Startups, software outsourcing companies, e-commerce websites, and mobile app and video game developers are all part of the budding technology industry in Vietnam that is setting its sights on the international market. But do they have what it takes to compete on a global scale? By Chris Mueller. Photos by Fred Wissink.

Cong Hoa street is a perfect metaphor for Vietnam’s developing technology industry — old mixing with new, innovation with tradition. The dusty thoroughfare just south of Tan Son Nhat airport runs from a dirt road intersection to a pothole-ridden busy highway. On one corner sits a shiny Burger King, and just a few doors down, old shops and restaurants that could have been in the same location for decades flank a new shopping mall.

Up the street a tall, modern office building sticks out from the ramshackle buildings on either side of it. This is the new Vietnam headquarters of KMS Technology, one of Vietnam’s up-and-coming software outsourcing companies that is trying to lead the way out of the dust and into international markets.

Viet Hung, KMS’s managing director, prefers sitting in the café-like lobby to his big office, complete with a vintage Vespa, at the top of the 10-story KMS building. Dressed in jeans and a short-sleeved shirt, the 36 year old tells me how KMS was founded four years earlier.

Hung and his two friends, Vu Lam and Chung Tran, had worked together for a while before splitting up to go to different companies. All three were unhappy with their new jobs and decided they had the skills and passion to start something new.

“We asked ourselves what our most valuable asset was,” Hung says. “It’s our brotherhood. We decided that any time there is a conflict, we would prioritise our relationship over business.”

It was an idealistic beginning to the company, a quality that continues today, but apparently it has worked. The company is now valued at $11 million, with 350 employees in Vietnam and 12 in the United States. Vu, the CEO, lives in the United States, where he ended up after fleeing Vietnam on a fishing boat in 1978.

KMS is just one of many companies to come out of the growing software outsourcing business in Vietnam. Some industry observers are hailing the country as a cheaper alternative to India and China, which dominate the outsourcing market, and believe more companies opening or coming to Vietnam will change its export focus from textiles to technology.

But that’s not likely to happen until some changes are made, says Prithvi Puttaraju, who is the founder and CEO of software outsourcing company InfoNam in Ho Chi Minh City and has more than 20 years of experience in the field.

“It’s a potential industry, but it needs work,” he says. “The educational system needs to improve a lot and language needs to improve. Otherwise Vietnam will miss the bus. Talent is also always an issue, but that can be resolved with good managers and training. Vietnamese are smart people and can come up with solutions to difficult problems.”

Puttaraju adds that the industry also requires more large, foreign companies to invest in Vietnam.

“The reason why is because in the technology business engineers learn on the job,” Puttaraju says. “If you have a company like Cisco or Nokia here, you’d be able to have more hands-on learning for new technologies. That’s what happened in India and China.”

In the meantime, companies like KMS are paving the way. Hung agrees that finding well-trained staff can be difficult, and dealing with common annoyances like losing internet connections, which he worries will cause clients to go elsewhere, is frustrating. But he is still optimistic, both for his company and the industry at large in Vietnam.

“As long as we have good people we can have good business, and that’s how we can contribute to this country,” he says. “Eventually it’s not just going to be a few companies, but a whole community, and KMS needs to be part of that story.”

In another part of town and in a different part of Vietnam’s technology industry, Le Hong Minh sits in the lofty headquarters of VNG in District 11. As the CEO and co-founder of Vinagame, later rebranded as VNG for the international market, Minh tells me he too believes the knowledge brought by foreign companies is vital to the success of the industry.

“One of the reasons the private sector has been flourishing in Vietnam for the past 20 years is because of market opportunities,” Minh says. “One of the biggest influencing factors has been the appearance of multi-national companies.”

Vinagame launched in 2004 as an online game company, at a time when few Vietnamese had access to the internet and Vietnamese internet companies were non existent. Fast forward to 2013 and there are nearly 31 million internet users in the country of 90 million, and VNG’s popular music downloading site, Zing, is the sixth most visited website in Vietnam, according to the Associated Press.

Recently Zing has come under fire after the AP reported that the site is a popular way for users to download and share music and movies illegally, and that the US Embassy was using Zing Me, a VNG-owned social networking site, to reach out to young Vietnamese. This prompted Coca-Cola and Samsung to pull their ads from the site, according to the AP.

But the local market isn’t as concerned about piracy. VNG launched Zing Me in 2009, and it wasn’t until October of last year that Facebook users surpassed it, with 8.5 million users compared to Zing Me’s 8.4 million. Now Facebook is at 12 million users in Vietnam, according to social media agency We Are Social.

Despite Facebook dominating the social networking market in Vietnam, VNG is still one of the largest internet companies, if not the largest, in the country, with roughly 2,000 employees and more than $100 million in profit last year.

Now Minh says in addition to their online games, VNG is focusing on launching mobile apps and games, both domestically and globally. They’ve recently launched a game in Japan and a mobile messaging app called Zalo. Right now Zalo has users in 18 countries, and they plan to launch an English version of it soon.

While the challenges for the domestic industry are numerous, including regulation and public perception, Minh too thinks getting trained employees is one of the biggest.

“Internet technology is a global business,” he says. “The bar is really high and we have to use local resources to reach that bar. We’re [internet companies in Vietnam] not focusing on the fundamentals. We really need to push our people to focus on the basics and convince people that it’s not just worth their money, but their time.”

Minh also says he feels success in the industry doesn’t only come from technical ability and skill, but also being passionate about the job and leaving a legacy for others to follow.

