IT companies find Japan hard nut to crack

While Indian IT service providers are trying to increase their presence in the US and European markets, few are aware of the growing opportunities Japan, world's second largest IT spender, has to offer.

Japan's IT services market is expected to grow to $107 billion by 2008 "" a compound annual growth rate (CAGR) of 8.7 per cent. It accounts for over a third of the total revenues for the Indian IT-ITeS exports to Asia, Oceania and West Asia. Revenues from the IT services' account form approximately 3 per cent of the Japan's gross domestic product (GDP).

However, there are only a handful of companies that have a presence in Japan. Some of these include Tata Consultancy Services (TCS), Wipro, Patni, and Zensar. But despite these companies being in Japan for close to 10 years, the country contributes just about 5-7 per cent of the revenues of these companies.

Doing business in Japan is not easy due to language constraints, long sales cycle, strong cultural influence in conducting business and stress on quality issues. Wipro, for instance, has been in Japan for close to 10 years, though it is growing at a rate of 35-40 per cent in the Japanese market, in terms of revenues, Japan contributes only 5 per cent.

H Venkatesh, VP, Japan and APAC business, Wipro Technologies, says: "Initial years were very tough but the past few years have been fairly smooth." He points out that this has happened due to their initiative to understand the culture and the people. The company has a five-and-a-half-month course 'Shimpo' for its engineers. This period is strictly utilised for learning the language and nuances of Japanese culture.

For Patni, with 5 per cent of its revenues coming from Japan, it has become a focus area. But the company is keen that its engineers are trained in the local language and culture.

"Our continued effort in nurturing relationship has paid well. Moving ahead, we see a rapid growth in product engineering services related to consumer electronics and the automotive segment. Moreover, Japanese companies are increasingly going global and hence it's a huge opportunity for Indian companies to provide services to both the Japanese companies as well as their customers," says Deepak Khosla, senior vice president, Patni. The company has over 200 people at its Japan centre.

Zensar, an RPG group company, is aiming for Rs 100 crore revenues for the 2008-09 financial year from Japan and is also planning to double the headcount of its Japanese centre. "We have grown 60 per cent year-on-year and just acquired a company in Japan. We are looking at Japan not only as a market but also as a base for innovative work," says Ganesh Natrajan, deputy chairman and MD, Zensar. The company has 45 local Japanese working at their centre along with 250 Indians with close to 70-75 people having bilingual capability.

There have even been cases when Indian companies have shut operations in the region due to culture and language constraints. However, all agree that though it is difficult to enter, once the required comfort level is reached, Japanese companies rarely abandon relationships. "There are three cultures that we need to understand. First is the country culture, followed by the company and then the managerial level culture," says Venkatesh.