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Japan report oct_20
- 1. Opportunities for Indian IT industry : Japan EMERGING MARKETS SERIES PRESS CONFERENCE New Delhi, October 20, 2008 Mr. Som Mittal, President, NASSCOM Mr. Ambarish Dasgupta, Partner and Head of Consulting practice, PricewaterhouseCoopers
- 16. Recommendations - Manage client expectations Client expectations What Indian companies offer/ expect Partnership towards a common goal of product development Client-vendor relationship with clearly demarcated scope of work. Project centric approach “ see the larger picture” Trust : Japanese value trust and loyalty above other aspects, especially when they are dealing with ‘outsiders’ Indian vendors view the inadequately defined contracts as potential risk area which also translates in their interactions with the client. “ develop trustworthiness” Value proposition: Technology expertise Value proposition: Low cost services “ target transformational change projects” Help them understand their requirements Look for clearly defined scope of work “ expect long sales cycles and scope changes”
- 21. Questions
Editor's Notes
- US is the biggest market for IT services at around 350-400 Bn USD Followed by Japan, Germany and UK
- It seen as a cost centre. No Designated CIO office. Most CIOs are from Finance/ Admin backgrounds IT is used largely for Fin/Accounts, HR and Purchase automation Vendor/ customer collaboration through IT is not practiced BFSI is the sector which makes strategic use of IT for competitive advantage
- 1- Each Japanese business group has its own internally defined processes which are not to be shared outside the group. Therefore Package products are discouraged over custom built 2- Employee attrition is low: often the person who designs the system also maintains it and troubleshoots. This leads to poor documentation Package products: Increasing acceptance of ERP, SCM, Sales force automation packages
- Keiretsu model: where the supply chain is vertically integrated with interlocking business relationships and shareholdings The top tier works closely helps clients decide on their investment priorities and the roadmap These large system integrators sign contracts with clients as “prime contractors”, and then outsource pieces of work to a number of small and midsize providers who are the “subcontractors” Secondary service providers further break each module and outsource components for development and coding.
- Indians are considered high on technology and domain expertise, better IP protection and better service delivery maturity
- Client companies are today Overdependent on few vendors. 1 They have not maintained documentations, 2 have to rely on “key” personnel in their IT teams, 3 have to seek advise from partner firm for each aspect of IT 4 cannot articulate their own requirements 5 Do not have processed defined for vendor management, project governance and scope management
- High barriers to entry in terms of language & cultural compatibility. Chinese students enrolled in the Japanese universities; After graduation, many of them find employment in Japan, and learn Japanese practices and at the same time develop professional relationships and networks with Japanese managers. These relationships and networks serve as channels for outsourcing work from Japan to China. Indian companies having served global clients struggle to cope with the immature IT project management practices in Japan
- Embedded systems development and Engineering and R&D services are the prospective quick win service offerings for Indian vendors Application development & Maintenance are the next big opportunity, helping Japanese clients move from their legacy COBOL based applications to new age platforms As the Japanese integrate with the global world order and compete globally, there is an increasing willingness to adopt package products over custom development. This offers implementations opportunities for Indian companies.
- Avoid opportunism : Long gestation cycles, importance of trust, Importance of references and endorsements from Japanese clients for selection Establish right value prop: Differentiate from low end chinese vendors. Indian vendors try to sell only the low cost advantage. “Pricing” is a secondary factor for the Japanese Localise, Localise, Localise: Japanese frontend sales team, markewting collateral in Japanese and English, Seek endorsements from Japanese clients. Additionally, Indian companies should also help the Japanese learn the global best practices on project management and governance Infosys and few other companies run programs where they hire Japanese graduates and train and train them on SDLC, Project management etc for 1 year in Bangalore
- Indian companies need to alter their traditional expectations management methods Expect large gestations. 5 person project may still be a 5 person project even after a year. Unlike in US where it can quickly ramp up to 50 in a quarter. Japanese take their own time to test the vendors. However , once you win their trust, you are their to stay. Market billing rates are as attractive as in the US. Indian vendors tend to undercut to get business. Because on undefined contracts and poor scope documents, Japanese prefer the hands on approach where their managers try and control the vendors resources. Issues regarding multiple reporting
- Change in Japan is imperative for them to benefit The whole world is able to cut costs and improve the go to market cycle times because of offshoring. Japanese are unable to exploit and remain uncompetitive.