Not natural resources, nor cheap labor, but innovation is the core factor in improving the competitiveness of the economy. To have innovation and creativity, the quality of human resources is decisive.
The Government has also affirmed the importance of science and technology, identifying digital transformation as a development focus in the coming years, and an important segment in the digital economy is the outsourcing industry. business process (BPO).
By Decision 749/QD-TTg dated June 3, 2022, the Government set the goal of the digital economy accounting for 20% of GDP by 2025.
But how has Vietnam prepared in terms of science and technology human resources for that leap?
According to FPT Digital's Report "Digital Human Resource Development Strategy" in April 2023, Vietnam has nearly 400,000 information technology engineers and more than 50,000 students majoring in this field graduating each year. With an existing workforce of about 50 million people, this number accounts for less than 1%, a rather modest proportion when compared to some other technology countries such as the United States (4%), South Korea (2.5 %) or India (1.78%). More worryingly, according to FPT Digital, only about 30% of the IT workforce meets the actual requirements of the job. Gửi
Clearly, statistics show that Vietnam still has a lot of work to do, and a lot of room for development.
As part of the Human Capital Development Program, we - Innovation Services Center (ISC), Saigon Times Foundation and VNFOCUS - will coordinate to organize the search for talent in the BPO industry by presenting stories. the success of a number of businesses as well as countries in this field, thereby contributing to encouraging and calling for cooperation between the State, schools and businesses to develop human resources for the field of science and technology in general. and BPO in particular.
BPO INDUSTRY SEEN FROM DIGI-TEXX VIETNAM
Ask any expert on major trends with strong impacts on the domestic economy, and more likely answers will include digital transformation. And ask any enterprise – not necessarily a big one – on this trend, and the answer will mostly be affirmative: they are or will soon be adopting digital transformation. The government is doubling down on this trend, while consumers have increasingly become used to digitalization.
An interesting point is that digital transformation is setting up a solid foundation for the rapid development of the fast-emerging Business Process Outsourcing (BPO) industry. It is simply because digital transformation and BPO are highly interlinked.
WHAT IS BPO?
In the current context when the domestic economy as well as the global one is facing challenges and uncertainties, a decisive factor for enterprises is how to optimize resources and cust costs, and BPO could well be the answer. Outsourcing business processes to professional service providers will help businesses enhance efficiency, reduce labor demand and cut costs, thus helping them to focus resources on their core activities.
BPO comprises front-office operations, referring to external activities at enterprises, and back-office operations focusing mainly on their internal activities. More specifically, front-office services often cover client support and assistance (call center), market survey, sales and marketing, customer relationship, transport and logistics, public relations, organization of events, or running publicity programs. Meanwhile, back-office BPO services are meant to help perform internal activities for enterprises, such as conducting payrolls, accounting, tranforming or upgrading business performance, administration, document digitalization, data extraction and analysis, and information technology services among others.
While seeking to better understand the BPO industry, we happen to learn about DIGI-TEXX Vietnam as a leading enterprise on digital transformation and BPO service provision in Vietnam. DIGI-TEXX Vietnam is a German-invested enterprise active here since 2003 and has won numerous high-profile IT awards in the country.
First, regarding the front-office area, DIGI-TEXX's BPO services are quite diverse, ranging from supporting the administrative management of businesses, customer care and support, data management and verification, statistical reporting, document digitization, to assisting businesses in verification processes to minimize fraud risks, checking and approving images, videos, and other multimedia content to protect the business's brand image as well as the user community. These services can be flexibly operated both offline at DIGI-TEXX and online on the client’s system.
Meanwhile, in the back-office area, a standout service of DIGI-TEXX is the processing of business invoices, which is a time-consuming and labor-intensive process, especially when done manually, and errors in this work can negatively affect business operations and are detrimental to the customer experience.
DIGI-TEXX, with its team of invoice processing experts, employs advanced scanning technology and specialized software that uses artificial intelligence to process payables and invoices in both electronic and paper formats, translating, categorizing, and automatically uploading data into the client's accounting system.
