BACKIn recent years, traditional outsourcing hubs like India and the Philippines have faced significant talent shortages. A 2024 report indicates that 80% of employers in India struggle to find suitable talent, surpassing the global average of 74%. Similarly, the Philippines grapples with a skills gap, particularly in advanced digital competencies such as artificial intelligence and data analytics.
As these challenges persist, businesses are turning to Vietnam for its skilled workforce and business-friendly environment. In this blog, we aim to explore talent shortages in traditional outsourcing markets and examine Vietnam as a viable alternative, offering insights to help your business define outsourcing strategies.
Contents
4 major hiring challenges in saturated outsourcing markets
Established outsourcing markets are struggling with critical talent shortages. With a Korn Ferry study projecting a global deficit of 85 million by 2030, potentially resulting in $8.5 trillion in unrealised revenues. These four talent accessibility challenges in traditional outsourcing underscore the need for businesses to seek alternative solutions.
1. Widening skill gaps
Traditional outsourcing markets face growing skill shortages, especially in AI, blockchain, and advanced development. In the Philippines, 60% of IT-BPM firms have adopted AI, but many lack skilled talent due to a shortage of AI-trained educators.
Much the same, India’s $250 billion outsourcing sector, employing 5.4 million people, risks disruption as AI automates routine tasks. This underscores the need for these markets to upskill their workforce to remain competitive in the evolving technological landscape.
2. Rising labour costs and high turnover rates
Labour costs in India and the Philippines are rising, reducing the cost advantage. IT and BPO salaries in the Philippines have surged, while India’s outsourcing sector faces increasing wages in software development and data analytics.
Beyond rising costs, high turnover disrupts business continuity as skilled professionals frequently switch jobs for better offers, leading to disruptions in business operations and increased hiring and training expenses.
3. Saturation of outsourcing services
Years of outsourcing growth in India and the Philippines have led to a saturated market, resulting in standardised, one-size-fits-all services. Companies prioritise volume over customisation, making it harder for businesses to find tailored solutions that meet specific needs.
4. Limited access to skilled talent
With increasing demand, securing top talent in traditional outsourcing hubs has become challenging. Businesses struggle with higher recruitment costs and slower hiring processes, impacting operations and growth.
These challenges highlight the need for businesses to explore flexible outsourcing destinations that provide tailored services, align with their needs, and maintain a competitive edge.
Hidden impacts of talent shortages on businesses
Talent shortages are disrupting business growth, with a projected shortfall of 85 million workers by 2030. This crisis presents several hidden challenges for businesses, impacting various aspects of operations and growth:
-
Lost opportunities and revenue due to project delays
Unfilled positions can lead to significant project delays, causing businesses to miss critical deadlines. These setbacks often result in lost revenue and strained client relationships, as companies fail to deliver products or services on time.
-
Rising operating costs
To mitigate the effects of talent shortages, companies may resort to offering higher salaries, increased benefits, or invest in training programs to upskill existing staff. While these strategies aim to fill skill gaps, they also contribute to escalating operating expenses, affecting the company’s bottom line.
-
Decline in innovation and competitiveness
A lack of skilled talent can stifle innovation, as existing teams may lack the bandwidth or expertise to pursue new ideas or technologies. This stagnation can erode a company’s competitive edge, making it challenging to keep pace with industry advancements and meet evolving customer demands.
-
Decreased productivity and employee burnout
When positions remain vacant, existing employees often shoulder additional responsibilities, leading to increased workloads and stress. Over time, this can result in decreased productivity, higher absenteeism, and burnout, further exacerbating the talent shortage issue.
-
Missed deadlines lead to lost clients and revenue
Consistent failure to meet deadlines due to understaffing can damage a company’s reputation, leading to client dissatisfaction and attrition. The loss of clients not only reduces immediate revenue but can also harm long-term business prospects through negative word-of-mouth and diminished trust in the market.
Overcoming these challenges requires alternative talent acquisition strategies, such as outsourcing to emerging destinations like Vietnam, to ensure business continuity and sustained growth.
How outsourcing to Vietnam solves key hiring challenges
Outsourcing to Vietnam offers five advantages that can help businesses overcome challenges associated with traditional outsourcing destinations:
1. Access to a large and skilled talent pool
Vietnam has a rapidly expanding talent pool across technology, finance, and eCommerce. Outsourcing IT services gives businesses access to skilled professionals worldwide, helping them fill critical roles that are often difficult to source locally, such as DevOps engineers, cloud engineers, or finance experts like accountants, accounts payable officers and payroll specialists.
By outsourcing to Vietnam, companies can bridge skill gaps and leverage skilled expertise to tackle complex challenges effectively.
2. Cost-effective solutions without compromising quality
Outsourcing to Vietnam offers significant cost savings by reducing expenses on hiring, training, and retaining in-house staff when compared to hiring locally. With a young, tech-savvy, and highly skilled workforce, businesses can access high-quality services for less.
3. Strong English proficiency
Vietnam is investing heavily in English language education, and proficiency levels are consistently improving, reducing communication barriers.
4. Government support
The Vietnamese government actively promotes the IT and outsourcing sectors, creating a favourable business environment. Initiatives like the “National Digital Transformation Program” aim to transform the country into a digital economy by 2025.
5. Time zone advantage
Vietnam’s time zone aligns well with Australian business hours, enabling real-time collaboration. Additionally, the time difference allows companies to provide round-the-clock services, enhancing global operations.
Utilising these benefits allows businesses to overcome talent shortages, control costs, and accelerate project timelines, ensuring long-term success.
Real-life success stories of outsourcing to Vietnam
Facing talent shortages and rising costs, businesses are turning to Vietnam for skilled professionals and cost-effective outsourcing. One standout success story is Detector Inspector, a leading Australian safety and compliance company.
To overcome rising local salaries, Detector Inspector sought alternative recruitment solutions to expand its talent pool. Recognising the potential of remote work, they partnered with Away Digital Teams to build a dedicated team of engineers, proving that physical location is no barrier to efficiency and success.
This partnership accelerated the development of their IT function, reinforcing their leadership in Australia’s safety and compliance sector. By tapping into Vietnam’s skilled talent, they streamlined operations and demonstrated how outsourcing solves talent shortages while driving growth and innovation.
Wondering what makes Vietnam a standout outsourcing destination? Explore our Outsourcing 2.0 to understand more on how you can solve talent shortages and drive business growth.