_The Global Information and Communications Technology Industry: Where Vietnam Fits in GVCs_ saturated nature of the market. Because of the fragmentation of the semiconductor industry into design and fabrication for hire in “foundries,” semiconductors designed in Vietnam can easily be fabricated in the few places in the world that dominate the foundry business: Chinese Taipei, Singapore, Malaysia, and the United States. In 2005, world foundry capacity for logic semiconductor fabrication surpassed capacity in “integrated device manufacturers” such as Intel, Samsung, and ST Microelectronics that produce their own designs of logic semiconductors in their own fabrication plants for the first time (Houseman et al, 2014)

# **Requirements for Upgrading the ICT Services and ICT-Enabled Services Sectors**

A number of software outsourcing and BPO firms interviewed for this study indicated a desire to grow in Vietnam and upgrade in the ICT services and ICT-enabled services segments of the value chain. Surveys including Gartner’s “Leading Global Locations for Offshore Services,” A.T. Kearney’s “Global Services Location Index” and Tholon’s “Top Outsourcing Destinations” indicate that Vietnam is emerging as “India+1” location for ICT and ICT-enabled services. However, many interviewees cited significant barriers to growth and upgrading, some of which will be highlighted here. Below we discuss how Vietnam can address training issues to support growth and upgrading into higher value industry niches. We focus specifically on language, technical and managerial training.

# _Language Skills_

The lack of foreign language skills in Vietnam is a serious impediment to growth in these segments of the GVC. As already indicated, Japan is an increasingly important software outsourcing market for Vietnam. In fact, Vietnam recently overtook India as the second largest exporter of software services to Japan.<sup>22</sup> Future growth in this market will depend in part on the availability of Vietnamese professionals with Japanese language skills. A similar problem exists with the US market, which requires English language skills. Many companies have developed strategies to overcome these deficiencies and continue serving key clients in foreign markets. Thirty-one percent of Global Cybersoft’s (now Hitachi Consulting) clients are based in Japan. However, very few of the company’s software engineers speak Japanese, and very few of their client’s software engineers speak Vietnamese. Therefore, the company employs boundaryspanning individuals – Vietnamese software engineers who speak Japanese – to coordinate projects. This means that the teams can only collaborate through these “bridge software engineers.” Other companies have been able to develop ICT solutions to partially address the shortage of language skills. Digi-Texx, a German BPO service provider, serves a number of German clients including the postal service, the library system and medical insurance companies. However, the company only has 20-30 German speakers. German is not needed to analyze and index the important information in the documents because key terms are presented to the operator based on an in-house ICT system that checks the name or term being entered against a database and then offers the operator suggestions (similar to an “autofill” feature). Difficult items are “dual keyed,” that is, entered by two operators, and sent to a quality control operator if the first two operators’ entries disagree. Digi-Texx has an in-house software group to develop IT tools to increase operator efficiency.

Such coping mechanisms enable Vietnam-based software outsourcing and BPO firms to participate in the global market. However, they are not sound platforms on which to build in the ICT sector. The fact that firms must find creative ways to overcome language barriers only underlines the problem of inadequate foreign language training in Vietnam. An apparently

> 22 Viet Nam News article available from: <u>http://vietnamnews.vn/economy/245585/viet-nam-climbs-itsoftware-exports-ladder.html.</u>

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