfee have had successes, but face competition from popular Vietnamese antivirus programs such as BKIS.
German software leader SAP is the world's largest business software company and in July 2009 included
Ho Chi Minh City on its world tour for the first time. SAP promoted its solutions as helping Vietnamese
organisations adapt to the world market. Local clients include PetroVietnam Technology, the
International Consumer Products Corporation and VinaCapital.
SAP has formed a strategic partnership with leading Vietnamese software venture CMC. The two partners
aim to develop the major enterprise market together with CMC becoming SAP's strategic partner for
consulting and implementing SAP solutions. The main target will be large companies, including in the
finance sector. CMC is one of Vietnam's largest software companies and is active in the IT, telecoms and ebusiness segments with an annual growth averaging at least 30%.
SAP's biggest global rival, US vendor Oracle, has performed strongly in the Asia Pacific (excluding Japan)
region during the recent financial crisis. According to the company, it managed to increase its market share
in the region. In Vietnam, the company has made strong inroads into the banking sector, where it claims to
have more than 15 customers, including banks such as Dong A Bank, Hubu Bank, Ocean Bank, Nam A
Page 47
Bank and Tien Phong Bank. Mid-sized bank Vietnam Asia Commercial (VietA) Bank, which is based in
HCMC and has 15 main branches and 47 sub-branches, announced that it was migrating to an Oracle
FLEXCUBE solution to cover all of its operations.
Oracle has placed a particular focus on middleware and has increased the number of its middleware
representatives in the Asia Pacific region in an attempt to boost its share. Other multinational vendors are
also targeting promising enterprise sectors. In 2011, Norway-headquartered software company Conexus
started the search for a partner to enter the Vietnam market, as a launching pad for the South East Asian
region. French software vendor Dassult Systemes has already entered into a strategy cooperation agreement
with domestic sector player FPT. The two will develop products to target Vietnam's telecoms and banking
sectors. Real Estate is another growth area, and Microsoft's wins in this sector have included a VDN3bn
contract for its Dynamics CRM solution from Sacombank Real Estate, an affiliate of Saigon Thuong Tin
Commercial Bank.
While many foreign vendors have found richest pickings in the corporate sector, some are increasingly
targeting Vietnamese SMEs. Epicor Software Corporation, a leading provider of ERP solutions in Asia,
has set up a strategic alliance with the Vietnamese subsidiary of US-based DiCentral Group to expand its
presence in Vietnam. Epicor provides DiCentral with technical and marketing assistance as the company
promotes its ERP solutions to local firms, with a focus on solutions for plastics manufacturing and
consumer packaged goods, as well as the hotel and property management segment.
An increasing number of Vietnamese companies have shown an interest in and willingness to use cloud
services, which are perceived by vendors as an emerging opportunity. In 2012, Microsoft launched its
Office 365 Small Business Premium solution on the market, which is designed for small businesses.
Microsoft said that it foresaw rapid development of cloud computing services in Vietnam, especially for
SMEs and in 2012 the company also launched a Vietnamese website focused on cloud services for this
segment. In 2010, FPT and Microsoft had reached an agreement on cooperation to research opportunities
for cloud computing in Vietnam. The partners will also launch commercial pilots. IBM is promoting cloud
computing as a cost-effective way for Vietnamese SMEs to realise efficiencies through IT utilisation. Key
prospects are seen as being enterprises in the finance and banking, insurance and retail sectors.
The main enterprise software vendors are increasingly focused on the SME segment, rolling out a
succession of product lines and software packages previously only available to larger companies. New
releases were tailored to SMEs' smaller budgets and particular organisational needs.
Page 48
Services
BMI expects Vietnam's IT services market will be the fastest growing segment of the overall IT market.
Spending is forecast to reach VND12.083bn in 2013, up 22.3% from VND9,882bn in 2012. We forecast
strong growth will continue over the medium term with a sectoral CAGR projected at 18.2% over our fiveyear forecast period to 2017, with the value of the market reaching VND22,812bn by 2017. The growth of
Vietnam as a destination of business process and software development outsourcing will be a strong driver
from 2013.
IT services were estimated to account for around

18.7% of total Vietnamese IT market in 2012, and
IT Services Market
BMI forecasts this figure will increase to 22.3% by
2010-2017
2017. As well as growth in outsourcing, over the

past few years, the size of IT services deals has
increased in key IT spending verticals. The
government has launched a number of major projects
in cities like HCMC, Hanoi and Danang, which will
boost public sector spending. Growing broadband
penetration in rural and remote areas will also fuel
the market's development.
Research by the Ministry of Information and

Communication (MIC) in August 2013 found that
the domestic IT services market had strong growth
potential, while outsourcing demand is also

