Why Luxoft Chose Vietnam for Off-shoring

Posted by: Steve Hamm on July 01

I wrote a brief posting a month ago about Moscow-based Luxoft’s announcement that it was opening a service delivery center in Vietnam. I didn’t have much info then, but recently spoke to Peter Vaihansky, vice-president of marketing and business development, and got the skinny on why Luxoft chose Vietnam. It comes down, basically, to cost, stability, and culture.

Luxoft has about 3,000 employees, mostly in Russia and Eastern Europe, but also in the US, Canada, and the UK. The decline of the dollar was hurting so it began looking for a lower-cost location, considering India and China before settling on Vietnam.

Attrition rates and salary inflation made India and China unattractive. "There were things special to our company culture that the Indian reality doesn't support," Vaihansky told me. "We have very stable teams. People aren't mobile in Russia. Most stay in one city their whole lives. And people aren't as keen to jump ship when they see a slightly higher salary, as they are in Pune and Bangalore." Attrition is typically between 15 and 20% in India, compared to less than 10% in Russia. Luxoft found that salary costs were about 15% cheaper in Vietnam than in India and China. And they were about 40% cheaper than Moscow's rates.

There was also an affinity with Vietnam because of the support the Soviet Union showed for Vietnam during the country's civil war. Luxoft found that computer science professors in Vietnam tend to speak Russian, as a result. In general, "Russians are very well received in Vietnam," Vaihansky said.

In business as in diplomacy, it pays to make long-term friends.

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