Software developers working at Mobile C&C Cambodia’s office in Phnom Penh, Cambodia on Jun 5, 2024
PHNOM PENH – South Korean technology companies grappling with prolonged software developer shortages are actively broadening their search for talented engineers across Southeast Asia beyond the world’s biggest IT service exporter India.
Vietnam was their first choice but Cambodia is now poised to beat its Southeast Asian neighbor thanks to the country’s fast-growing software-developing talent pool available at much cheaper wages than those in Asia’s fourth-largest country and even Vietnam.
“Starting salaries for local developers in Cambodia are one-seventh of those in South Korea. Their skills and experience still lag behind their peers in Korea but the gap is closing fast,” said Yoon Jung-hyun, the head of software development at Mobile C&C’s office in Cambodia, on Friday.
Mobile C&C is a Korean company offering various platform and information technology system building and management services mainly for Korean banks operating local branches and offices in Cambodia and those at home. It currently operates one overseas office in the Southeast Asian country.
“Cambodian engineers’ performance is considered the world’s best given their (low) salaries,” said Yoon. “Korean companies are satisfied with their work very much.”
IT TALENT SHORTAGE AGGRAVATES
Korean companies counting on foreign software developers, especially those in Southeast Asia, are growing as the IT talent shortage shows no sign of abating in Korea.
Phnom Penh, Cambodia (Courtesy og Getty Images)
Since the end of the COVID-19 pandemic, software developers’ salaries have shot up amid the prolonged IT talent shortage, accelerating Korea’s IT offshoring outsourcing.
As a result, Korean firms are on the avid hunt for software developers in countries like Cambodia and Mongolia beyond traditional IT service outsourcing powerhouse India or Vietnam,.
According to a survey on Korea’s labor market by Korea’s Ministry of Trade, Industry and Energy, 150,122 people worked in the country’s software sector in 2022, falling short of the industry’s demand by 6,374 and recording a labor shortage rate of 4.2%.
The overall labor shortage stood at 2.6% over the same period.
The main culprit behind the software workforce shortage is a jump in their salaries.
Korean portal and IT giant Naver Corp. spent 2.2 trillion won ($1.6 billion) in payroll costs in 2023, up 40.8% from 2021.
(Courtesy of Getty Images)
Such a trend has made even big non-IT Korean conglomerates shift their eyes to other foreign countries beyond India and China.
Samsung Electronics Co. runs a R&D Center in Vietnam, while Lotte Innovate Co., formerly Lotte Data Communication Co., Naver Labs Corp., Shinhan DS Co. and DAOU IDC have local offices in Vietnam to outsource IT engineers.
Due to the growing popularity of Southeast Asia as an IT offshoring base, labor costs in the region have also climbed.
MORE SOUTHEAST ASIAN COUNTRIES JOIN THE RANKS
Monthly salaries of mid-level software developers in Vietnam range between $2,500 and $3,000 after a minimum 10 to 15% rise every year, said Kim Do-yeon, or Patrick Kim, chief executive officer of TechValley Inc., a Korean IT service outsourcing company based in Hanoi.
The top software developers in the Southeast Asian country are now paid 70% of Korean peers’ salaries, Kim added.
(Courtesy of Getty Images)
According to the Korea Software Industry Association, the average monthly salary for Korean system software developers is about $4,250.
To cope with the rising labor costs in Vietnam, Korean IT companies have shifted their eyes to other countries in Southeast Asia, such as Cambodia, Myanma and Malaysia.
“Cambodia is considered the next software developer outsourcing powerhouse after Vietnam,” said Song Kil-hyun, the head of Mobile C&C Cambodia.
The company, which offers IT services mainly to Korean banks’ operations in Cambodia with 90 local developers, plans to hire additional 100 local developers to handle growing projects in Korea, Song said.
The monthly salary for system software developers in Cambodia more than doubled to $500 to $700 from five years ago.
But they are still lower than those in other countries.
This is why Korea-native business-to-business financial program provider Webcash Co. runs a software engineer incubation center in Phnom Penh, the capital city of Cambodia.
The Korean company partners with prestigious local universities to build a strong software developer pool in anticipation for the growing demand for well-trained tech talent from around the world.
By Yong-Hee Kwak
kyh@hankyung.com
Sookyung Seo edited this article.
