Japan has for long been a frontier that the Indian technology industry has yet to conquer. Indian IT has left its mark on the world IT map catering principally to the software outsourcing needs of major clients in the USA, Europe and, recently, Australia. These are all, by and large, English speaking or, at least zones where English for business is very acceptable. India’s twin decades of software development experience has empowered its IT industry to become the number one software outsourcing destination in the world.
But, going forward, the Indian IT industry will have to look beyond its comfort zone. That process has begun, albeit tentatively. I speak of Japan and China. The latter is a nation with which we have begun engaging more actively. This engagement, however, is limited to services for export rather than penetration of the national market.
Japan continues to be the second largest IT market in the world after the US. This market has its own unique sets of rules and manners of engagement that are often radically dissimilar to our comfort zone.
Today, for India, Japan constitutes less than 2% of the IT services exports. Penetrating the second biggest IT services market in the world continues to be a challenge for Indian IT companies—both, culturally as well as in terms of creating a sound Japan centric policy to penetrate the Japanese market successfully.
Further, as the Japanese IT industry opens its doors to long term investors, there will be greater opportunities for the Indian IT industry. The important aspect is for software outsourcing companies to aim for long term investment sans immediate returns expectation in order to benefit. The obvious challenge that companies/corporates face is that of the language barrier. Japanese businesses prefer to conduct their work in Japanese, rather than English. To overcome this impediment we would need to look at allocating more resources to train its workers on Japanese language and culture.
Indian companies looking to de-risk themselves from dependence on a single market have long tried to establish themselves in this market, but with nominal success. With its large technically qualified manpower base and IT service delivery expertise, India definitely has a big role to play as the aging Japanese economy makes choices to stay competitive in global markets.
As per Nasscom’s Japan reports, a key element for Japan to retain its competitiveness in the global market is that it would need the proactive effort by Japanese government and industry to break the traditional models and they would have to reach out.
From the Indian side, Nasscom’s president, Som Mittal, has said in the past, “With (a) shortage of technical skills in Japan, and urgent need for business transformation, Japan would be a large market. While Indian companies have been targeting this market, a new concerted approach needs to be taken by both sides.”
During and post recession, the Japanese companies are leaving no stone unturned in their pursuit to pare costs. If this is not an opportunity to penetrate this $108-billion IT services market, I do not know what would be. Troubled auto-makers Toyota and Nissan are putting out outsourcing deals worth $100-$200 million; Japanese electronics majors are re-looking at existing contracts as they seek for more cost-effective ways to maintain and support their global IT systems. Opportunities are there for the taking…
However, for our Indian companies to score a home run in this new, promising scenario, they would need to convince the Japanese to look at changing options in their choice of outsourcing destinations. Only then may we begin to see a shift from China and Korea towards India. If a Japanese company sees better service at a lower cost then you will find cooperation. The good news is that, once three or four companies see value and commit, then the foot in the door pretty soon forces it ajar. Japanese business networking is among the best in the world and success is often sought to be emulated through an element of basic copying.
The China connection
Today, Japan outsources the majority of IT development to China’s software industry. Despite an element of historical animosity dating back to the second World War and which is always remembered in China, the fact is that these two nation states are geographically and culturally closer to each other. Many Chinese software professionals know Japanese (language) and this has helped them immeasurably. Finally, once you have built trust with the Japanese, you are generally there to stay.
In light of such connectivity, the Indian technology industry would do well to look at China very seriously and in a holistic manner. That country today offers a lucrative market for Indian software development companies, their government is now more focused on developing their IT industry having declared 21 regions in China as tax-free up to 2014 to boost its offshore IT industry.
We aren’t entirely blind to this. Wipro already operates a global IT delivery centre in China. Other players among the big 6 have a presence there from ‘large to could do better’.
Basically, you ignore these two economies at your peril. Not only do they offer bright opportunities in the coming years, the fact is that the traditional lucrative western markets are beginning to head rather rapidly in the general direction of a plateau.
Speed is of the essence here—the early bird catches the worm. Further, emerging IT economies like Vietnam and Thailand are not sitting idle. This is their immediate sphere. Leave this wide open and their bite will be deep enough to keep us out for good. The time is now.