After ten years of implementing policies on encouraging the development of information technology (IT), software firms still cannot attain domestic clients, even though the domestic market is considered as having great potentials.

A step back in the government market

State agencies remain the biggest domestic clients of software firms. However, many barriers still have been existing for the last many years. According to Tran Luong Son, General Director of VietsoftWare, the costs of an investment project include the capital for project (A) + investor’s resources (B) + maintenance service fee for contractors (C). In general, A is always very big, B is insignificant and sometimes unclear, while C is always at zero.

Meanwhile, when providers cannot receive service fees, they do not have a reason to try to provide good services. Projects’ investors will not receive good services except for the 12 month period of free maintenance.

The problems in the relation between the parties in the implementation of IT projects does not encourage a reliable partnership between them. They miss many opportunities and exterminate the usefulness of IT systems at state management agencies.

“The gloom of the government market and the loss of confidence on the government market is evidence. A lot of big companies have been gradually withdrawing from the market. Many small companies were once set up to grab the opportunities, but many of them went bankrupt right after they attempted to expand,” Son said.

The number of the companies that provide high quality IT services to the government market has decreased considerably, while the “next generation of service providers” has not appeared yet. As a result, many IT centers run by government agencies have appeared and provide services to the projects funded by governing bodies or agencies in the same localities. This should be seen as a step back in the IT industry.

“A PPP (public-private partnership) model is needed in order to make a breakthrough for the software industry to develop. Only when software is considered a kind of service, will service providers spend money to invest in long term market strategies,” Son said.

Enterprises disoriented

According to Le Hai Binh, Chair of Mat Bao (stormeye) Company, Vietnam’s software industry has made a big leap in its development. Though the industry still can bring a modest turnover (2 billion dollars in 2010), it is the sector with the highest profitability. However, most of the earnings come from outsourcing work. Vietnam is now well known in the world as the address for foreign enterprises to outsource their products.

Meanwhile, the domestic software market has been left open. There are not many software firms that make software products for the domestic market. The majority of operational enterprises are small enterprises, which have limited finances but have enough experience to make deep investments.

“The opportunities for Vietnamese software firms to develop are very big, while it is not easy to conquer the home market,” Binh said.

In fact, Vietnam once witnessed a boom in the software industry, but the boom faded as soon as it came. There are some big names in the software market, such as Lac Viet, Diginet, Vietsoftware, BKAV, Misa, Fast, and there are some well known programs for the healthcare, e-government and geography. However, Vietnam’s software industry remains fuzzy.

According to Binh, it is very difficult to exploit the market. Many enterprises are used to simple software products like Word or Excel and they do not want to see any changes. Meanwhile, financially capable enterprises prefer using foreign software over domestic products.

Pham Anh Chien, General Director of FPT Software, complained that the problems in the copyright protection and staff management are also big worries of enterprises when deciding to develop products. Software officers, after a cooperation period, may leave companies to set up private businesses and write similar programs for themselves. A lot of disputes could not find appropriate answers because the regulations relating to settling disputes remains unclear.

Chien also agreed that Vietnamese businesses prefer using foreign software, because domestic software firms still cannot offer high grade applications for specific fields, such as petroleum, treasury or banking.