Also related to document processing services, DIGI-TEXX offers specialized BPO services for hospitals and dental facilities, with technological solutions including patient data entry, request or complaint verification, issuing payment slips, and more. These services are just a few highlights of DIGI-TEXX's BPO services.
Thus, with increasingly developed and specialized BPO services, businesses using BPO can optimize operations and reduce costs and time. Imagine the cost difference between a business having to hire an IT specialist to design software that meets the company's operational needs versus giving the requirements and hiring a professional IT company to do the job.
A BIG MARKET FOR BPO
BPO is a rapidly growing service industry worldwide, with an estimated market size exceeding US$300 billion after surpassing US$250 billion in 2021. Data from Statista shows that global BPO revenue was US$221.5 billion in 2019, with a compound annual growth rate (CAGR) of 8% expected from 2021 to 2028. Statista forecasts that by 2027, revenue will reach US$405.6 billion.
It is important to distinguish between two types of BPO activities: domestic (onshore) and cross-border (offshore). The mentioned revenue figures refer specifically to the offshore BPO sector.
Due to the lack of statistical data on the onshore activities of individual economies, we do not have comprehensive figures for the global BPO market. However, the estimated size is significantly larger than the offshore market. For instance, according to Statista, China's domestic BPO market alone was US$207.8 billion in 2019.
The BPO market in Vietnam is developing rapidly, although its scale remains modest. In 2015, the BPO market size in Vietnam was approximately US$2 billion, which is far behind the Philippines' US$22 billion. However, for the offshore segment, Statista estimates that Vietnam's revenue was US$0.53 billion in 2023, with a CAGR of 12.7% from 2016 to 2023.
If these figures are relatively accurate, then over eight years from 2015, with a CAGR of 12.7%, Vietnam's market size has more than doubled to US$4 billion by 2023.
The revenue ratio of onshore to offshore for BPO companies varies significantly depending on the target customer base. For example, at DIGI-TEXX, offshore revenue accounts for up to 80%, while onshore revenue is only 20%. However, the company is striving to expand its domestic market, as evidenced by its recent investment in Hau Giang at the end of 2023, with a large-scale project aimed at "not only expanding operational capacity but also supporting the local economy's digital development and training a skilled IT workforce," according to CEO Nguyen Thi Diep. This workforce will contribute to the province's digital economy and society.
BPO'S pedestal
Returning to the topic of digital transformation and BPO.
Digital transformation requires the application of digital technology in all aspects of a business's operations, thereby enhancing and strengthening business activities, streamlining workflows, and providing greater value to customers and partners. Many businesses are heavily investing in digital transformation, from adopting cloud computing technology, business process management (BPM) applications, robotic process automation (RPA), to machine learning and artificial intelligence.
Digital transformation leverages IT resources to integrate and automate processes in both the front office and back office, helping businesses achieve their goals. With such requirements, outsourcing business processes is essential for businesses to effectively execute their digital transformation strategies.
As previously mentioned, the Vietnamese government has considered digital transformation a prerequisite for economic development in the coming years. Specifically, under Decision 749/QD-TTg dated June 3, 2022, regarding the National Digital Transformation Program to 2025 with a vision to 2030, Vietnam aims to "become a stable and prosperous digital nation, pioneering in testing new technologies and models." This provides a solid foundation for the BPO sector to thrive in the coming period.
According to the decision, the government aims for the digital economy to account for 20% of GDP by 2025, which translates to nearly US$100 billion based on an estimated total GDP of about US$480 billion at that time. In each specific industry and sector, the digital economy's share will reach at least 10%. These targets present significant opportunities for the BPO sector.
Currently, globally, an estimated 58% of businesses outsource business processes to cut costs, focusing primarily on customer service (this front-office service accounts for 42%, with a compound annual growth rate of 14.2%), while back-office services account for about 36%.
Vietnam is deeply integrating into the global economy, and therefore, it can be expected that the trend of using BPO services domestically will somewhat align with the global trend.
Source: Saigon Times Foundation
