Success Cases of Japanese Companies’ Outsourcing in Vietnam

Company Outline

Nissan Techno Vietnam (NTV), established in June 2001, is a 100% equity subsidiary of Nissan Techno (JNT), which is a subsidiary of Nissan Motors. Nissan Techno dispatches engineers to Nissan bases in the US and Europe, but Vietnam represents the first case of it establishing its own base overseas.

The content of NTV’s operations is CAD design of automobile-related parts (creation of automobile CAD data), as well as CAD analysis and layout. It is groundbreaking as the offshore outsourcing of business to Vietnam by a Japanese company. The goal is to utilize young and talented Vietnamese engineers.

The number of employees rapidly increased from about 200 in the beginning of 2006 to 502 in January 2007. Among the employees, about 200 are university graduates and the remaining 300 are high school and junior college graduates. In January 2006, there were 11 resident Japanese employees and 20-30 employees on short-term business trips. In terms of the composition of employees, unlike software development outsourcing centers, NTV’s operations specialize in the labor-intensive parts of areas such as CAD data creation. One could say it is closer to BPO outsourcing rather than ITO outsourcing.

Business Structure

NTV’s current business is 100% outsourced orders from the home company. Nissan Motors, which develops cutting-edge technology, is at the top. Nissan Techno, which is in charge of developing new products, is placed in the middle. Nissan Techno Vietnam, which designs parts and conducts CAD analysis, is at the bottom. In this way, the three companies comprise a pyramid relationship.

Almost all of the business content is received as digital information via the network system. Once design drawings, design inspection reports, and various design technology data have been created within the company, they are resent as digital information to Nissan Techno (JNT) for a final quality check, and then delivered to Nissan Motors. Unlike offshore development of software, communication is done among people in the same group company, and consequently few problems from changes in specifications or communication arise.

The primary communication infrastructures that NTV utilizes are IP-VPN leased lines (6Mbps capacity), ADSL telephone lines for teleconferences, and normal internet lines. In Vietnam, until last year IP-VPN services were unusable because of delays in the installation of base stations, and frame relay communication lines were used. Because of high communications costs, the communication capacity was only 1/6 of the current level. The utilization of IP-VPN leased lines has made it possible to take on major business orders, and the scale of orders received has expanded rapidly. For example, it has become possible to receive orders for large-scale data analysis that changes information regarding the structural composition of automobiles into digital data. Moreover, while in the past single drawings were created, the installation of high-performance communication infrastructure has made it possible to conduct module parts and layout analysis.

NTV’s official language is Japanese, and knowledge of Japanese, IT, and CAD are required as part of the conditions for employment. NTV collaborates with a technical school within Hanoi City for its pre-training, and language instruction is continued after employment. The number of employees has rapidly increased from 200 at the beginning of 2006 to 502 in January 2007. This is likely because the introduction of high-capacity IP-VPN leased lines has made it possible to receive large-scale CAD analysis orders, and because human resource cultivation systems have been established within the company.

Nissan Techno Vietnam’s Factors of Success

A local visit to Nissan Techno Vietnam points to the follow factors of success.

1. The president of Nissan Techno also took on the top position of the Vietnam base. The strong will and achievements of a top manager like this makes it possible to carry out pro-outsourcing managerial innovation that can break through local resistance. In addition, Nissan Motors CEO Carlos Ghosn’s visited the Vietnam base and gave Nissan Techno Vietnam’s work high marks. This affirmation of the outsourcing operations opened the door for further development of outsourcing from the management side.

2. Local base managers understand the necessity of having skilled staff with solid training rather than impressive education backgrounds, and have established effective education and training systems through collaboration with universities and have hired optimal human resource portfolios. This both minimizes management costs and promotes human resource stability.

3. Choosing communication infrastructure services in line with the capacity of the local base also deserves recognition. If the home company is unable to provide an organized response to outsourcing, and if the local base is unequipped with the capability to receive orders, then success would be unachievable even with the provision of high-grade communications infrastructure. Once organizational response has been established, the optimal choice is therefore to pursue an upgrade in outsourcing in line with communications infrastructure services that can be received. Nissan Techno Vietnam can be commended as a leading example of upgrading outsourcing business by creating an optimal combination of communications infrastructure and organizational preparedness.

4. These factors, coupled with high-caliber communications services and an upgrade in local personnel, should lead to further advancement in the development of outsourcing business such as online work between global bases.