40% Cost Reduction via Establishing a Global Development Center (GDC) on Cloud Managed Services [Case Study]

Our customer, a prominent IT service company in Korea, is spearheading technological innovation across sectors. This case study describes their collaboration with VTI, where establishing a Cloud Global Development Center (GDC) focused on Managed Service Provider (MSP) services in Vietnam emerges as a strategic response to the challenges of labor shortage and high labor costs faced by the Korean IT industry. 

Customer Overview & Requirement

Our customer is a leading IT service company based in Korea. They offer systematic IT services in various areas, such as IT consulting for system management, integration, and e-business. With top-notch technology and experience, the customer provides professional services in various industries such as public sector, manufacturing, service, and finance.

A Global Development Center (GDC) is an overseas development center launched by companies that want to address the shortfall of tech talent at home, diversify IT technology, and pursue business globalization. Our customer aims to establish a GDC in Vietnam focused on Cloud and MSP services, particularly monitoring and troubleshooting with warning tools.

Korean IT labor shortage and high labor cost

Building an in-house GDC in Korea presents several challenges, primarily centered around the shortage of skilled IT and Cloud labor, coupled with high labor costs.

According to a Software Policy and Research Institute report, 9,453 unfilled software developer jobs in 2021 are expected to grow to over 15,000 in 2023.  However, industry insiders projected that the actual number in 2021 might be closer to 20,000. Together with a greater-than-ever demand for IT specialists, this talent shortage is becoming a widespread concern in Korea.

Noteworthily, another challenge Korea is currently facing is high labor costs. The supply-demand mismatch has increased the pay and compensation levels of native IT professionals. Particularly, the average hourly rate for IT professionals in Korea can range from $60 to $80 or more, depending on the position and expertise.

These dual challenges of labor shortage and high costs make establishing an in-house GDC in Korea a complex undertaking, prompting businesses to explore alternative solutions such as outsourcing or collaboration with external partners in regions with abundant and cost-effective IT talent.

Building a GDC in Vietnam: the solution

In response to the customer’s requirement of building a GDC, Vietnam is recognized as an optimal destination, competent in addressing the aforementioned challenges faced by the Korean IT industry. 

Vietnam boasts a pool of highly skilled engineers with specialized expertise in Cloud technologies. Establishing a GDC in Vietnam ensures the availability of qualified professionals and the ability to scale up flexibly. According to a report by TopDev, Vietnam has over 530,000 IT professionals, with an additional 57,000 graduating from IT programs each year, making Vietnam one of the fastest-growing IT workforces in Southeast Asia. 

Remarkably, leveraging the cost-effective labor market in Vietnam, a GDC in Vietnam offers a competitive advantage, providing quality services at substantially lower costs than in-house GDCs in Korea. CJ OliveNetworks stated that companies can save 1000-2000 USD upon hiring one local developer. Furthermore, they can reduce monthly fixed costs of more than 2000 USD/month per 20 employees. 

>> View more: Human Resources of Vietnam IT Industry in 2023 and Prediction for 2024

Our work process and initial results: start small, dream big

Our collaboration began with deploying a small onsite Cloud Engineer team from VTI to the customer’s office. This team underwent comprehensive training, delving into the customer’s systems, working processes, and organizational culture. Upon returning to Vietnam, the onsite team played a pivotal role in training and scaling up the VTI Development Team. Currently, both the VTI Development Team and Onsite Engineer Team are responsible for Managed Service Provider (MSP) functions for the customer’s business, with an efficient workflow visualized below.

The initial results of this collaborative effort have been highly encouraging. Customers reported positive experiences, attributing it to VTI’s commendable problem-solving capabilities and effective Korean and English communication. VTI’s commitment to ensuring a swift response and adherence to Service Level Agreements (SLA) has not only enhanced customer satisfaction but has also translated into significant cost savings for the customer, with a remarkable cost reduction of 40% compared to utilizing Korean resources. This collaborative model sets a strong foundation for continued success and mutual benefits in the ongoing partnership between VTI and the customer.

VTI’s GDC and the Future of Cloud Managed Services

Recognizing the immense potential in VTI’s GDC model, our customer envisions scaling it up to 100 skilled professionals within the next two years. Additionally, VTI aims to extend the collaboration beyond the current public platforms such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud (GCP) to Naver Cloud and SK Cloud, Korea’s two popular cloud computing platforms. By diversifying its offerings and capabilities, VTI aims to cater to the evolving needs of its customers, ensuring continued success and mutual growth.

Driven by strengths in human resources, work quality, and cost-effective labor solutions, the GDC model positions VTI as a go-to partner for businesses seeking efficient and scalable solutions. If you need help developing a GDC in Vietnam, please contact us, and we will embark on a journey of transformative success together.