Having burnt fingers due to high exposure in the US and UK markets, Indian IT sector sees huge opportunity emerging in Japan. Currently, Japan contributes a mere 2% to the total revenues of the Indian IT sector at $1.1 billion. The total off-shoring IT market size of the country is around $10.8 billion. That leaves a lot of room for growth for the Indian IT players considering that India is the second largest outsourcer for Japan after China, which has a 50% share of the market.
?Japan is the second largest country in economy and is highly dependent on technology. With shortage of technical skills and an urgent need for business transformation, Japan would be a large market,? said Som Mittal, president, Nasscom, while releasing a report on Japan in association with PricewaterhouseCoopers (PwC).
The industry body is also in the process of setting up a desk in Japan, which will facilitate greater IT-related business between the two countries. The office is expected to be operational by the year-end. Though, most of the top Indian companies are already present in Japan, language and cultural issues are some of the biggest challenges faced by the companies.
The fact that the Japanese way of doing business is different from that in the US and the UK also acts as a spanner in the aspirations of Indian IT players. ?Indian companies must change the mindset, and move from being transactional to transformational in their approach, and be ready to invest in strong relationships upfront,? said Ambarish Dasgupta, partner and head of consulting practice, PwC.
He added that the alternative markets to the US and the UK, like Japan, are very relationship focused. ?The prospects expect the partners to prove themselves in a relationship, building trust and being a trusted advisor rather than a vendor selling products and services,? he said.
Currently, around 90% of the Indian IT revenues come from the US and the UK. Mittal said that though Japan is not an immediate solution to the problems in the US and the UK markets, the country could contribute 5% to its revenues in the next 5-7 years. He added that servicing the Japanese market by setting up centres in China is one of the ways to make a footprint in the untapped market.
Japan?s total IT services market is to the tune of $108 billion of which off-shoring is limited to 8-10% of the total market. The country is also amongst the lowest spenders in IT with only 1-1.5% of their budgets going towards IT as compared to 3.5-4% in the US.