VTI Nearshore Strategy: Positioned to Manage Software Development Projects in Japan

VTI, founded in 2017 and headquartered in Hanoi, Vietnam, has rapidly grown, securing consecutive system development contracts from major Japanese corporations despite being a relatively new player. With an existing office in Tokyo, VTI aims to further expand its target market in Japan by establishing a “Nearshore Development Center” in Fukuoka City in April 2024. Below is the interview with Mr. Nguyen The Manh, Division Leader, and Nearshore Project Director at VTI, to learn more about the company’s nearshore strategy and the advantages of establishing a presence in Fukuoka. (Interviewer: Naotaka Owada, Director of Innovation ICT Lab, Nikkei BP Research Institute)

Could you explain the rationale behind establishing a new nearshore development center?

Traditionally, Japan’s offshore development demands have primarily been directed towards China. However, due to the increasing geopolitical risks, more companies are now looking for alternative destinations. We aim to position our company as the ideal alternative. With the growing demand for digital transformation (DX), the scale of offshore development is expected to expand even further. If we can secure these projects, our company will experience significant growth.

However, we’ve heard that when Japanese companies outsource offshore development to countries other than China, they often face language barriers. To address this challenge, we established a nearshore development center in Japan, staffed with highly proficient Japanese-speaking personnel, including native Japanese employees. By effectively combining our nearshore development center with our offshore base in Vietnam, we can offer cost advantages while maintaining high-level Japanese language support.

Another key reason for establishing the nearshore development center is to secure projects in finance and public services. Many projects in these areas have policies that prohibit cross-border task assignments. We also aim to capture these types of projects by having a nearshore center in Japan.

Why did you choose Fukuoka as the location for the nearshore development center?

There are several reasons, starting with the ease of obtaining visas, which makes it convenient for Vietnamese employees to travel there for business. In 2023, Fukuoka City became the first in Japan to introduce the “Engineer Visa” system, designed to shorten the screening period for foreign engineers entering the country.

In cities like Tokyo or Osaka, obtaining a visa can take around three months. However, in Fukuoka, with the Engineer Visa system, the process can be completed in about one month.

Beyond the visa advantages, Fukuoka is popular as a city where foreigners find it easy to live, and it has become a hub for international startups. Its geographical proximity to Asia is another significant benefit. Additionally, Fukuoka Prefecture and Hanoi City signed a friendship agreement in 2008, and exchanges between the two have been increasing year by year.

The presence of many universities, which is beneficial for recruiting Japanese talent, and the lower cost of living compared to Tokyo or Osaka, are also strong points in Fukuoka’s favor.

Could you give us an overview of the Fukuoka Center?

Currently, we have about 15 members at the Fukuoka Center. Our goal is to expand this number to 100 by 2025 and to 500 by 2030. We plan to maintain a balanced team, with half of the members being Vietnamese and the other half Japanese. We will be recruiting Vietnamese professionals who are fluent in Japanese as well as skilled Japanese IT professionals.

In terms of quality, we will apply the same strict development processes in our nearshore development center that we use in Vietnam. This ensures that our projects maintain the highest standards of quality, regardless of where they are managed.

How do you plan to recruit Japanese engineers?

We aim to collaborate with universities in Kyushu to accept interns and eventually hire them as full-time employees upon graduation. We’re also considering offering scholarships to students, with the condition that they join our company after completing their studies.

What about the recruitment of Vietnamese professionals who are fluent in Japanese?

We are actively seeking individuals who have studied in Japan or have lived there for an extended period. Additionally, we offer a free in-house Japanese language program to help our employees improve their language skills. We ensure that those who enhance their Japanese proficiency can leverage it in their work environment.

For those who haven’t studied IT in their previous careers, we offer the “VTI Takumi” Bridge SE Training Program. This way, we provide career paths that cater to the diverse backgrounds of our employees.

We are also actively promoting the rotation of personnel between Japan and Vietnam. By creating a cycle where Vietnamese staff work in Japan and Japanese staff work in Vietnam, we believe this will enhance the collaboration between our Vietnam and Japan centers.

What kind of projects is the nearshore development center handling?

We are currently working on our first project, which involves developing and maintaining a client application for an insurance-related company. We are participating in this project as a subcontractor for a Japanese system development company.

Since this project requires handling within Japan, we are not collaborating with our offshore team in Vietnam; the nearshore center is handling it independently. In addition to development and testing, we are also planning to take on the design phase of the project.

When aiming to expand orders from Japanese financial institutions, I imagine the demands for quality, delivery timelines, and security will be extremely stringent. How do you plan to meet these expectations?

We intend to demonstrate our track record in offshore projects and apply the expertise we’ve gained there to our nearshore operations. We also recognize the need to hire more personnel with strong design capabilities and financial industry skills to meet these demands.

What other sectors do you plan to target for projects beyond finance?

We are looking at public sector projects and distribution industries. In terms of systems, we are considering mobile apps, web-based systems, and cloud implementation and operations. In the future, we are also keeping an eye on areas like IoT (Internet of Things) and AI (Artificial Intelligence).

How has the response been from Japanese companies regarding the establishment of the nearshore center?

We’ve received very positive feedback from clients in Fukuoka and across Kyushu, and we are confident that this will lead to an increase in orders.

While we haven’t received much feedback from clients in Tokyo or Osaka yet, we are aware that many companies require domestic handling of their projects. As we build our track record and continue our PR efforts, we believe we will receive requests from these companies as well.

Source: Nikkei Business Publications (日経BP)