projected to grow rapidly. The MIC identified
system integration and development, and especially data services, as the fastest growth areas. Domestic
firms are facing a sharp increase in data, primarily generated by information on the internet, meaning they
are seeking services from the simple (migration to new systems) to more complex demand such as business
intelligence. Looking further ahead, the MIC expected infrastructure leasing, training, consultancy, website
development, e-commerce, app development and data services would be the services in highest demand.
Growing demand for digital infrastructure projects in segments such as banking, telecoms, energy and
government has attracted global IT services leaders such as IBM to invest more in Vietnam. Large local
organisations such as the Corporation for Financing and Promoting Technology (FPT) have also targeted
Page 49
this opportunity and announced plans to compete with established multinational vendors and offer highquality outsourcing services.
Bottlenecks To Development
The IT service market has been growing rapidly in Vietnam, and domestic firms are becoming increasingly
important players in the regional and global market. However there are still impediments to market
expansion. One area is cyber security, where the government is working to strengthen domestic
infrastructure and give reassurance to firms looking to outsource to Vietnamese companies.
Another is the country's legal framework, with the IT sector regulated by the 2006 Information Technology
Law, and contains general provisions for IT services. With the fast-moving nature of the IT services market
investors have complained that the law is out of date and some types of IT services are not legalised,
reducing certainty and impeding long term planning.
However the government has been making some progress in recent years and the Ministry of Information
and Communications regulates operational requirements and procedures for firms providing IT services,
with new guidelines introduced in 2010 after the government authority pointed to a lack of regulations for
businesses providing IT services, consulting or security services. In March 2013 Nguyen Trong Duong, the
director of the Information Technology Department of the Ministry of Information and Communication,
stated that only around 3% companies in Vietnam have ISO/IEC 27001:2005 certificates for information
security. The certificates are important for IT firms, business and institutions applying IT solutions. So far
only banks, finance and data centres have focused on information security certificates. According to Duong
the primary barrier to achieving information security certificates has been the fee required, as well as the
requirement that all software must have licences for a firm to be eligible (with piracy prevalent). The
government is offering a total disbursement of VND20bn for firms obtaining ISO27001 certificates for
information security.
Vietnam also suffers from a shortage of trained IT workers, with some estimating that Vietnam would need
an additional 1mn IT engineers in order to achieve the government's ambitious targets for the domestic
software and IT services sector. Lack of language skills and patchy ICT infrastructure are other barriers, and
this situation represent an opportunity for external service providers and trainers.
In February 2013 the Vietnamese government was considering setting up new IT skills standards to bring
up the skill level of IT engineers to international levels. The government wants to see 1mn IT engineers
Page 50
working in the industry by 2020. The government considers the lack of international standard qualified
engineers to be a bottleneck for the continued development of the IT sector.
In June 2013, Le Truong Tung, head of the FPT University in HCM City, predicted that the there could be a
shortage of skilled IT staff by 2014 due to a declining number of students training in IT. Tung reported that
the number of students applying to study IT as a major has dropped 10-15% each year from the highs of
2008.
Outsourcing
Vietnam is already a top Asian destination for outsourcing such as ITO and BPO, along with India, China,
Singapore, the Philippines and Thailand. However there remains strong growth potential for outsourcing
due to improving ICT infrastructure and international bandwidth, as well as government targets for growth
of the domestic IT services and software sector. The government's drive to create a significant IT services
industry in Vietnam over the next 15-20 years is expected to be a significant factor shaping this opportunity
by expanding BPO, as well as moving into higher value opportunities such as software development.
Growing numbers of foreign firms are now using Vietnam as an outsourcing alternative to India and China.
Vietnam was found to be the second largest outsourcing location for Japanese firms after India in a survey
by Nikkei Computer. In January 2013 the Information Technology Promotion Agency survey of 1,100
Japanese IT firms showed Vietnam was the leading outsourcing destination with 31.5% of firms choosing it,
ahead of India (20.6%), China (16.7%), Thailand (9.7%) and Philippines (7.4%). The report also stated that
Vietnam had service fees that were 30% lower than China. However 75-80% of the outsourcing contract
value still goes to Chinese firms, with Vietnam estimated to account for 5%. The data indicate that Vietnam
is set to see strong growth as firms pursue their interest in the market and move business away from China.
Relocation by Japanese firms would also provide momentum and enable Vietnamese outsourcing firms to
diversify geographically.
In May 2013, AT Kearney reported that in 2012 Vietnam occupied eighth position for software testing
outsourcing destinations. In 2012, Vietnamese firms won major contracts from Japan and the US due to its
cost advantages, however it continues to face stiff competition from China and India which have a greater
number of software engineers for testing.
In March 2013, Global Cyber Soft (GCS), a software firm based in Quang Trung Software Park,
announced a new outsourcing contract from a satellite telecom network in the US. GCS has been expanding
into new markets following initial success with Japanese firms, particularly in automation projects. It has
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benefited most from demand from the healthcare and telecoms sectors but in 2013 GCS is also expecting
demand to grow from the insurance sector. In order to meet growing international demand GCS is opening a
second development centre in Da Nang.
TMA Solutions, another major outsourcing firm, has also been expanding internationally. It has 1,200
engineers and is targeting 20% growth in 2013. FPT Software has also stated ambitious targets for 2013,
increasing revenue from US$81mn in 2012 to US$100mn in 2013. It is the biggest software firm in
Vietnam with 4,000 engineers, and plans to hire a further 1,500 in 2013. In March 2013, FPT formed a joint
venture (JV) for business process outsourcing (BPO) with Japan's Agrex, which has been touted as the first
BPO JV in ASEAN. Both companies invested in the creation of F-Agrex, which will begin operations in
July 2013. F-Agrex will initially target the Japanese outsourcing market, before expanding globally. Staff at
launch will number 100 but the JV is targeting growth to 500 staff by 2015. Foreign owned firms have also
performed well, such as KMS, which specialises in outsourcing services for the US and operates in three
sectors - healthcare, e-commerce and online training.
Cloud Computing
One potential demand driver will be organisations looking for help with to utilise efficiencies from cloud
computing such as SaaS and Infrastructure-as-a-Service. BMI forecasts that the cloud market will achieve
growth of 300-400% over our five-year forecast period. Various government organisations, including the
Ministry of Education and Training (MOET), have started using cloud services as a way of cutting costs.
Other areas of opportunity for cloud computing include banking and retailing, as organisations in those
fields look to enhance efficiency and save money on hardware investments.
More investment in local call centres will generate spending on IT hardware, software and services, and be
another source of opportunities for IT vendors. In 2010, Japanese company Moshi Moshi established
MOCAP Vietnam Joint Stock Company in partnership with a Vietnamese company to provide call centre
services for the Vietnamese market. MOCAP Vietnam was claimed to be the first outsourcing company
established with Japanese backing in Vietnam. Economic growth and rising spending power should attract
new entrants to this segment.
Vendor Performance
According to Vietnam's Ministry of Information and Communications (MIC), the country has around
10,000 firms licensed to provide IT services. However, only a third are actually operating. The MIC is
developing a draft decree to map out policies to help the IT industry grow in the future. Measures to
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eliminate firms that had been previously licensed to provide IT services, but were for whatever reason not
actually doing so, will be included in the decree. The decree will also stipulate procedures and operational
requirements for firms providing IT services.
Local software producers are increasingly offering software development and outsourcing services as
Vietnam's government targets a larger share of the global outsourcing opportunity. Vietnamese companies
have a particularly strong Japanese client base for these types of services. According to the Vietnam-Japan
IT cooperation club, Vietnam ranks third after China and India for IT and software outsourcing services to
Japanese organisations, with a 0.5% market share.
However, the major US IT vendors also have a solid presence in the market. In July 2012, IBM won a
contract from Vietnam's Orient & Commercial Bank (OCB) to implement its analytics solutions. The
OCB is looking to install a new customer-centric approach as it transitions from a multifunction to a retail
bank. Growing demand from Vietnam's citizens for new banking products has created the need for the
country's banks to process growing volumes of data.
In January 2013 Vietnam's University of Technology (UIT) awarded an IT systems supply contract to US
technology services firm IBM. The agreement will see the university make use of the US company's
PureSystems package in order to create its own cloud platform and 'virtual campus', PR Newswire reports.
The organisations have also signed a second agreement with the aim of encouraging and providing IT
education in the country.
The largest Vietnamese software company, FPT, offers software custom development and outsourcing
services to foreign companies and earns 56% of its revenues from Japan. In 2011, the company unveiled a
major new restructuring plan that will consolidate five technology subsidiaries in a search for higher
growth. The company's five subsidiaries - FPT Information System; FPT Telecom Corp; FPT Software;
FPT Online and FPT Trading Group - will be merged, with the company either buying out minority
shareholders or facilitating a share swap.
FPT is focused on expansion through adding to its network of partners. The company is looking to stake a
position in the small, but emerging cloud computing opportunity and in May 2011 announced a cloudcomputing alliance with Microsoft. FPT's wins in this area have included a US$2mn outsourcing contract to
develop core retail and e-commerce software for Nissen Co.
Japanese companies are also involved as players in Vietnam's developing outsourcing sector. In 2010,
Japanese companies Mitsui and Co and Moshi Moshi Hotline Inc jointly established MOCAP Vietnam
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Joint Stock Company (MOCAP Vietnam) in Hanoi in partnership with a local company. The new
company said that this was the first Japanese-founded call centre outsourcing company to be founded in
Vietnam.
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Industry Trends And Developments

