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Japanese companies have become more open to engaging Indian IT vendors in their quest to internationalise their operations and reduce cost overheads, industry watchers feel.
According to Arup Roy, Research Director at advisory firm Gartner, software spends in Japan are expected to increase this fiscal and this is good news for Indian IT companies.
Frontline Indian IT firms are better positioned to make meaningful inroads in Japan’s challenging IT services market — the second largest in the world after the US — as they have established business relationships for several years now. While TCS has been present in Japan since 1987, while Infosys and Wipro too have been long-term players in the country.
Today, Tata Consultancy Services said it will merge two Japanese IT units with that of Tokyo-based Mitsubishi Corpo- ration to form a new joint venture, where the Indian IT giant will be holding 51 per cent stake with the balance being held by the Japanese conglomerate.
The combined revenue of the new IT joint venture is pegged at $600 million.
Industry watchers opine that TCS’ Japanese joint venture would propel other IT companies to look at the joint venture route for capturing a larger slice of the Japanese market, which is the estimated to be over $100 billion.
“Traditionally, Japanese companies have relied on either local outsourcing vendors or Chinese players for their software support needs. However, these vendors neither have the scale nor the ability to service the Japanese companies in foreign countries. In such a scenario, Indian vendors have a good chance to bag business,” said Arup Roy.
Recent studies indicate that 50 per cent of Japan’s IT offshoring work goes to China while only 13 per cent comes to India.
Moreover, political relations between China and Japan have hit a new low in the recent past, compelling Japanese firms to search for other outsourcing alternatives, said Roy.
Japan has been a tough market for Indian IT companies since doing business in the country requires adherence to a different set of business practises and values.
“Decision-making in Japanese companies is heavily federated and hence time consuming. The strength of an existing client vendor relationship is more important than the business case itself,” said Sudin Apte, Chief Executive Officer of advisory firm Offshore Insights. Moreover, Japanese companies prefer to deal with Japanese-speaking individuals while negotiating a business deal.
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