Vietnam Could Be the New China

Vietnam offers a number of advantages other than cost, says Atul Vashistha, CEO of NeoIT. For example, the country's large population of well-trained, low-cost nurses makes it a popular place for U.S. medical transcription companies to outsource work. And many Vietnamese speak English as well as French, making it easier to communicate there than in China.

Offshoring in Vietnam has its share of problems. With a relatively small population, Vietnam will likely never equal China or India in terms of labor force. NeoIT's report notes the scarcity of senior IT professionals in the Vietnamese labor force, which generally lacks the sophisticated training and experience of other countries' labor forces. Roads, airports, the power grid and real estate developments are less modern and widespread in Vietnam than in China, India and some other countries. "Vietnam is a late entrant to this field," says Vashistha.

Alan Tonelson, a research fellow at the U.S. Business and Industry Council in Washington, DC, believes Vietnam holds much potential. "Like in most East Asian cultures, there's a lot of entrepreneurial energy there," says Tonelson, whose organization serves mainly small and midsize manufacturers. Tonelson says the Vietnamese people's language skills, along with U.S. outsourcers' desires to diversify outside China and India, will serve the country well.

For his part, Kruse says he finds Vietnam a great place to outsource manufacturing, and he's also been impressed with Vietnamese suppliers' capabilities in an activity once reserved for U.S.-based providers -- producing quick-turnaround prototypes for new product designs. "They were able to provide solutions in a very quick manner," Kruse says, "and the solutions were excellent."