Outsourcing Boom
Vietnam was the second largest outsourcing location for Japanese firms after India in a survey by Nikkei
Computer. In January 2013, an Information Technology Promotion Agency survey of 1,100 Japanese IT
firms showed Vietnam was the leading choice of outsourcing destination with 31.5% of firms choosing it,
ahead of India (20.6%), China (16.7%), Thailand (9.7%) and Philippines (7.4%). The report also stated
Vietnam's service fees are 30% lower than China. However 75-80% of the outsourcing contract value still
goes to Chinese firms, with Vietnam estimated to account for 5%. The data indicates Vietnam is set to see
strong growth as firms pursue their interest in the market and move business away from China to cut costs.
In May 2013, AT Kearney reported that Vietnam occupied eighth position for software testing outsourcing
destinations in 2012. Vietnamese firms won major contracts from Japan and the US due to its cost
advantages. However it continues to face stiff competition from China and India which have a greater
number of software engineers for testing.
In March 2013 Global Cyber Soft (GCS) a software firm based in Quang Trung Software Park announced
a new outsourcing contract from a satellite telecom network in the US. GCS has been expanding into new
markets following initial success with Japanese firms, particularly in automation projects, which it expects
to continue in 2013. It has benefited most from demand from the healthcare and telecoms sectors but in
2013 GCS is also expecting demand to grow from the insurance sector. In order to meet growing
international demand GCS is opening a second development centre in Da Nang.
TMA Solutions, another major outsourcing firm, has also been expanding internationally. It has 1,200
engineers and is targeting 20% growth in 2013. FPT Software has also stated ambitious targets for 2013,
increasing revenue from US$81mn in 2012 to US$100mn in 2013. It is the biggest software firm in
Vietnam with 4,000 engineers, and plans to hire a further 1,500 in 2013. Foreign-owned firms have also
performed well, such as KMS, which specialises in outsourcing services for the US and operates in three
sectors - healthcare, e-commerce and online training.
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Chinese Tablets Flooding The Market
In November 2012 local press reported Vietnamese PC dealers were pushing cheap tablets from China as a
result of the margins they could generate on the devices. It has been reported that wholesale dealers are able
to sell the tablets for double the market price in China in Vietnam. Examples include the Hipad Mid A13
and Ondan V971, as well as other own-brand Chinese manufacturers such as Teclast and Ampe - as well
as counterfeits of foreign products. This increase in low-price tablets could be detrimental to other PC sales,
particularly low cost notebooks.
Ultrabook Price Declines
In 2012 brands such as HP, Asus, Acer, Sony, Lenovo and Samsung launched ultrabooks in Vietnam.
However they failed to see success in terms of unit sales due to high prices. Local press have reported that
prices of low end ultrabooks have declined in early 2013, from around VND15mn in 2012 to VND10mn.
Local producer CMC has moved into the Ultrabook market in November 2012 with low-end models. Midrange Ultrabooks are reported to be retailing for VND20-30mn while premium models are priced over
VND30mn. The cheaper models are using lower power Intel i3 chips rather than i5 and i7 chips.
Hi-Tech Parks
In March 2013 the chairman of the Ho-Chi Minh City (HCMC) People's Committee said the board of the
Saigon Hi-Tech Park (SHTP) should establish a mechanism to attract foreign capital. The HCMC
government approved the second phase of SHTP development in 2012, which will see investment of
VND8trn by 2020 for functions such as traffic, water drainage, water and electricity supply. The
government has stated the SHTP must accelerate the development of infrastructure in order to attract
investors, especially technology firms. It is considering approval for private capital to be used in developing
SHTP infrastructure. So far, ten investors have registered to invest in the project, with combined capital of
VND111mn, 69.5% of the SHTP target.
Quang Trung Software City
Quang Trung Software City Development Company, which operates Quang Trung Software City (QTSC)
in HCMC, reported that it did not meet its targets for 2012. It did however achieve some successes such as
winning a software project from Hewlett Packard and attracting KDDI, a leading Japanese telecoms
Page 56
operator, to set up in QTSC. Despite underperformance in 2012, which was attributed to global economic
conditions, there are plans to create a second park after QTSC has been operational for 12 years.
HCM City Increases IT Investment
In April 2013 the Ho-Chi Minh City authority announced plans to spend VND300bn (US$14.3mn) on
developing e-government capacity. It will also focus on replacing out of date hardware and improving
network security in 2013. An additional feature is the authority's intention to work with local small and
medium IT enterprises where possible, rather than immediately turning to large IT vendors. Spending in
2013 is a marked increase over 2005-2012 when the city authority carried out 1,012 projects with a total
spend of VND665bn. This investment was used to develop IT infrastructure including hardware, software,
databases and staff training in 64 departments and agencies.
IT Worker Demand Booming, Potential For Labour Constraints By 2014
In June 2013 Le Truong Tung, head of the FPT University in HCM City, predicted that the there could be a
shortage of skilled IT staff by 2014 due to a declining number of students training in IT. Tung reported that
the number of students applying to study IT as a major has dropped 10-15% each year from the highs of
2008.
Open Source Development Opportunity
HCMC plans to spend VND31bn to use open source software in 2013, primarily for the city's state
agencies. To put this figure in perspective HCMC will spend VND240bn on software licences for state
agencies and VND800bn on licences for business and social organisations in 2013. However HCMC plans
to continue shifting spending towards cheaper open source alternatives. In order to rival major international
software firms, open source implementers in Vietnam are creating alliances to be able to compete on scale
in terms of finance and labour.
Microchip Market Growth Forecast
The HCMC People's Committee approved a program to grow the microchip manufacturing industry by 30%
a year through to 2020. Under the program, five leading international companies will invest in HCMC,
forming 25 local companies. The program will see a full value chain for microchip construction developed,
including training, design, manufacture, marketing and sale. One investor is the Sai Gon Industry
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Corporation, which is constructing a microchip plant for local demand and export across Asia. The plant
will produce 1.8bn microchips per year.
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Regulatory Development
Table: Government Authority
Ministry of Information And Communications (MIC)
Minister: Nguyen Bac Son
Source: BMI
The Ministry of Information and Communications of the Socialist Republic of Vietnam is the state
administration in charge of policymaking and regulatory matters in posts, telecommunications, information
technology, electronics, internet, radio transmission and emission techniques, radio frequency management
and national information infrastructure, and management of public services. It also has control over, on
behalf of government and as stipulated by laws and regulations, the state capital in posts,
telecommunications and information technology enterprises. Its main functions include:
submitting to the government drafts of laws, ordinances, regulations, strategies and development plans on
posts, telecommunications and information technology;
giving guidance in implementation of laws, ordinances and regulations, as well as development strategies
and plans related to posts, telecommunications and information technology;
regulating the electronics and information technology industry development plan;
regulating the quality of posts, telecommunications and information technology networks, plants,
products and services;
conducting international cooperation activities in posts, telecommunications and information technology;

