Vietnam — The leading country in cloud market among Southeast Asia

After the COVID-19 pandemic, the trend of recovery and development has created leverage to promote the digital transformation process. It was viewed as a great opportunity to accelerate growth, and the Vietnam government has increased its efforts in using public digital for citizens in tandem with technology migration. As of June 2022, 45.78% of the administrative services were conducted online, a 1.6-fold increase from the same time period last year.

In Vietnam’s digital transformation revolution, cloud computing has played an important role and grown significantly along with a fast rate of adaptation by organizations and businesses. Many experts predict that Vietnam is a potential market for cloud computing that is poised to exponentially grow over the next few years. However, the cloud journey is not easy for enterprises that embark on it. There are still challenges that need to be resolved in order to continue on the path to success.

So what is the context of Vietnam’s cloud adoption in 2022? What is the outlook for the future? Let’s discover the answer through this blog!

The context of Vietnam’s cloud adoption in 2022

Although the COVID-19 epidemic damaged many sectors of the economy, there is no denying that it created a “push” to promote technological development in general and the cloud computing industry in particular. Cloud computing may be viewed as a significant driver of innovation and digital transformation. As a result, the past year has seen the blossoming of Vietnamese businesses as they rush to migrate their systems, data, and applications to public cloud-based solutions.

What efforts have been made?

The pandemic has contributed to accelerating the cloud computing market’s growth by nearly 40%. By September 2022, about 56% of enterprises and organizations have chosen to use cloud services with an average investment of more than 66 million VND per year. From the above statistic, it is obvious that the adoption of cloud computing services in Vietnam has been rapidly increasing. In the banking industry, for example, the State Bank of Vietnam has transformed its policies by allowing diligence checks for account openings and transactions through the bank’s digital KYC (know-your-customer) program. Given this, citizens and banks can easily migrate to digital banking for their banking needs.

Currently, Vietnam’s cloud service market is characterized by a mix of a significant number of international and domestic cloud service providers. According to the National Institute of Information and Communications Strategy, by the end of 2022, the cloud computing market in Vietnam reached 200 million USBs (equivalent to VND 4,600 billion) and 27 data centers. There are foreign cloud service providers (CSPs) account for nearly 80% of the market, while the remaining 20% is in the hands of local enterprises.

The biggest highlight is that Vietnam has been shaping up as Southeast Asia’s most impressive economic success over the last few years. Businesses in Vietnam are leading the cloud market with a Compound Annual Growth Rate (CAGR) of 32% from 2018 to 2023. While this figure for Indonesia and the Philippines is 31%. And over the same period, Thailand’s cloud market CAGR is 26%, Malaysia’s is 25%, and Singapore’s is 22%.

It is not the least bit surprising that Vietnam has outperformed all of its regional peers in the cloud market. Despite the post-pandemic landscape, it maintained steady positive growth while other countries struggled to recover. Now, International Data Corporation (IDC) predicts it is expected to surpass the rest of Southeast Asia in cloud adoption.

What are the challenges we face?

In general, 2022 was a year of widespread cloud adoption by Vietnamese businesses. However, they still have to face many challenges to develop cloud computing platforms in the right direction and method.

Regulatory compliance: One of the apprehensions is regulatory compliance relevant to cloud computing. In terms of the market, cloud computing is relatively huge, and Vietnam has issued a number of circulars relating to criteria for measuring and selecting cloud computing platform solutions to ensure safety. Thus, businesses need to train their employees on a solid awareness and mindset about the cloud, as well as on technology auditing abilities, to clear barriers to their cloud adoption journeys.

Lacking a holistic approach: Another actual state is that enterprises still lack a holistic approach to cloud adoption in their systems. The highlighted reason could be that cloud adoption is still viewed as a technology initiative, so it should be known and led by technology experts and the IT department in most cases. But a comprehensive cloud adoption approach should involve multiple parts of the organization in order to achieve business strategies and become sustainable.

Lacking a clear strategy: Some organizations found the cloud migration journey difficult, the reasons were rooted in a lack of a clear cloud adoption strategy and a business-driven approach. The solution to this might be, firstly, clearly define the business and technology goals, secondly, to find and adopt a suitable agile approach, and finally, to look at internal resources and find partners or a third party to help build the cloud infrastructure. In addition, this is when we need to look at the value of a well-designed proof of concept (POC) to reduce business and technical risks associated with cloud adoption.

Technology Change and Information Security: Despite the fact that the Vietnamese cloud industry experienced a booming year, there are still numerous situations when organizations’ cloud migrations prove to be not only unsuccessful but also costly. According to EY Vietnam’s Cloud Readiness and Adoption Survey, one of the most difficult tasks for more than 150 local firms is upgrading technology while guaranteeing information security. As a result, the Vietnamese government is being urged to reexamine the need for a comprehensive risk management system. There are three major elements to consider: data privacy and cybersecurity, third-party management, and cross-border data flow. If the issue of data security in cloud infrastructure is addressed by legislation, it will assist firms in developing a risk-aversion strategy for cloud adoption.

What is the outlook for the future?

Vietnam’s cloud services market has experienced ups and downs in 2022. However, due to the rapid pace of digital transformation and the participation of both domestic and foreign players, we can expect that cloud adoption will scale and grow significantly in the future. By 2025, the CAGR of the cloud computing market in Vietnam is predicted to increase by over 18.88%, as highlighted by Research and Markets. IaaS, PaaS, and SaaS are among the three cloud computing models expected to have substantial revenue growth in the future. As a result, organizations will have a high degree of possibility to explore and adopt multi-cloud and seek integrated industry solutions on the cloud.

According to IDC, expenditure on cloud services in ASEAN is expected to more than quadruple to US$11 billion by 2025, driven by the growing digital economy and tech companies. This is closely followed by the increasing demand for infrastructure upgrades and the emergence of low-code and no-code platforms, both of which are critical to modernization and digitalization. Interestingly, the governments of Vietnam are well aware of the benefits of being in the cloud along with the development of the region, as evidenced by its push for cloud adoption as part of its larger Digital Government Strategy for 2021–2025.

Summary

In conclusion, Vietnam experienced the cloud market’s exponential growth through outcome-focused and technology-neutral policies in 2022. Local enterprises are increasingly embarking on the cloud adoption journey and benefiting hugely from it, but they are still challenged by multiple factors to successfully migrate. Fortunately, given Vietnam’s efforts over the last year, we can expect that cloud adoption in Vietnam will continue to grow in the future.

Nonetheless, the cloud market is one of the most unexpected transnational factors of the digital transformation age. As a result, enterprises require a complete strategy for their cloud journey, and we can help you optimize your cloud adoption better with a well-planned implementation at a cost-effective.

Terralogic has extensive expertise in offering cloud solutions to a wide range of clients in the Financial Services, Retail Sector, and Healthcare Sector industries, and has been creating cloud hosting services that are suitable for both big and small businesses. We pledge to make cloud adoption easy and consistent while also maintaining security and regulatory requirements in the Vietnamese cloud market. We will support you in unifying your data and workflows in order to boost innovation, enhance your operations, and get closer to your customers.