South Korean technology companies are expanding their search for software developers to Southeast Asia to address a persistent shortage of IT talent.
The growing demand for skilled developers has led Korean firms to explore new regions, including Cambodia and Mongolia.
Increasing costs amid talent shortage
Since the end of the COVID-19 pandemic, salaries for software developers in South Korea have skyrocketed due to a prolonged IT talent shortage. This situation has intensified the need for IT offshoring, with the rise in salaries fueled by the rapid adoption of new technologies such as artificial intelligence and big data.
To illustrate, Naver Corp., a leading Korean portal and IT giant, spent 2.2 trillion won ($1.6 billion) on payroll in 2023, marking a 40.8% increase from 2021. Even major non-IT companies like Samsung Electronics, Lotte Innovate, Shinhan DS, and DAOU IDC have begun outsourcing to foreign countries beyond traditional markets like India and China.
A survey by Korea’s Ministry of Trade, Industry, and Energy revealed that in 2022, the country’s software sector employed 150,122 people, falling short of the industry’s demand by 6,374 workers and resulting in a labor shortage rate of 4.2%. The overall labor shortage during the same period was 2.6%.
Exploring new talent pools
Due to this shortage, Korean firms are now looking at countries like Cambodia and Mongolia for outsourcing, moving beyond traditional IT service powerhouses such as India and Vietnam.
Yoon Jung-hyun, head of software development at Mobile C&C Cambodia, shared that while Vietnam was their initial choice, they opted for Cambodia due to its developing talent pool and significantly lower wages.
“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,” Yoon said. “Cambodian engineers’ performance is considered the world’s best given their (low) salaries. Korean companies are very satisfied with their work”
Mobile C&C Cambodia, which currently employs 90 local developers, plans to hire 100 more to manage its increasing projects in Korea, according to Song Kil-hyun, head of the company.
“Cambodia is considered the next software developer outsourcing powerhouse after Vietnam,” he added.