and as stipulated by law.
Assign and organise to implement regulations in fields of copyright and intellectual property right
regarding press, publications, information technology services, related inventions; and
Take actions to protect organisations, individuals in the fields of copyright and intellectual property right,
inspecting all activities and settling all regulatory breaches in the fields of its legal functions.
IT Plan
In 2012, the Vietnamese government unveiled ambitious plans for developing the country's IT industry.
According to a draft plan released in May 2012 by the Information Technology Department of Vietnam's
Ministry of Information and Communications, the government has pledged to invest VND2.4trn
(US4115mn) from the State Budget in the ICT sector by 2020.
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In August 2013 a draft resolution from the Ministry of Information and Communications proposed
allocating at least 2% of the state budget for boosting the IT sector each year. The fund will be used to help
Vietnam catch up with regional rivals and move up the value chain in areas such as outsourcing and
software development. In addition, the Ministry argue that the development of the IT sector would make a
positive contribution overall through modernisation of other industries - thereby improving international
competitiveness.
The plan will focus on six 'pillars', namely improving the policy environment, developing IT human
resources, developing IT enterprises and trademarks, products and markets, attracting investment to build IT
zones and open source software. In the preceding decade (2001-2010), the IT sector achieved average
annual growth rates of 20-25%. In 2011, the industry's revenues were reported to be more than US$8.5bn,
up 15% y-o-y. Revenues from hardware and electronics accounted for 74% of the total, reaching US$6.3bn,
up nearly 12% y-o-y. Revenues are projected to reach between US$17bn and US$19bn in 2015. The
industry is targeted to contribute 8-10% to the national GDP by 2020.
The government hopes to attract US$5bn of foreign investment into the IT industry by 2015. The
government's campaign to attract more foreign IT companies to invest in Vietnam received a boost in 2011
with the announcement that HP would set up a wholly owned firm in Vietnam. The government plans to
continue to revise tax structures in order to incentivise both foreign investors and local producers. Separate
funds will also be allocated to support IT human resource development and IT development.
However, there are fears that inconsistent government policies on subsidies and tax breaks for inward
investment in the IT sector have caused Vietnam to become less attractive as a destination for such
investment compared with China or India. For example, the government has revised the tax rate on revenues
from digital services to 10% in 2012, from 0%, causing dismay among companies in the sector.
The government's plans, which state a revenues target for the ICT sector of between US$17bn and US$19bn
over our five-year forecast period, include major investments to develop production centres in software,
services, hardware and electronics. Revenues are projected at US$2bn from software sales, US$12.5bn from
hardware, US$2bn from digital content and US$1.5bn from IT services.
To achieve these targets, the government will drive the development of three production centres for
software, services and digital content. These are, respectively, Ho Chi Minh City, with projected revenues
of US$3bn by 2015; Hanoi, with US$1.8bn; and Danang, with revenues of US$300mn. Three regions will
be established in Hanoi, Hai Duong, Bac Ninh and Vinh Thien Hue provinces, with revenues targets of US
$5bn, US$6bn and US$700bn respectively by 2015.
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Other components of the plan include the creation of two hardware and electronics companies with average
annual revenues of more than US$2bn and two software businesses with average revenues of more than US
$200mn. Some 50,000 IT engineers are to be trained and become proficient in foreign languages.
Government IT Strategy
The government's Strategy for IT Development covers the 2010-2020 period and focuses on four major
areas: enhancing IT application, developing the local IT industry, developing ICT infrastructure and
developing IT HR. Key opportunities for IT vendors involve the development utilisation of IT applications.
Major threads here include building and developing e-citizens and building e-government and e-business, as
well as developing transactions and e-commerce.
A number of specific IT plans have been developed, including one to modernise IT in government agencies,
which was first approved in March 2009. In an April 2010 cabinet meeting, Prime Minister Nguyen Tan
Dung ordered all members of his cabinet to use computers while working. New government departments
continued to go online in 2010, with the Ministry of Agriculture and Rural Development launching its eportal in February 2010.
Other government ICT projects have included a plan to modernise the customs department in 2005-2010
and a Tax Administration Modernisation Plan for the 2008-2013 period. Other plans include developing the
internet in rural communities (2008-2013) and developing the Vietnamese IT industry. The plans all have
regional versions, focused on the central, south and northern regions.
Government Cloud
Various government departments have started to utilise cloud services, with a major objective being to
make cost savings and enhance resource efficiency. In 2011 the MOET instructed local education and
training departments to shift to cloud computing. The ministry views the cloud model as suitable for the
education sector and with the potential to have significant cost benefits. The Ministry of Natural Resources
and the Environment claimed to have realised 20% investment cost savings after an initial period of
virtualising IT infrastructure. The ministry has now put in place a strategy for more utilisation of cloud
computing in IT applications and is putting in place standards and policies to enable this.
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Cyber Security
Vietnam faces serious cyber security threats, which are a particular problem as it looks to promote the
outsourcing and software development industries. In August 2013 it was reported that the government was
investing US$42mn in the creation of the National Centre for Network Security Technology. The centre
will be managed by the Ministry of Public Security, the Government Secrecy Committee and the Ministry
of Industry and Trade. The government also updated the Law on Information Security, which closed for
public comment in July 2013, as it looks to improve the cyber security environment including combating
attacks originating in Vietnam.
Regulatory News
IT Education Standards
In February 2013 the government of Vietnam is considering setting up new IT skills standards to bring up
the skill level of IT engineers to international levels. The government wants to see 1mn IT engineers
working in the industry by 2020 and considers the lack of international standard qualified engineers to be a
bottleneck for the continued development of the IT sector.
Software Piracy
In March 2013 the Copyright Office of Vietnam reported that software piracy was declining, but remains a
serious issue. The software piracy rate has declined from 90% to 80% from 2004 to 2011, with a 2pps
decline from 2010 to 2011 alone. The government stated that it had signed copyright agreements with a
range of software firms, but private enterprises remain copyright infringers, particularly computer trading
firms. In January 2013 local authorities reported that piracy rates were as high at firms with foreign
investment as domestic firms, including those that were wholly foreign owned. Vietnam is targeting a
software piracy rate of 55% - the regional average for South East Asia.
In June 2013, inspectors from the Ministry of Culture Sports And Tourism, High-tech Crime Police and
General Department of Anti-Crime Policy raided two PC retailers/exporters and found large numbers of
PCs with illegal software pre-loaded. The most common illegally installed software was Microsoft
Windows 7 and Microsoft Office, while software such as Adobe Photoshop, AutoCAD and Symnatec's
antivirus were also found on devices. The total value of illegal software was estimated at VND7bn (US
$33,000).
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Software Security Certification Drive
In March 2013 Nguyen Trong Duong, the director of the Information Technology Department of the
Ministry of Information and Communication, stated that only 10 of the 800 software companies in Vietnam
have ISO/IEC 27001:2005 certificates for information security. The certificates are important for IT firms,
business and institutions applying IT solutions. So far only banks, finance and data centres have focused on
information security certificates. According to Duong the primary barrier to achieving information security
certificates has been the fee required, as well as the requirement that all software must have licenses for a
firm to be eligible (with piracy prevalent). The government is offering a total disbursement of VND20bn for
firms obtaining ISO27001 certificates for information security.
Import Restrictions On Used PCs
In 2012, the Vietnamese government introduced a new regulation restricting the import of several categories
of used consumer electronics products, including tablets. Under the Circular No. 11/2012 of the MIC,
enterprises can import used products to serve their R&D purposes. However, tablets, (and smart phones)
have been added to the list of products subject to restrictions. Enterprises now have to get confirmation
from the MIC that the enterprises are importing products for R&D. The confirmation will then have to be
presented to the customs agencies to get the imports cleared. The regulations, which include a requirement
that imported used electronics products should not be more than one year old, will help to curb the growth
of one channel for gray market refurbished devices.
Data Digitalisation Export VAT Threatens BPO Development
Local outsourcing firms have been petitioning the Ministry of Finance over the 10% VAT on digital
services that came into effect in March 2012, whereas prior to that firms benefited from no VAT. Firms
have petitioned the government claiming that the VAT makes Vietnamese firms less competitive
internationally and therefore affects the attractiveness of the country to international investors. The Ministry
of Finance responded, stating that export services will be subject either to zero VAT or a tax exemption.
Page 63
Competitive Landscape
International Companies
Table: Samsung Electronics
Address
Yen Phong 2 Industrial Zone, Long Chau Ward, Yen Phong District, Bac Ninh
Province, Vietnam
Company History
Samsung Electronics is part of South Korea-based industrial conglomerate the Samsung

Group and is one of the leading consumer electronics brands in the world. As well as
selling devices in Vietnam, Samsung also has a major production base in the country
spread across several facilities with total staff of 25,000. In 2009 it opened a US$700mn
production facility near Hanoi, with capacity of 100mn units per year and staff of 10,000.
The facility is largely for export, with estimated revenues of US$5bn a year (approximately
6% of Vietnam's total export revenues). In 2012 Samsung began plans for a significant
expansion of production in Vietnam as it shifts away from China to avoid rising labour
costs, with wages in Vietnam as little as a third of those in China. Samsung will also
benefit from no tax for the first four years of operation, and half the full rate for the
following 12 years. The new US$2bn facility will produce 40% of Samsung Electronics
global smartphones by 2015, about 120mn handsets, when full capacity is reached.
Services And Products
As well as being an important production base Vietnam is also a market in which

Samsung Electronics has seen great success. Samsung operates in the PC market, with
its share of the tablet market only exceeded by Apple. However, despite the favourable
reviews for its notebook products it remains a smaller player trailing the global leaders. It
has been the major beneficiary in the Google Android ecosystem of the smartphone and
tablet boom in recent years, but it has also seen success in the low and middle income
segment with a huge featurephone range. However, in 2013 Samsung's range of tablets
and smartphones have faced increasing competitive pressure from low priced rivals from
China that is putting pressure on units and margins.
Company Developments
In September 2013 Samsung announced its KNOX security platform was available for
consumers (although not for all smartphone models). The KNOX platform is a
hardware-software solution that allows selected applications to run within a container
away from the rest of the device data.
Samsung launched its latest flagship smartphone, the Galaxy S4, in Vietnam in April
2013 through all major retail chains and mobile operators.
In September 2013 Samsung Electronics announced plans to build a US$1.2bn chip
and components plant in the northern province of Thai Nguyen to supply its tablet and
smartphone production facilities. The plant will be operational by August 2014.
Source: BMI
Page 64
Table: Intel
Address
Office Hanoi Tung Shing Square 2 Ngo Quyen St., Suite 1106 Hoan Kiem District,
Hanoi Vietnam
Company History
Intel opened its first office in Vietnam in 1997 and continues to be responsible for
developing and deploying strategies to support OEMs and developers in the local
market. In 2006 Intel announced it was going to invest US$1bn in an assembly test
facility in Vietnam near Ho Chi Minh City, which began operation in 2010. The plant in
Vietnam is one of seven Intel production facilities globally, as it chose Vietnam due to
technical proficiency, low cost of labour and proximity to large and important markets.
Intel was the first major foreign investor in Vietnam's technology sector, and the first
investment in the semiconductor industry. Intel also works with Vietnam's Ministry of
Education and Training and Vietnamese universities to improve educational programs,
as well as providing scholarships to students.
Intel provides support to local partners through its head office in Ho Chi Minh city but its
more significant presence in the country is through its production facility. The facility in
Vietnam is the largest assembly test facility in Intel's global network to produce chipsets.
In July 2010 the facility began using the latest chipsets for mobile computing products
such as laptops, tablets and smartphones. It uses the flip chip ball grid array binding
technology for mobile processors. Intel states that its 500,000 square foot facility in
Vietnam is now the model for new larger efficient assembly facilities it will build around
the world.
In December 2013 the transfer of capital from Intel Asia Holding to another Intel
company for a cost of US$100mn was cited as an example of tax loopholes utilised by
foreign companies. The Ho Chi Minh City People's Committee asked the Ministry of
Finance to implement new mechanisms and policies to manage such share
purchasing and franchising more effectively.
A prime ministerial decision in November 2013 stated that producers of electronics
products will be responsible for treating or recycling electronic waste from January 1
2015. Intel is ahead of many of its partners, with its e-waste already treated by locally
owned Ngoc Tan Kien Company.
Source: BMI
Page 65
Table: Global CyberSoft
Address
Helios Bldg, Quang Trung Software City, Tan Chanh Hiep Ward,District 12, Ho
Chi Minh City, Vietnam
Company History
Global CyberSoft was founded in California in July 2000 and has grown
internationally, particularly into South East Asia. Global CyberSoft moved its Global
Development Centre to Quang Trung Software City in Vietnam in 2007. In order to
meet growing international demand Global CyberSoft is opening a second
development centre in Da Nang. Vietnam has become one of its largest offices
globally, with a strong focus on software development. It employs a total of over 550
staff, with almost 500 engineers on staff in the country.
Global CyberSoft is a software development outsourcing company, with its global

