Southeast Asia emerges as Korea’s new IT outsourcing hub
SEOUL, SOUTH KOREA — South Korean technology companies are increasingly turning to Southeast Asia to address a persistent shortage of software developers.
The shortage, coupled with rising wages for local developers, has driven Korean firms to seek talent through various outsourcing destinations.
Rising costs and shifting focus
The end of the COVID-19 pandemic has led to a significant increase in software developers’ salaries, worsening the shortage of IT talent in South Korea.
A survey by Korea’s Ministry of Trade, Industry, and Energy found that the software sector employed 150,122 people in 2022, falling short of the industry’s demand by 6,374, resulting in a 4.2% labor shortage.
The main reason for this shortage is the sharp rise in salaries. New technologies like artificial intelligence and big data have driven up software developers’ pay even more.
For example, Naver Corp. spent 2.2 trillion won ($1.6 billion) on payroll in 2023, which is a 40.8% increase from 2021.
This trend has led even large non-IT companies to seek IT talent outside the country. Companies such as Samsung Electronics, Lotte Innovate, Naver Labs, Shinhan DS, and DAOU IDC have set up offices in Vietnam to hire IT engineers.
South Korea outsourcing to Vietnam, Cambodia
Vietnam was initially the top choice for South Korean companies looking to outsource IT work. Samsung Electronics has an R&D center in Vietnam, and other companies like Lotte Innovate, Naver Labs, Shinhan DS, and DAOU IDC also have offices there to hire IT engineers.
Kim Do-yeon, CEO of It outsourcing company TechValley Inc., revealed that mid-level software developers in Vietnam earn between $2,500 and $3,000 per month, with salaries increasing by at least 10 to 15% each year.
However, as labor costs in Vietnam rise, Korean IT companies are looking to other Southeast Asian countries.
Top developers in Vietnam now earn about 70% of what their counterparts in Korea make. According to the Korea Software Industry Association, the average monthly salary for Korean system software developers is around $4,250.
“Cambodia is considered the next software developer outsourcing powerhouse after Vietnam,” said Song Kil-hyun, head of Mobile C&C Cambodia.
In Cambodia, the monthly salary for system software developers has more than doubled to $500 to $700 over the past five years but is still lower than in other countries.
This cost advantage is why Mobile C&C Cambodia plans to hire an additional 100 local developers to handle growing projects in Korea.
Similarly, Webcash Co., a Korean financial software provider, runs a software engineer training center in Phnom Penh. The company collaborates with local universities to build a strong pool of software developers to meet the growing global demand for tech talent.
