Why Doesn’t South Korea Outsource Its IT Projects Like Other Developed Countries?
Last updated: August 05, 2025 Read in fullscreen view
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While many developed countries such as Japan have actively outsourced IT projects to lower-cost countries like Vietnam, India, and the Philippines, South Korea appears largely resistant to this global trend. Why is that?
This raises several questions about a nation that is growing rapidly—now surpassing Japan in GDP per capita:
- As a high-tech country, does South Korea face an IT talent shortage?
- With relatively high domestic labor costs, why doesn't it cut costs through outsourcing?
- Are there cultural, linguistic, or internal strategic barriers that drive companies to develop in-house instead of collaborating externally?
- What are the key reasons why Korean businesses avoid IT outsourcing?
Based on our consulting experience at TIGO with troubleshooting ERP systems customized for Korean factories, several deep-rooted factors may explain this pattern:
1. Self-Reliance and Information Security
Korean corporate culture places strong emphasis on internal control and data confidentiality. Major corporations such as Samsung, LG, and Naver maintain strong in-house IT departments and avoid sharing core data externally. Outsourcing is often seen as a risk—either for leaking technological secrets or losing internal control.
2. Language and Cultural Barriers
Korean is not a widely spoken language, and Korean companies primarily operate in their native tongue. They do not commonly use English in technical communications, which creates significant difficulties in collaborating with global outsourcing teams. Unlike Japan, Korea has made fewer efforts to “internationalize” its technical teams.
3. Investment in Domestic Talent
South Korea heavily invests in training local engineers and developing strong partnerships between tech universities and businesses. This strategy has helped create a stable pipeline of domestic IT talent, reducing dependency on external resources.
At events like K-Innovation, Korean companies showcase hundreds of high-tech solutions developed by Korean engineers. Very few of these solutions are outsourced to other countries.
4. In-House Technology Development Strategy
South Korea tends to build everything in-house—from hardware to software. With a long-term vision to become a global leader in AI, 5G, robotics, and more, maintaining in-country development capacity is a core part of the national strategy.
5. Proprietary Software and Database Ecosystems
Unlike many countries that rely on global database systems such as Oracle, MS SQL, or PostgreSQL, Korean businesses often develop their own “made-in-Korea” database systems. When expanding abroad, they bring their entire proprietary ecosystem instead of adopting local or international platforms. This makes outsourcing nearly impossible, as there is little documentation or external expertise available. In fact, hiring foreign engineers to customize these systems often costs more than using local talent, due to the need for additional training and familiarization.
6. Lean and High-Productivity Operations
Korean IT companies are known for being extremely lean and efficient. Many are able to build large-scale software systems with teams of fewer than ten developers. The “work hard – deliver fast” culture is deeply embedded in their work processes and discipline. As a result, if internal capacity is sufficient, there's little need to expand with external resources.
7. Conclusion
Is South Korea going against the tide of global IT outsourcing to preserve its “technological identity”? Or is this a strategic move to strengthen domestic capabilities in the era of global tech competition?
However, the golden era of Korea’s IT industry may not last long amid rapid and profound global technological shifts. The rise of AI, large language models (LLMs), low-code/no-code (LCNC) platforms, and new development paradigms such as “vibe coding” is fundamentally changing how digital products are created.
Moreover, powerful and affordable solutions like Odoo, ERPNext, Zoho, and Larksuite are increasingly dominating the enterprise world thanks to their open, flexible, and integrable nature. In contrast, Korea’s closed and locally-oriented software ecosystem is at risk of falling behind if it does not adapt to the more open and collaborative trends.
As the world moves toward global cooperation, even the most efficient closed systems risk isolation. Without strategic shifts—both technologically and organizationally—South Korea may find it increasingly difficult to stay competitive.
Pham Dinh Truong
TIGO CONSULTING
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