development centre located in Vietnam. The development centre in Vietnam serves
clients domestically, but the majority of its business comes from abroad, with the US
and Japan key markets. As well as software development Global CyberSoft offers
other outsourcing services including R&D outsourcing, system integration, ERP and
business analytics, application testing and automatic testing. It gets the largest share
of its business from the healthcare and telecoms sectors but in 2013 Global
CyberSoft reported that it has experienced growing demand from the insurance
sector.
In March 2013, Global Cyber Soft announced a new outsourcing contract from a
satellite telecom network in the US. GCS has been expanding into new markets
following initial success with Japanese firms, particularly in automation projects,
which it expects to continue in 2013.
In October 2013, GCS announced the completion of an SAP BusinessObjects
implementation project for MegaStar Media Company. BusinessObjects is SAP's
business intelligence solution.
Source: BMI
Page 66
Local Companies
Table: Sara Vietnam
Address
182 Le Dai Hanh st., Ward 15, Dist. 11, Ho Chi Minh City, Vietnam
Company History
Sara Vietnam was founded in 2002 as a information technology and foreign language
skills training centre through the SARA Centre. It has since expanded into new fields, but
remains headquartered in Hanoi. Sara Vietnam is a member of the Vietnam Software
Association and the Vietnam Chamber of Commerce and Industry. Sara Vietnam is also
listed at the Hanoi Securities Trading Centre. Sara Vietnam was the first recipient of
Japanese investment in Vietnam, with 15% of its shares owned by Japanese CPR
International.
Sara Vietnam began as a training company but has expanded into a variety of
information technology fields. It offers IT research and software development services,
particularly software development for datacentres, e-commerce, e-portals, content
management, online training software, accounting, procurement, human resources,
customer service, industrial production technology and hospital management. Sara also
provides consultancy services for software systems. It also has activities in non-IT
related areas including television programming and real estate development and
management, and is evaluating a move into the mobile marketing industry in Vietnam.
In October 2013 Sara Vietnam announced it was implementing the Japanese model
5s of managing operations to increase efficiency. Sara stated that it does not expect
significant expenditure in implementing the new work practices, but will generate
efficiencies.
Source: BMI
Page 67
Company Profile
FPT Software
SWOT Analysis
Strengths
Based in fast-growing market for IT services provision.
International outlook including Japanese market that provides around half of the
company's revenues.
Weaknesses
Strong position on developed markets in Europe and US that have lower growth
prospects.
Opportunities
Lacks scale compared to Chinese counterparts.
Well positioned to capitalise on growth of outsourcing from Japanese enterprises

through F-Agrex joint venture.
Growing regional market presents expansion opportunities.
Developing market for financial services in the region puts FPT in strong position to
capitalise following inclusion into Eon Technologies BankFlex programme.
Threats
Established players in India offer considerable competition for overseas clients.
Company Overview
FPT Software was founded in 1999 and has become Vietnam's largest software
outsourcing company. It has headquarters in Hanoi and had an engineering workforce
of 4,100 as of December 2012. FPT offers software custom development and
outsourcing services to foreign companies. Specific services include software
development and maintenance, ERP implementation, migration, embedded systems
and quality testing. FPT's expertise covers verticals such as automotive, healthcare,
distribution and supply chain, mobile, ISV, banking and finance, manufacturing,
telecommunications and education.
Strategy
FTP is looking to stake a position in cloud computing and big data markets. In May
2011 it announced a cloud-computing alliance with Microsoft. The company has said
that it will continue to focus on an 'e-Citizens' strategy of concentrating on core
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business areas and trying to increase synergies among product and service
introductions by FPT group companies.
Developments
In August 2013 FPT announced it won its biggest ever cloud computing contract in the
US, worth over US$1mn. FPT Software is based on the SaaS model, with FPT
participating in all phases of the project from consulting, design to deployment.
In July 2013 FPT signed a contract to upgrade the Oracle ERP system, deploying
additional Oracle Business Intelligence Applications, for Vietnam Dairy Products
(Vinamilk). The project is reported to be worth VND15bn and includes software licences,
hardware infrastructure, consultation and implementation services.
In April 2013 Eon Technologies announced that FPT Software would e included in its
BankFlex integration program. Eon's BankFlex platform is a multi-channel banking suite
enabling new services such as internet banking, mobile banking, mobile wallet, SMS
banking, telephone banking, ATM and Teller support and back-end monitoring. The
platform is being rolled out to Vietnam and neighbouring markets as the banking sector
develops.
In March 2013 FPT formed a joint venture (JV) for business process outsourcing (BPO)
with Japan's Agrex, which has been touted as the first BPO JV in ASEAN. Both
companies invested in the creation of F-Agrex, which will begin operations in July 2013.
F-Agrex will initially target the Japanese outsourcing market, before expanding globally.
Staff at launch will number 100 but the JV is targeting growth to 500 staff by 2015.
In 2012 FPT established an office in Germany to target the European market. It also
launched its first application development on Amazon Web Services on a project with a
Japanese electronics company.
In 2011 FPT unveiled a major new restructuring plan, which will consolidate five
technology subsidiaries in a search for higher growth. The company's five subsidiaries FPT Information System, FPT Telecom Corp, FPT Software, FPT Online and FPT
Trading Group - will be merged, with the company either buying out minority
shareholders or facilitating a share swap.
Among major developments in 2010, FPT revealed that it had launched a US$2mn
outsourcing contract to develop core retail and e-commerce software for Nissen Co.
The company's US$12mn revenues in Q110 exceeded planned projections by 9%,
while profits were 46% higher than initially projected. The fastest growth compared with
2009 came in Vietnam, where revenues were up 90% y-o-y, while Asia Pacific
(excluding Japan) grew 47%; Europe, 75%; and the US, 69%. However, the Japanese
market, which accounts for over half of FPT's revenues, grew by only 16%.
Performance
Page 69
FPT recorded revenues of US$81.5mn in 2012 and is targeting revenue of US$100mn in

2013. It is also planning to expand its workforce by hiring an additional 1,500 engineers
in 2013, to take its total to 5,600.
Presence
FPT is headquartered in Hanoi, and has offices in Ho Chi Minh City and Da Nang in
Vietnam. The company is also present in some major global IT markets, including Japan
(Tokyo, Osaka), Australia, Singapore, Malaysia, the US, France and Germany. In March
2013 FPT opened its first R&D centre in the US in Silicon Valley. The centre will focus
on development and innovation in mobility, cloud and big data.
Sectors
FTP earns 56% of its revenues from Japan. The company focuses mainly on the largest
IT-spending verticals including banking and finance, telecoms, manufacturing,
government, retail, infrastructure and utilities. Major clients include Deutsche Bank,
Schroders, SoftBank, Omron, Hitachi and Unisys.
Table: FPT Group Revenue By Segment (VNDbn)
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Telecommunication
599.2
607.7
657.7
675.0
708.2
709.5
767.9
818.6
Digital Content
443.7
283.2
380.2
520.0
423.8
488.3
207.4
223.3
Software Development
453.7
633.4
381.2
532.4
578.4
847.8
567.6
639.3
System Integration
734.2
1,349.4
488.4
524.2
453.6
1,453.1
326.9
897.5
Informatics services
126.3
156.5
119.6
190.5
166.4
203.5
151.4
171.3
Education
151.3
50.1
148.2
114.2
183.0
62.5
164.9
93.4
4,017.0
4,174.4
3,460.2
3,269.9
3,638.0
3,968.8
3,496.2
3,956.6
Revenue
manufacture, distribution and

retail
Source: FPT, BMI
Page 70
Table: Profit Before Tax Margin By Segment (%)
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Telecommunication
23.0
22.6
28.3
26.1
24.0
22.5
26.7
28.2
Digital Content
16.4
24.6
15.8
11.2
13.4
5.7
15.4
22.8
Software Development
21.9
28.7
15.0
20.6
21.9
23.8
21.0
23.8
System Integration
14.5
13.0
11.6
8.1
9.1
12.5
2.4
11.7
Informatics services
16.2
-3.6
13.0
21.2
17.9
6.1
15.8
23.0
Education
31.4
27.7
35.5
27.1
29.1
15.0
29.1
20.2
3.2
2.7
4.0
4.0
1.7
1.7
3.3
2.4
manufacture, distribution and

retail
Source: FPT, BMI
Financial Data
Company Details
Annual Revenue (2010): VND20.5bn

