2009
OPPORTUNITIES FOR UNIFIED COMMUNICATIONS
IN VIETNAM
Asia Pacific Market Insights
Frost & Sullivan’s commentary on the Asia Pacific ICT industry, addressing
opportunities, best practices, and major events
“We accelerate growth”
Opportunities for Unified Communications in Vietnam
Market Insight
Introduction
After having experienced strong economic growth in the past decade, Vietnam has been able to shake off its long standing
isolation of being a war ravaged nation. Once hailed as the Asian miracle, Vietnam is going through its fair share of problems
since its economy overheated in tandem with the global economic meltdown. However, industries continue to flourish
despite the country’s several challenges including its problems with inflation and it’s less than adequate infrastructure.
The communications landscape of Vietnam has been led in the recent past by its rising hospitality industry and the consequent
rise in infrastructure development. Although conventionally an economy that has relied on exports and manufacturing,
Vietnam now aims at bringing its ICT industry to a level comparable to other ASEAN countries both in terms of quantity as
well as quality of skill sets available within the country.
The shortage of indigenous industry solutions on the one hand and the growing demand for system integration and
technology solutions by the growing local industries on the other hand indicates the potential opportunity for MNCs and
other technology vendors to establish a foothold in the country. Communications being critical for any business, has given
rise to a few key business trends resulting in the growing relevance of effective business communications. Many businesses
are also expanding their geographical reach and seeing an increase in corporate presence across remote locations. Vietnam
is developing several of its tier 2 cities and this trend presents a strong need for tools that will help these distributed teams
to communicate and collaborate at a reasonable cost.
In response to these changing business needs, the entry of Unified Communications (UC) presents answers to several
organizational goals including productivity gains, cost savings in the medium to long term, enhanced collaboration across
distributed teams and the overall ability to stay competitive in a volatile and aggressive business climate. While the concept
of UC has been in circulation for a while, real time communication such as conferencing & collaboration, and instant
messaging has been implemented in the past as point solutions, rather than as complete true UC implementations. And
although true UC deployments may still be premature for Vietnam at this point, it shouldn’t be long before vendors woo
different market segments for a piece of the UC pie.
Drivers and Restraints for the growth of Unified Communications
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Opportunities for Unified Communications in Vietnam
Market Insight
While unified communications (UC) in Vietnam continued to be in the early stages of adoption all through 2008, the
addressable market opportunity from Unified Communications not including services was estimated at $31.3 million in 2008
and is forecasted to grow at a CAGR of 27 percent to reach $ 70.6 million by 2014.
Potential Market Size of UC in 2014
Key Verticals expected to drive the uptake of UC
Verticals that are driving the adoption of communication technologies include Service Providers, Hospitality, Telecom and
local BFSI sectors. The BFSI has traditionally been a big IT spender and with the influx of foreign banks in Vietnam this vertical
continued to see substantial spends on communication and networking technologies spurring the potential growth for UC.
However, the global financial crisis has negatively affected the foreign banks from contributing significantly in the last two
quarters of 2008. Despite this shortfall evidenced in the short term, the medium and long term forecast continues to be
relatively positive with the continued growth of the local banking sector. There is also an increasing trend of the average
middle class person with greater spending power vacationing in regions with weaker currencies that is becoming a growing
phenomenon spurring the growth of the hospitality and tourism industries.
The other verticals that are keen adopters include Government and Manufacturing sectors.
Size and Location of UC Opportunities by Key Verticals
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Opportunities for Unified Communications in Vietnam
Market Insight
Key Applications expected to see adoption in Vietnam
Most deployments in Vietnam continue to revolve around implementing IP telephony. Given the country’s relatively slow
adoption of technology, most industries have the advantage of having leap frogged into deploying IPT directly rather than
having to upgrade from traditional PBX systems.
Real-time communications such as secure Instant Messaging are also gaining traction given the thrust on security that is
driven by the growth of the local BFSI industry.
Collaborative applications are also set to take off in the future given the fact that they enable enterprises to interact with
their partners and customers, outside of their own network, in a secure and reliable way. While having employees within an
organization connect with each other, regardless of location, is important, collaboration across networks, across different
platforms, in a seamless and secure manner is where the true value is. It’s the ability to not only bring employees together
but bring external customers and partners within an organization’s ecosystem together as well, that is becoming a
competitive advantage for enterprises
Vietnam is also taking to conferencing solutions both audio and web based systems. Although bandwidth continues to be
limited in provinces outside of the capital and commercial capital cities, the trend is likely to ensue given the limited travel
budgets and increasing presence of global and distributed teams. While video conferencing is still a rarity, Vietnam’s national
telecom service provider VTN can boast about being among the first few in South East Asia to implement a telepresence
system in both Hanoi and Ho Chi Minh.
Critical Success Factors for Vietnam
In summarizing some of the Critical Success Factors that might aid vendors in succeeding in Vietnam, here are some
considerations to take note of:
Operating Model:
There are several models of operating in the Vietnamese market. There is the option of a Joint Venture, a Business
Cooperation Contract, a 100 percent foreign invested enterprise (FIE) and the Build-operate-transfer model. FIEs have
become increasingly common, as investors have learned to navigate the local system on their own and as problems with
joint venture partners have become more rampant. The success of this local presence however depends upon the vendor’s
relationship with channels and in their consistent effort to support their business partners through regular training, joint
event sponsorships and financial assistance
Pricing:
One of the factors driving price sensitivity in Vietnam is the country’s low per capita income. Hence while there is an
appreciation for the benefits of what UC can deliver, decisions to invest are increasingly led by the ability to justify its ROI,
cost savings and the opportunity cost of that investment.
Vendors also need to factor in import taxes, value-added tax (VAT), special consumption taxes, customs service fees, and
delivery delays which quickly price products out of the market or cut margins.
Product Localization:
A key differentiator for vendors looking to tap into the opportunities in Vietnam would be product localization in
Vietnamese, including product support and documentation. While many vendors have already localized products for China,
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Opportunities for Unified Communications in Vietnam
Market Insight
South Korea and Japan, product localization for Vietnam is still not common. Local channels play a crucial role today in
bridging this gap and deploying UC solutions in the market.
Channel Network
One of the most important success factors would be the channel network that a vendor can build in Vietnam. Currently,
there are only a few system integrators in Vietnam that have capabilities locally to execute UC projects. Some of the leading
local channels in Vietnam include FPT Information Systems, Innovated Technology for Communication (ITC), HPT Vietnam
Corporation, Niem Tin Co.Ltd (NTC) & Sunshine Solution &System Service.
Business Culture Issues:
Business interactions in Vietnam require a personal element. It is important to establish a good relationship with business
counterparts, even prior to undertaking business negotiations or transactions. An understanding of the local culture and
business ethics is critical in succeeding in the market. With accelerated growth fuelled by a booming economy and foreign
investment, success in sustaining relationships will depend upon being supported by the local industries in a cohesive
manner.
Vietnam is the fastest growing UC market in the region. It is driven by IP telephony deployments, and adoption of applications
such as Conferencing. Opportunities are aplenty in the Telecom, Banking, Hospitality and Government sectors, however,
vendors need to consider their go-to-market model and pricing in order to succeed in this market.
Susan Prakasam is a Research Analyst with Frost & Sullivan ICT Practice, tracking the Unified Communications & Enterprise Telephony
markets in Asia Pacific.
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Opportunities for Unified Communications in Vietnam
Market Insight
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