Japan not tapped by Indian information technology, despite opportunities

Representative image.
Prominent Indian information technology (IT) firms have long been anticipating Japan’s recent move in acknowledging the need to welcome Indian professionals.

 

Following their hunch, software and automobile giants have been crowding business platforms forums in the land of the rising sun for years. With a rapidly ageing economy, a falling birth rate and an unemployment rate of about 2.8 per cent, Japan is in need of professionals across quarters.

 

The Shinzo Abe government had formally recognised this almost a decade ago, bringing the current population of foreign workers in the country to a little less than 13 million. Despite these efforts, cultural and language barriers have resulted in less than 6,000 visas generated for highly skilled professionals since 2015.

 

By 2030, Japan will need almost 600,000 IT professionals. On the sidelines of an event in India last week, Shigeki Maeda, executive vice-president (VP) of Japan External Trade Organisation, a government-backed agency that promotes global trade relations, had said there was an immediate need for 200,000 IT professionals. “This is being necessitated due to the advent of rapid technological innovations in the country's societal needs. Japan wants to fill this yawning gap and is looking towards India’s assistance in the IT space. Many Japanese companies feel the limitations of conventional “in-house innovation” and hence are moving towards “most-advanced IT Capabilities, for which India is the ideal partner to look out for,” he had said. 

 

So, what has prevented the country from attracting talent effectively? “The Japanese economy was built on manufacturing excellence. With the advent of smart machines, they need a lot of people skilled in software technology. This is where India steps in. Top Japanese technology giants such as NTT, Fujitsu, Hitachi and NEC will be front runners in hiring talent,” said Pareekh Jain, senior VP of HfS Research India.

 

Indian IT companies that already have a presence in the country will be spending more resources to scale up operations — Japan is the third largest software market globally.

 

The only concern would be the language constraint, a reason why major business partnerships were restricted to the country's eco-system.

 

According to the World Economic Forum’s global competitiveness report, Japan ranks 9th and India 40th in the scale. Yet, when it comes to retaining and attracting talents, India ranks at 24 and 19, respectively, compared to 44 and 73 in the case of Japan. Even on the latter of hiring and firing practices, India ranks much higher at 19, whereas Japan comes up at the bottom of the index at 113. Japan’s restrictive labour regulations are also a huge concern for analysts.

 

As software emerges to be a backbone of major businesses and products, India finds itself in a favourable position. While Japan has built a strong brand around robotics and automation, it finds itself amid a big shortfall of experts.

 

These issues have not deterred the country's resolve to improve economic growth. Japan has also been exploring robotic process automation (RPA) as a major area of innovation, to reduce labour dependence. In November 2017, financial giant Sumitomo Group announced a strategic RPA initiative, designed to spare them hundreds of millions of dollars.

 

When it comes to breaking into Japanese markets, Indian IT services companies haven’t made much inroad. Only TCS has been continually growing its base in the country, with the launch of iON and Ignio services last year, and a $50 million JV with Mitsubishi Corporation in 2014.

 

In 2016, India accounted for less than two per cent of software export to Japan, of a $108-billion-market there.

 

Last year, Tech Mahindra announced a strategic partnership with Toshiba Digital Solutions to offer smart factory services, focusing on Internet of things (IoT) products.

 

In addition, Japan runs a Project IIT programme with the Indian Institute of Technology (IIT) to offer internship opportunities to Indian students in the hope that they might take up permanent job opportunities there. The National Association of Software and Services Companies (Nasscom) signed an MoU with the IoT Acceleration Consortium of Japan in February, last year, to address IoT adoption.

 

Gagan Sabharwal, senior director of Nasscom, said, “With Japan focusing on Society 5.0 model, the country will need up to 2.5 million data analytics professionals to help them put data to use. They have also realised the huge potential our start-up ecosystem offers.”

 

He stressed that while Tier I and II IT companies from India already had presence in Japan, there was enough scope for niche businesses, too. Major opportunities would be in automation, manufacturing, digital services, blockchain, artificial intelligence, data analytics and IoT.

"To meet the client’s needs, foreign based IT service providers often need to hire Japanese people or taking advantage of resources who master the Japanese language and its culture. For example, both  Infosys Japan and TCS Japan are emphasising that they will strengthen the local support especially in sales and consulting area," said Misako Sawai, research analyst, Gartner.

Sawai adds that Japanese clients are open to work with foreign base IT service providers for digital business especially when existing providers don't have  the capability.


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