EBITDA (2008): VND1.6bn
Net Profit (2008): VND1.1bn
FPT Software
FPT Building
Duy Tan Street
Cau Giay District
Hanoi
Vietnam
Tel: +84/(4) 3 768 9048
Fax: (4) 3 768 9049
fsoft.contact@fsoft.com.vn
www.fpt-software.com
Page 71
Regional Overview
Asia Pacific IT markets are on the whole developing rapidly, boosted by strong underlying economic
growth and proactive government policy. However the region is diverse in terms of geography, levels of
development and population, which is reflected in the makeup of IT markets and their medium term
prospects.
Cyber Security Could Derail Bright Outlook For Regional Leaders
In terms of the contribution to GDP there is great diversity across APAC. The higher income markets
generally have IT account for a greater share of GDP, as is the case at the global level. However a few
lower income markets have carved a position out for themselves in global supply chains boosting the share
of IT in GDP, for instance Thailand for production of semiconductors and the Philippines in outsourcing.
Singapore is expected to have the largest IT sector relative to the size of its economy at 2.3% in 2014,
slightly ahead of Hong Kong and Thailand at 2.1%. Singapore and Hong Kong share many similar
characteristics, with both high-income city-states benefiting from domestic spending, as well as positioning
themselves as regional hubs for IT services vendors in the wider APAC region.
Hong Kong and Singapore are competing to become the leading regional cloud computing hub, with
significant inward investment taking place from cloud vendors and telecoms providers such as NTT. The
latest research from Rackspace shows that Hong Kong had the highest adoption rate for cloud services by
mid-2013, boosted by demand from the financial services sector. However, it should be noted that Hong
Kong and Singapore both trail leading global cloud markets in terms of the deployment of more complex
cloud solutions such as hybrid clouds, disaster recovery, and testing and development.
Singapore's government has put in place policies to close the gap with Hong Kong and global leaders by
boosting local expertise in the emerging technology of Big Data applications. In August 2013 it was
announced that the Infocomm Development Authority of Singapore (IDA) had partnered with Revolution
Analytics, a commercial provider of software, services and support for the open source "R" project, to form
a Business Analytics Centre of Excellence. The IDA's efforts will help Singaporean enterprises utilise Big
Data, and tap into local demand. The outlook for Big Data is positive with 80% of enterprises surveyed by
EMC stating that use of Big Data will lead to better decision making in their organisation. The survey,
released in September 2013, questioned 130 respondents, of which 63% believed that Big Data will be a key
factor determining winners and losers, while 37% stated they had already benefited from competitive
Page 72
advantage via the use of Big Data. The areas respondents believed Big Data will prove most beneficial were
data centre automation (83%) and cyber security (64%).
Other markets in APAC have also been able to carve out a position in global IT markets, for instance,
Philippines and Vietnam are both growing centres for outsourcing. The Philippines has a more developed
outsourcing industry and is now moving up the value chain to software and application development
services, but Vietnam is developing rapidly and is well positioned to benefit from demand from Japanese
enterprises. In January 2013 the Information Technology Promotion Agency survey of 1,100 Japanese IT
firms showed Vietnam was the first choice outsourcing destination, with 31.5% of firms choosing it, ahead
of India (20.6%), China (16.7%), Thailand (9.7%) and Philippines (7.4%).
The Vietnamese government is developing policy to maximise the development of the outsourcing industry.
In August 2013 a draft resolution from the Ministry of Information and Communications proposed
allocating at least 2% of the state budget for boosting the IT sector each year. The fund will be used to help
Vietnam catch up with regional rivals and move up the value chain in areas such as outsourcing and
software development. Such a financial commitment from the government, combined with Vietnam's
attractive cost profile, should see the IT market, and specifically outsourcing, continue on the recent
trajectory of rapid development.
The markets highlighted above are some of the regional outperformers, and cases where the industry is
developing rapidly. However, there is a trend that BMI highlights as a major downside risk across the
region - cyber security. Markets in Asia have among the highest incidences of cyber crime globally, and an
additional factor is politically driven cyber attacks from North Korea. Many governments in the region
updated cyber security policy and legislation in 2013, while also strengthening defensive capabilities,
however these steps could prove insufficient.
Even after state investment and policy reform we believe the potential for cyber security issues to slow IT
market development exists, as the loss of confidence from a severely disruptive attack would be significant
and long-lasting. It will be important over the medium term that governments pursue proactive rather than
reactive cyber security policy to remain ahead of threats in terms of defensives and retaliatory capabilities.
South Korea is the most exposed to this risk due to the activities of North Korea, as demonstrated by the
number of attacks in 2013, and recent experience shows how state spending has had to be increased. In
March 2013 South Korean banks -including Shinhan, Nonghyup and Jeju - and TV broadcasters were
subject to an attack from North Korea which disrupted their operations. The attacks followed a February
2013 statement from North Korean leader Kim Jong-un, expressing confidence in the government's cyber
Page 73
warfare capabilities against South Korea. The government had set aside KRW240bn for information
protection and less than KRW10bn for strengthening cyber warfare capabilities, but these plans came under
pressure following another round of attacks. In late June and early July 2013 there were attacks during
which 69 government offices, news outlets and other institutions, including the presidential office website
were attacked. It was reported that 2.5 million members of the ruling Saenuri Party, 300,000 military
personnel and 200,000 registered users of the presidential office's website had data stolen. The South
Korean experience illustrates the scale of the potential threat, and the scope for spending increases.
Hardware Sales Opportunity Remains

The most advanced markets in APAC are geared
towards IT software and services, deploying
IT Market As % Of GDP
emerging technologies and combating the associated
2014
risks of cyber security. However, in the two largest

markets in the region - China and India - spending is
still weighted towards hardware, and with low PC
penetration a significant growth opportunity remains
for vendors.
Household PC penetration in Australia, Singapore,

South Korea and Hong Kong at the end of 2011 was
already high at around 80%. These mature markets
are high income, and as such the upgrade/
replacement markets are still lucrative for vendors.
However it is in the middle income markets that
Source: BMI
greater potential exists. China and India, with their

huge populations and respective PC penetrations of 38% and 6.9% at the end of 2011 grab the attention, but
Indonesia, Philippines, Vietnam and Sri Lanka are also notable opportunities. As incomes increase in these
markets BMI expects the same pattern of rising PC penetration to occur.
Increases in PC penetration will not be uniform as rising incomes are not the only driver of spending on
PCs, with factors such as government policy ie PCs for students programmes and financial assistance for
low-income families, also determinants. However, there is a strong relationship between higher incomes
and PC penetration. We forecast strong growth in GDP per capita for all the catch-up markets to 2017, but
the outlook for Vietnam, Sri Lanka and China are particularly strong. Vietnam and China are also markets
Page 74
where the government is promoting PC ownership, so we expect them to outperform. Despite the Akash2
initiative we expect India will continue to lag behind its regional peers over the medium term.
The medium-term opportunities for hardware vendors in the large catch-up markets of APAC is in stark
contrast to the recent experience in their core markets in North America and Europe where maturity,
economic weakness and tablet cannibalisation have resulted in market declines. Consumers in APAC may
also opt for tablets instead of traditional notebooks and desktops, but we believe the threat is less
pronounced in the first time buyer market where productivity features will be important. So far tablet sales
have predominantly been to existing PC owners, whereas to tap the emerging market opportunity in the
first-time buyer market, BMI believes a mix of mobility and productivity could underpin outperformance,
for instance via hybrids/convertibles or tablets with greater functionality.
Rising Incomes Deepen The Market

