Thursday , December 1 2022

Firms spend US$2 bln on outsourcing in 2021

Businesses in Vietnam spent some US$2 billion on outsourcing services last year, 10% less than in Indonesia but 25% more than in Malaysia.

Outsourcing refers to a company hiring a third party to perform certain tasks or handle operations for it.

John Antos, vice president in charge of strategy, Asia Pacific & global payroll at the Asian Development Bank, said Vietnamese businesses’ spending on outsourcing has increased rapidly in recent years.

Outsourcing of human resources is shifting from being a stopgap measure when there is a shortage to becoming an important link in their long-term development plans, he said.

He cited the example of British company Prudential Vietnam, which had, until 2017, more than a 30 percent share of the life insurance market and was the runaway leader.

But suddenly its share began to decline steadily and it fell to fourth place at one time. It then began to outsource human resources, bringing highly qualified personnel into key departments, and soon bounced back into third place.

Vietnam’s outsourcing practices follow the global model, being most favored by enterprises in the manufacturing, finance, technology, and retail sectors, Antos said.

One of the biggest problems with the outsourcing model in Vietnam is the high turnover rate. According to human resources service provider Talentnet, the rate of regular employees quitting their jobs is an estimated 12-15 percent a year, but for outsourced employees it rises to 35-40 percent.

“Most outsourced personnel quit because they feel lost,” Nguyen Thi Xuan Huong, human resources director at AkzoNobel Vietnam, said.

“They have an outsider mentality, and think there is no opportunity for promotion at their companies, and their income is not equal to that of a full-time employee.”

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