“We have a simple mission: When people think of the internet, we want them to think of us,” he says.

VNG may not pop into Nguyen Tuan Son’s mind when he thinks of the internet, but he does share Minh’s passion. Son, 27, is the founder and CEO of Kleii, a Dropbox-like cloud computing platform that allows users to stream data and sync it across devices. That means you can upload music or movies to Kleii from your laptop and access them somewhere else with your smartphone or tablet.

When asked why he chose cloud computing, Son says, “I think it’s a trend of the future. I wanted to make something different. Most Vietnam startups are doing websites or e-commerce. I wanted to make something at a higher level. Now a lot of people know that Kleii, and Vietnam, can do high-tech stuff also.”

It’s an ambitious project for the young team of 12 developers — even the name, Kleii, which means “glory” in ancient Greek, is telling — but since launching seven months ago, they already have more than 700,000 users, from Southeast Asia to South America. The company will be launching a Portuguese version soon to accommodate the Brazilian market.

Kleii is the first company to move to a new development for tech companies in Binh Duong, about an hour north of Ho Chi Minh City. They are being financed by BTIC, a venture capital firm that provides facilities and seed funding to promising tech startups.

Young companies like Kleii and money-making corporations like VNG are both doing their part to push the industry forward. Vietnam has a lot of room for improvement, including with education, training, and especially venture capital. However the drive is there.

“Vietnam has more hunger [than other countries in the region], more need to win,” says Anh-Minh Do, a blogger who covers Vietnam’s tech industry for Tech in Asia, an online technology news startup based in Singapore. “If you look at the region, Vietnamese are much more competitive among each other. Vietnamese are very proud of being Vietnamese.”

WHAT WOMEN WANT
In the last few years, the fastest growing part of the emerging tech industry in Vietnam has been e-commerce websites. Like in the west, everything is going up on the internet for sale. But with so many jostling for a share of the market, is it really a profitable industry?

“It is a huge market, and has a lot of potential,” says James Vuong, CEO of Project Lana, which operates several e-commerce sites and mobile apps aimed at women.

“But this market is really, really difficult and startups have to lose a lot of money before they reach critical mass,” Vuong says. “A lot of companies don’t realise that. It’s not for the faint hearted.”

He says the idea for Project Lana came from observing Vietnam’s largest women’s forum, Web Tre Tho.

“It started out as a forum for moms and pregnant women to share and discuss about pregnancy and raising children,” Vuong says. “Then it became more than that. The women started to share their experiences about home decoration, cars, bikes, where to go on vacation, and what kinds of things you can do with family.”

Web Tre Tho has 1 million members and 4 million unique visitors a month. Vuong says he thought this would be the perfect market for e-commerce, so he started Project Lana 10 months ago.

“Many of us in the tech community don’t know what women want,” says Vuong, who grew up in Silicon Valley and used to work for a chip manufacturer in the United States. “Women in Vietnam do most of the buying, most stores target women. They make decisions on purchases and also on their kids and what to buy for the home.

Now the company has three websites, Foreva, Be Yeu, and Lam Dieu. Foreva sells inexpensive lingerie, underwear, swimwear and sleepwear. Be Yeu sells baby products and Lam Dieu sells beauty products.

While Vuong says he thinks Project Lana is positioned to do well in the Vietnamese market, it still will take a lot of time to get in the black. As for the tech industry as a whole, he sees a lot of potential.

“The downside is a lot of people still need a lot of experience, but the entrepreneurial spirit is very strong in Vietnam,” he says. “As long as there is a house with a street where people pass by, they’ll try to sell you something.”

TRY, TRY AGAIN
Emobi Games is another Vietnamese startup trying to make it in the global technology market. Last year the company appeared on international radar after it released 7554, the first Vietnamese PC game to be built with modern 3D graphics. The game is a Call of Duty-style shooter that recreates the famous 1954 battle at Dien Bien Phu in northern Vietnam that sent the French packing and ended nearly 70 years of colonisation.

The game made headlines in Vietnam and abroad, but has since been a financial flop

Emobi’s goal was to sell 100,000 copies, says Nguyen Huy Hoang, a former architect and now Emobi’s vice director and head of the art department. But they didn’t come close, losing half a million dollars in the process.

“That loss brought us to a very critical point,” Hoang says in a phone interview from Emobi’s office in Hanoi. “It’s very lucky that we can stand until now. It was very difficult for us.”

Although the game didn’t make money, Hoang feels the release was still a success, and investors agreed.

“We didn’t have commercial success, but we were successful in making a brand and showing we can create good-quality video games, so they [investors] wanted to give us another try,” he says.

Emobi just released their second PC game, 2112, an online sci-fi strategy game, but they’ve had trouble getting players for this as well, and are still far from their goal of 2,000 users.

Hoang says this could be because the local market doesn’t seem to be interested in these games. For one, most PC owners here don’t have machines powerful enough to handle the graphics for the game. Local gamers, and publishers who can license them cheaply, also tend to favour Chinese-style games. He adds that since it is still new and evolving, the game is far from perfect and turned off a lot of international customers.

But Hoang says Emobi hasn’t lost hope. Right now they are working on getting out mobile games that should bring in enough money to turn a profit. Though this is already a saturated area of the Vietnamese market, Emobi thinks they can compete and will be able to use these profits to fund larger projects — ones the whole company feels passionate about.

“We all believe that [Emobi will be successful], which is why we keep doing this kind of work,” Hoang says. “The income isn’t very good, but we are still working on this because we believe one day we will be the best and we will earn what we deserve.”