Household PC Penetration Vs GDP
Source: BMI, national regulators, WEF
Page 75
Demographic Forecast
Demographic Outlook
Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is
the total population of a country a key variable in consumer demand, but an understanding of the
demographic profile is key to understanding issues ranging from future population trends to productivity
growth and government spending requirements.
The accompanying charts detail Vietnam's population pyramid for 2013, the change in the structure of the
population between 2013 and 2050 and the total population between 1990 and 2050, as well as life
expectancy. The tables show key datapoints from all of these charts, in addition to important metrics
including the dependency ratio and the urban/rural split.
Population Pyramid
2013 (LHS) And 2013 Versus 2050 (RHS)
Source: World Bank, UN, BMI
Page 76
Population Indicators
Population (mn, LHS) And Life Expectancy (years, RHS), 1990-2050
Source: World Bank, UN, BMI
Table: Vietnam's Population By Age Group, 1990-2020 ('000)
1990
1995
2000
2005
2010
2013e
2015f
2020f
68,910
76,020
80,888
84,948
89,047
91,680
93,387
97,057
0-4 years
9,315
9,323
7,128
6,898
7,229
7,152
7,012
6,575
5-9 years
8,606
9,212
9,253
7,023
6,791
7,052
7,181
6,968
10-14 years
7,857
8,541
9,162
9,117
6,899
6,619
6,757
7,147
15-19 years
7,359
7,788
8,492
9,050
9,011
7,686
6,866
6,726
20-24 years
6,644
7,222
7,673
8,333
8,874
9,148
8,936
6,802
25-29 years
6,006
6,470
7,065
7,471
8,112
8,528
8,772
8,837
30-34 years
5,138
5,890
6,352
6,910
7,286
7,703
8,022
8,680
35-39 years
3,888
5,065
5,803
6,242
6,763
7,011
7,208
7,940
40-44 years
2,463
3,826
4,994
5,719
6,147
6,472
6,685
7,127
45-49 years
2,017
2,409
3,753
4,935
5,648
5,894
6,054
6,589
50-54 years
1,968
1,959
2,346
3,700
4,855
5,306
5,521
5,926
55-59 years
2,046
1,891
1,885
2,237
3,542
4,278
4,677
5,330
60-64 years
1,669
1,934
1,790
1,734
2,068
2,795
3,352
4,444
65-69 years
1,412
1,522
1,771
1,610
1,562
1,673
1,906
3,104
70-74 years
1,028
1,216
1,322
1,530
1,399
1,360
1,379
1,695
Total
Page 77
Vietnam's Population By Age Group, 1990-2020 ('000) - Continued
1990
1995
2000
2005
2010
2013e
2015f
2020f
75-79 years
752
819
984
1,080
1,263
1,219
1,167
1,160
80-84 years
430
536
597
732
815
919
964
900
85-89 years
224
261
336
385
483
517
546
654
90-94 years
71
108
132
177
210
245
268
306
95-99 years
16
25
41
53
74
83
89
115
100+ years
12
17
21
24
30
e/f = BMI estimate/forecast. Source: World Bank, UN, BMI
Table: Vietnam's Population By Age Group, 1990-2020 (% of total)
1990
1995
2000
2005
2010
2013e
2015f
2020f
0-4 years
13.52
12.26
8.81
8.12
8.12
7.80
7.51
6.77
5-9 years
12.49
12.12
11.44
8.27
7.63
7.69
7.69
7.18
10-14 years
11.40
11.23
11.33
10.73
7.75
7.22
7.24
7.36
15-19 years
10.68
10.25
10.50
10.65
10.12
8.38
7.35
6.93
20-24 years
9.64
9.50
9.49
9.81
9.97
9.98
9.57
7.01
25-29 years
8.72
8.51
8.73
8.79
9.11
9.30
9.39
9.11
30-34 years
7.46
7.75
7.85
8.13
8.18
8.40
8.59
8.94
35-39 years
5.64
6.66
7.17
7.35
7.60
7.65
7.72
8.18
40-44 years
3.57
5.03
6.17
6.73
6.90
7.06
7.16
7.34
45-49 years
2.93
3.17
4.64
5.81
6.34
6.43
6.48
6.79
50-54 years
2.86
2.58
2.90
4.36
5.45
5.79
5.91
6.11
55-59 years
2.97
2.49
2.33
2.63
3.98
4.67
5.01
5.49
60-64 years
2.42
2.54
2.21
2.04
2.32
3.05
3.59
4.58
65-69 years
2.05
2.00
2.19
1.89
1.75
1.83
2.04
3.20
70-74 years
1.49
1.60
1.63
1.80
1.57
1.48
1.48
1.75
75-79 years
1.09
1.08
1.22
1.27
1.42
1.33
1.25
1.19
80-84 years
0.62
0.70
0.74
0.86
0.91
1.00
1.03
0.93
85-89 years
0.32
0.34
0.42
0.45
0.54
0.56
0.58
0.67
90-94 years
0.10
0.14
0.16
0.21
0.24
0.27
0.29
0.32
95-99 years
0.02
0.03
0.05
0.06
0.08
0.09
0.10
0.12
Page 78
Vietnam's Population By Age Group, 1990-2020 (% of total) - Continued
100+ years
1990
1995
2000
2005
2010
2013e
2015f
2020f
0.00
0.00
0.01
0.01
0.02
0.02
0.03
0.03
Table: Vietnam's Key Population Ratios, 1990-2020
Dependent ratio, % of total working age

Dependent population, total, '000
1990
1995
2000
2005
2010 2013e
75.8
71.0
61.3
50.8
42.9
41.4
2015f
2020f
41.3
41.9
29,712 31,567 30,734 28,617 26,741 26,860 27,293 28,655
Active population, % of total
56.9
Active population, total, '000
58.5
62.0
66.3
70.0
70.7
70.8
70.5
39,198 44,453 50,154 56,331 62,306 64,820 66,094 68,402
Youth population, % of total working age
65.8
Youth population, total, '000
60.9
50.9
40.9
33.6
32.1
31.7
30.2
25,778 27,076 25,544 23,038 20,918 20,822 20,950 20,690
Pensionable population, % of total working age

Pensionable population, total, '000
10.0
10.1
10.3
9.9
9.3
9.3
9.6
11.6
3,934
4,491
5,190
5,579
5,823
6,037
6,343
7,965
Table: Vietnam's Rural And Urban Population, 1990-2020
1990
1995
2000
2005
2010
2013e
2015f
2020f
Urban population, % of total
20.3
22.2
24.4
27.3
30.4
32.3
33.6
36.9
Rural population, % of total
79.7
77.8
75.6
72.7
69.6
67.7
66.4
63.1
Urban population, total, '000
13,958
16,867
19,716
23,175
27,064
29,632
31,384
35,771
Rural population, total, '000
54,952
59,153
61,172
61,773
61,983
62,048
62,003
61,286
Page 79
Methodology
Industry Forecast Methodology
BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case being determined, as per standard practice, by the prevailing features of the industry data being
examined.
Common to our analysis of every industry, is the use of vector autoregressions. Vector autoregressions
allow us to forecast a variable using more than the variable's own history as explanatory information. For
example, when forecasting oil prices, we can include information about oil consumption, supply and
capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality
is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for
analysis and forecasting.
BMI mainly uses OLS estimators and in order to avoid relying on subjective views and encourage the use of
objective views, BMI uses a 'general-to-specific' method. BMI mainly uses a linear model, but simple nonlinear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for
example poor weather conditions impeding agricultural output, dummy variables are used to determine the
level of impact.
Effective forecasting depends on appropriately selected regression models. BMI selects the best model
according to various different criteria and tests, including but not exclusive to:
R2 tests explanatory power; adjusted R2 takes degree of freedom into account
Testing the directional movement and magnitude of coefficients
Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value)
All results are assessed to alleviate issues related to auto-correlation and multi-collinearity
Page 80
BMI uses the selected best model to perform forecasting.
It must be remembered that human intervention plays a necessary and desirable role in all of BMI's industry
forecasting. Experience, expertise and knowledge of industry data and trends ensure that analysts spot
structural breaks, anomalous data, turning points and seasonal features where a purely mechanical
forecasting process would not.
Sector-Specific Methodology
A number of criteria drive our forecasts for each IT variable.
IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor
data and low apparent agreement between many sets of figures in terms of market definition, base and
methodology. In addition, forecasts are affected by consideration of a variety of internal and external
political and economic factors.
Within best-practice techniques of time-series modelling, BMI's quarterly updated forecasts are improved
substantially by intimate knowledge of the prevailing features of each local market.
Individual variables taken into account in creating each forecast include:
Overall economic context, and GDP and demographic trends;
Underlying 'information society' trends;
Projected GDP share of industry;
Maturity of market structure;
Regulatory developments and government policies;
Developments in key client sectors such as telecommunications, banking and e-government;
Technological developments and diffusion rates;
Exogenous events.
Estimates are calculated using BMI's own macroeconomic and demographic forecasts.
Sources
Additional sources used in IT reports include national ministries and ICT regulatory bodies, national
industry associations, and international industry organisations such as the International Telecommunication
Page 81
Union (ITU), officially released company results and figures, and international and national industry news
agencies.
Risk/Reward Rating Methodology

