Tuesday, October 21, 2008

IT firms eye Japanese market

This is a special note that would interest all the AJP/AAJP students of Nihongo Bashi across India. Note the revised forecasts compared to the Nasscom-MicKinsey report which predicted USD 3 Billion in IT revenues from Japan in 2008! Looks like reality is finally creeping in. Now the forecast is much more balanced and takes reality into account. The prognosis is for a cautious optimism rather than blind bullishness. In line with the Japanese mindset finally. Here is the article that appeared in Business Standard today. Interesting read indeed. Editor

With prominent Indian IT companies such as Tata Consultancy Services(TCS), Wipro, Infosys Technologies, Zensar Technologies and Satyam Computer Services increasing their presence in Japan, the world's second largest IT services market is becoming a lucrative market for India.

Nasscom pegs the Japanese IT services market at $108 billion, India's share in the market being only $1-1.5 billion (around Rs 4,900-7,500 crore). Offshoring is limited to 8-10 per cent of the total market, with China being Japan's biggest offshoring partner, accounting for over 50 per cent of the total offshoring. "We see India's share of IT exports to Japan growing in the next 5-7 years. This increased diversification to Japan has got nothing to do with the current economic downturn," asserts Som Mittal, Nasscom president.

However, the task is easier said than done. Japan has low overall IT spending, with spend to sales ratio being around 1-1.5 per cent for most industries, as compared to around 3.5-4 per cent in the US. BFSI and manufacturing are the highest spenders among all industries. Zensar Technologies currently has an all Japanese team of 250 people in Japan. The company gets almost six per cent of its revenues, less than $10 million (Rs 49 crore) from Japan but sees it doubling to $20 million (Rs 98 crore) in three years.

"We have been in Japan for six years and it is a slow market in terms of culture. It is a different market and the number of young people who can take up IT jobs is very less," says Ganesh Natrajan, Global CEO, Zensar. Nucleus Software, which gets 50 per cent of its revenues from Japan, has 100 employees there but the company doesn't want to increase this number. "Japan is a tough proposition in terms of language and culture and has low tolerance for mistakes," says Vishnu R Dusad, CEO and MD of Nucleus Software.