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Sudhindra's writes a fortnightly column in Deccan Chronicle / Asian Age in the Business - Technomics section. This column 'Tech-Sutra', will appear every alternate Monday starting 15th Jun 2009.
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Delhi, Mumbai, Kolkata, London
Monday, 21st December 2009
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:: Business / Technomics
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Japan-India: Good idea?
21st December 2009
Sudhindra Mokhasi
Everytime there is a recession or slowdown in the western markets, it has become customary for our CEOs to make a Japan announcement. "As part of our derisking strategy, we have set up a Japan focused business unit and expect x per cent of our revenues from this region in the next y years".
And rarely do we find press announcements of the accomplishments of these initiatives. Is it then justified to dismiss these as mere shareholder PR or do they play a role in the big picture?
In the last column, I mentioned how we have a measly 2 per cent share of the world's second largest IT market, and more importantly how it is a concerning 13 per cent against China's share of 50 per cent plus of the outsourced market. Another interesting statistic is that only 3 per cent of the revenues of the Indian IT biggies come from this market. I had also laid out the idiosyncrasies of the Japanese market; the Keiretsu system where there is an almost incestuous relationship between the vendor and client facilitated by financial crossholding, high gestation periods where relationships are tested in the crucible of time, the imperatives of knowing the Japanese language, business and cultural nuances.
There are two other important factors. Unlike other developed nations where IT is a CxO function, in Japan IT is mostly treated as a cost head and the strategic decisions are often driven by the vendor.
My friend Yuka makes another interesting point -because of the lack of strategic perception of IT, banking and manufacturing are still the most preferred option for job aspirants.
The second factor is the differing approaches to software development. The Indian approach is scaringly close to that of Microsoft -- develop, deploy and then incrementally fix bugs. Given their manufacturing legacy, this is a strict anathema to the Japanese. All issues are expected to be fixed before the system is released to the customer. This is a huge perception and expec tation mismatch and has resulted in quite a few Indo-Japan engagements languishing and not scaling to full potential.
Business take the path of - highest returns and least resistance -- given the constraints Indian companies have in Japan, we have - always reverted to the favored western markets with a resultant lower focus on Japan.
China, on the other hand, has a cultural homogeneity with Japan, even the Japanese Kanji character set is derived from the Chinese one. Chinese firms already have contract manufacturing relationships with Japan have been able to penetrate the IT market far better than Indians. The number of Chinese studying in Japanese Universia ties is over a 150 times as Indians.
Now for the bigger picture.
Japan and China have never had the best of relationships...politically, they are rival powers. The memories of Japanese occupation of China still linger.
With China's economic rise and the inevitable progress up the value chains - it is now encroaching into the space dominated by Japan.
The Japanese USP has been quality products - which are smaller, very user friendly, and less power consuming. China, with its experience in manufacturing Japanese products, is now attempting to catch up. In this context, the weak IP security in China is being seen as a major risk.
Falling birth rates, an unwelcoming immigrant and guest worker policy have made Japan one of the fastest ageing populations in the world resulting in growing shortage of IT workers.
Because of maturing western markets, India , needs newer markets like Japan to sustain its growth momentum and Japan needs a non-competitive partner like India to address its shortage of human resources, bring a holistic view to IT and - make Japanese companies more competitive through outsourcing.
Next on Tech-Sutra: What must India and Japan do to build the bridge?
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