BMI's Risk/Reward Ratings (RRR) provide a comparative regional ranking system evaluating the ease of
doing business and the industry-specific opportunities and limitations for potential investors in a given
market.
The RRR system divides into two distinct areas:
Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development. This is further broken down into two sub categories:
Industry Rewards (this is an industry specific category taking into account current industry size and
growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall
score for potential returns for investors)
Country Rewards (this is a country specific category, and the score factors in favourable political and
economic conditions for the industry)
Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic
profile that call into question the likelihood of anticipated returns being realised over the assessed time
period. This is further broken down into two sub categories:
Industry Risks (this is an industry specific category whose score covers potential operational risks to
investors, regulatory issues inhibiting the industry, and the relative maturity of a market)
Country Risks (this is a country specific category in which political and economic instability,
unfavourable legislation and a poor overall business environment are evaluated to provide an overall
score).
We take a weighted average, combining industry and country risks, or industry and country rewards. These
two results in turn provide an overall Risk/Reward Rating, which is used to create our regional ranking
system for the risks and rewards of involvement in a specific industry in a particular country.
For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
Risk/Reward Rating a weighted average of the total score. Importantly, as most of the countries and
territories evaluated are considered by BMI to be 'emerging markets', our rating is revised on a quarterly
basis. This ensures that the rating draws on the latest information and data across our broad range of
sources, and the expertise of our analysts.
Page 82
BMI's approach in assessing the risk/reward balance for infrastructure industry investors globally is
fourfold:
First, we identify factors (in terms of current industry/country trends and forecast industry/country
growth) that represent opportunities to would-be investors.
Second, we identify country and industry-specific traits that pose or could pose operational risks to
would-be investors.
Third, we attempt, where possible, to identify objective indicators that may serve as proxies for issues/
trends to avoid subjectivity.
Finally, we use BMI's proprietary Country Risk Ratings (CRR) in a nuanced manner to ensure that only
the aspects most relevant to the infrastructure industry are incorporated. Overall, the system offers an
industry-leading, comparative insight into the opportunities/risks for companies across the globe.
Sector-Specific Methodology
In constructing these ratings, the following indicators have been used. Almost all indicators are objectively
based.
Table: It Risk Reward Rating Indicators
Indicator
Rationale
Rewards
Industry
IT market value, US$bn
Denotes breadth of IT market. Large markets score higher than smaller ones.
Sector value growth, %

year-on-year (y-o-y)
Denotes sector dynamism. Scores based on annual average growth over five-year forecast
period.
Government initiatives and Denotes spending boost provided by public sector, which can be a crucial determinant of
spending
sector development.
Hardware, % of total sales Denotes maturity of market. A high proportion of hardware sales, compared to services/
software, indicates that the overall IT market is immature.
Country
Urban-rural split
Urbanisation is used as a proxy for development. Predominantly rural states therefore score
lower.
GDP per capita, US$
A high GDP per capita supports long-term industry prospects.
Overall score for country rewards is also affected by the coverage of the power transmission network across the state.
Risks
Industry
Intellectual property (IP)
laws
Markets with fair and enforced IP regulations score higher than those with endemic
counterfeiting.
ICT policy
Subjective evaluation of official policy towards IT development, as enshrined in statute and

tax code.
Page 83
It Risk Reward Rating Indicators - Continued
Indicator
Rationale
Country
Short-term external risk
Rating from CRR evaluates the vulnerability to external shock, which is the principal cause
of economic crises. Such a crisis would cut investment.
Short-term financial risk
Rating from BMI's CRR, to denote risk of currency crisis and stability of banking sector. The
former would hit revenues in hard currency, while the latter would curtail investment funding.
Trade bureaucracy
Rating from CRR to denote ease of trading with the state.
Legal framework
Rating from CRR denotes the strength of legal institutions in each state - security of
investment can be a key risk in some emerging markets.
Bureaucracy
Rating from CRR denotes ease of conducting business in the state.
Corruption
Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in
tendering/business operations affecting companies' ability to compete.
Source: BMI
Weighting
Given the number of indicators/datasets used, it would be wholly inappropriate to give all sub-components
equal weight. The following weighting has been adopted:
Table: Weighting Of Components
Component
Rewards
Weighting (%)
70 of which
- Industry
65
- Country
35
Risks to
30 of which
- Industry
40
- Country
60
Source: BMI
Page 84

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Q1 2014

Vietnam Information Technology

Part of BMIs Industry Report & Forecasts Series

Business Monitor International

2013 Business Monitor International

Vietnam Information Technology Report Q1 2014

Industry Forecast .............................................................................................................. 16

Macroeconomic Forecasts ............................................................................................... 23

Industry Risk Reward Ratings .......................................................................................... 27

Market Overview ............................................................................................................... 31

Industry Trends And Developments ................................................................................ 55

Regulatory News .................................................................................................................................... 62

Competitive Landscape .................................................................................................... 64

Local Companies ................................................................................................................................... 67

Company Profile ................................................................................................................ 68

Business Monitor International

Vietnam Information Technology Report Q1 2014

Regional Overview ............................................................................................................ 72

Demographic Forecast ..................................................................................................... 76

Business Monitor International

Vietnam Information Technology Report Q1 2014

BMI Industry View

Headline Expenditure Projections

Computer Hardware Sales: VND44,389bn in 2013 to VND68,935bn in 2017, CAGR of +12.5% in

Key Trends & Developments

Business Monitor International

Vietnam Information Technology Report Q1 2014

Business Monitor International

Vietnam Information Technology Report Q1 2014

Government policies and funding in place to promote the development of the IT

Limited access to credit and budgets restrain spending by SMEs.

Highly cost-sensitive market, with 75% of software provided by lower-cost local

Vietnam is becoming a popular destination for software development and IT services

Business Monitor International

Vietnam Information Technology Report Q1 2014

SWOT Analysis - Continued

SMEs have much potential to increase spending on basic solutions, including

The implementation of the China-ASEAN free trade agreement means that

Business Monitor International

Vietnam Information Technology Report Q1 2014

Vietnam's fixed-line and internet access markets are dominated by state-controlled

Although alternative broadband infrastructures are currently being explored,

Broadband tariffs remain high, creating a barrier for low-income subscribers to

Significant opportunities exist to develop alternative broadband technologies,

Business Monitor International

Vietnam Information Technology Report Q1 2014

Fixed-line sector may enter a period of decline, with potentially negative

VTV's dominance in the pay-TV sector is holding back market development.

Business Monitor International

Vietnam Information Technology Report Q1 2014

The Communist Party of Vietnam remains committed to market-oriented reforms and

Vietnam has allowed legislators to become more vocal in criticising government

Macroeconomic instabilities continue to weigh on public acceptance of the one-party

Business Monitor International

Vietnam Information Technology Report Q1 2014

The heavily-managed and weak currency reduces incentives to improve quality of

Urbanisation will continue to be a long-term growth driver. The UN forecasts the

Prolonged macroeconomic instability could prompt the authorities to put reforms on

Business Monitor International

Vietnam Information Technology Report Q1 2014

Vietnam remains one of the world's most corrupt countries. According to

Vietnam is increasingly attracting investment from key Asian economies, such as

Business Monitor International

Vietnam Information Technology Report Q1 2014