The US government last week signed its first deal to outsource software development to Vietnam.

Under the terms of the six-month deal, the US state of Oklahoma will outsource the development of a trade website to Vietnam-based technology company Silkroad Systems.

A report published last week by Research Vietnam revealed that big name North American companies are outsourcing to the country, along with European and Japanese players.

Nortel, Cisco, IBM, Hewlett Packard, British Aerospace, BP and Sony are just some of the names investing in Vietnam.

"We did not have any reservations about working with Vietnam-based developers since the country has a vast pool of intellectual resources that is largely untapped," said Hung Truong of Nortel.

Dan Stern, director of Research Vietnam, which produced the IT Vietnam 2002: Outsourcing to an Emerging Market report, said: "The fact that Vietnam is starting to attract public sector work from the US demonstrates that the country's emerging IT industry is finally getting global recognition."

According to the report, IBM is setting up its own outsourcing centre in Vietnam after successfully outsourcing projects to third-party providers.

Le Quang Tri, IBM software solutions manager in Vietnam, stated: "We are looking closely at Vietnam this year and may consider opening a development centre in the near future.

"Work is going on and talks have already started between IBM and the Vietnamese government."

William Baker, a director at Pacific Ventures, which will act on behalf of the State of Oklahoma during the six-month deal, explained: "If you can acquire the same or better technology and IT solutions at 50 per cent of normal cost, the bottom line becomes a reality.

"The combination of high quality work and lower costs makes Vietnam a very attractive place for IT outsourcing right now."