Korea turns to Southeast Asia for IT outsourcing

[Photo by Han Joo-hyung]

South Korea is turning to overseas developers such as those from Southeast Asia to outsource information technology (IT) tasks as companies hope to save labor costs.

According to industry sources, Southeast Asian system integration (SI) companies that build IT systems are increasingly entering the Korean market.

FPT Software Co., a leading Vietnamese IT company, is one of them.

FPT Software entered Korea in 2016 and has been expanding rapidly, with the number of Korean branch employees reaching 200 this year from 100 last year.

Its sales in Korea also surged from 20 billion won ($14.44 million) in 2022 to 32.9 billion won last year.

Its major clients include LG CNS Co., Shinsegae I&C Inc., and DGB Financial Group.

The company also opened an office in Daegu in the first half of this year to support DGB Financial Group’s operations.

“We are planning to open additional offices in Gangnam, Pangyo, and Busan,” said an official from FPT Software Korea Co.

The company has offices in Yeouido and Magok in Seoul.

“We also have more than 2,000 Vietnamese developers working remotely to support projects in Korea,” the official said.

Another Southeast Asian SI company, SotaTek JSC., entered the Korean market in December 2022 and has received favorable evaluations from companies such as MegazoneCloud Corp., Yogiyo, and Coway Co.

Vietnamese SI company CMC Global Co., in which Samsung SDS Co. holds a roughly 30 percent stake, established its base in Signature Tower, Jung District in central Seoul, in May this year, marking its full-scale entry into the Korean market.

The primary reason behind this offshoring to Southeast Asian manpower is cost reduction.

According to Glassdoor, a U.S. workplace evaluation platform, the average annual salary range for software engineers in Vietnam is 204 million to 492 million Vietnamese dong (VND), about 11.16 million to 26.88 million won, which is lower than the average range of 53 million to 93 million won for software engineers in Korea.

“Previously, companies turned to domestic companies but the trend has now shifted towards Southeast Asian companies,” said an industry insider.

Korean small and medium-sized enterprises (SMEs) are also increasingly seeking overseas developers due to the unsustainable rise in domestic developer salaries over the years.

They are looking to hire developers from Southeast Asia and India as an alternative.

In response, the country’s Ministry of SMEs and Startups, in collaboration with the Korea Venture Business Association, launched an overseas software manpower program this year, linking domestic companies with Indian developers and supporting visas and stays upon employment.

About 300 companies have applied for the program so far.

With the rise in overseas workforce utilization by Korean companies, human resources (HR) management solution providers are also entering the Korean market.

Remote, a global startup that secured a $300 million investment from SoftBank Group Corp. and Sequoia Capital Operations LLC, officially launched Korean services in April.

“Korea is one of the top 10 fastest-growing countries for overseas employee hiring, with an annual growth rate of 141 percent,” said Remote.

India, known for its abundant IT workforce, is also seeing a rise in remote employment.

A startup that assists in hiring Indian developers noted, ”Initially, companies were interested in hiring due to relatively low salaries, but now they find it challenging to hire developers who match the latest trends.”

“This year, there has been a significant increase in requests for developers in the field of artificial intelligence (AI),“ it added.