Addressing The Japanese Conundrum

The PM’s maiden visit to Japan to meet his counterpart Shinzo Abe, is in many ways be a harbinger of change ensuring that the next level of confidence building measures are met. Against this larger backdrop and much excitement, NASSCOM delegation’s visit to Japan, this week could not have been better timed.
Addressing the Japanese Conundrum

About 20 – 25 IT companies comprising a healthy mix of small, medium and large will meet establishments there, and make a strong representation for outsourcing, on how India can leverage talent and be amongst the leading service providers. From our industry’s perspective, the time is ripe to build on awareness that already exists and identify potential business opportunities by working closely with bodies based in Japan.

In terms of GDP, the Oriental nation (Japan) ranks a high third, globally, and in IT spends, it is even a notch higher – 2nd. It is not altogether without reason why India has not been as successful in Japan as desired. Japanese IT Services market is pegged at 108 Bn USD or thereabouts, out of which only about 8% (8.6 Bn USD) has adopted the off-shoring model. At the very outset, this has been a limiting factor and every interaction that we have with Japan, should endeavour to change their mind-set of over-dependence in In-sourcing. The Indian share of this pie is a modest 2 Bn USD, which is slightly better than what US and Philippines could do, but much lower than what China has achieved (nearly 4.7 Bn USD).

Clearly, China has a cultural homogeneity which perhaps has been the single-most important factor contributing to its success. Just as much as this is true, equally striking is the fact that India is in a more advantageous position on several other counts such as: Ability to manage complex projects, a remarkably high degree of technical expertise, comparatively lower levels of attrition and a more proactive approach to data security and IP protection. Moreover, medium – large Indian IT companies in Japan have already proven track records with varying degrees of success. Given a slackening economy, a weakening Yen and an ageing population, Japanese companies are on the lookout for high quality, lower cost differential, as well as newer markets. A perfect fit for Indian service providers. Some of the largest companies from Japan already recognize this and are warming up to leverage Indian IT by partnering with Indian companies in Japan or by making direct investments into India (by setting their own Global In-house centres – GICs). Both the governments are aware of this opportunity for a strategic partnership, and, over time, increasingly we have seen joint declarations, delegation visits and other business events between the two countries.

The realisation has been long, that deeper inroads need to be made – in Japanese market. Towards this, efforts have been forthcoming as well but somewhere we have not been able to expand as much as we would like to and reduce our over-dependence on traditional markets. In April, we launched “NASSCOM Japan Council” to focus on interests of Japanese GICs based in India and encourage growth for both the countries. This initiative is focussing on policy matters and create a conducive business environment for Japanese companies in India.

Typically, while doing business, the Japanese put a premium on trust and for more than a decade we have been relentlessly pursuing with moderate amount of success. Clearly, the PMs visit, signing of the FTA and other landmark steps, will put NASSCOM delegation’s objective a step closer to build on that one word, “TRUST” without which the Japanese would not even move an inch!

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