Offshore IT Outsourcing: The Japanese Perspective

1
Offshore IT Outsourcing The Japanese
Perspective
WITSA Public Policy Meeting Hanoi,
Vietnam November 26, 2003
2
Trends in Japanese Offshore Outsourcing

• Japan is increasing its offshore efforts
• Sustained competitive pressure from international
  companies continues to drive outsourcing efforts
• Our most significant outsource destinations
  remain China, Korea and India
• The bulk of work being outsourced is made up of
  labor intense downstream design and coding for
  software development projects
• We still have yet to see significant offshore
  outsourcing of back office functions

3
The Main Challenges

• Although the market for offshore outsourcing is
  continuing to expand, several main issues impede
  its pace
• Japan is hampered by a shortage of experienced
  CIO-level professionals, especially in
  government. Many projects start without
  appropriate prior consultation work, leading to
  specifications changing during the course of the
  project.
• Linguistic problems often arise, and translation
  adds additional costs and complications.
• Differences in business culture, especially
  surrounding contract interpretation.
• Difficulties in foreign engineers obtaining work
  visas.

4
Government and Industry Response

• Though facing many challenges, both government
  and industry are strongly behind efforts to
  increase offshore outsourcing
• Driven by the desire to decrease infrastructure
  TCO in high-priced Japan, industry groups are
  pushing hard to systemize their efforts and bring
  economies of scale to utilize foreign outsourcing
  resources.
• Smaller domestic IT services companies continue
  to be unable to take advantage of the cost
  savings from offshore outsourcing, so still must
  team up with larger companies, adding a layer of
  cost.
• Led by METI, the Japanese government is taking
  steps to increase the overall IT educational
  infrastructure, particularly in project
  management, to provide the skills in Japan
  necessary to take advantage of increased
  outsourcing.
• Due to the high demand for bilingual engineers in
  offshore countries, many companies have to deal
  with a high rate of employee attrition. Besides
  the obvious disruptions this causes to projects,
  theft of intellectual property also becomes a
  concern.

5
Future Vision

• Japan feels that preserving a free and unfettered
  atmosphere for offshore outsourcing is essential
  for strengthening both the domestic and regional
  ICT industry.
• In order to strengthen competitiveness and reduce
  costs, offshore outsourcing will continue to
  increase in importance. Gradual utilization of
  both foreign professionals for high-level
  consultation and peripheral service BPO will
  undoubtedly increase.
• Outsourcing to less developed countries will help
  speed skills transfer and strengthen the Asian
  region as a whole.
• Building upon our experiences in offshore
  outsourcing of manufacturing, Japan feels that
  the overall benefits increased offshore
  outsourcing for our economy will outweigh any
  temporary need for workforce restructuring.

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Thank you for your time
Mark Schikowsky Manager, International Argo 21
Corporation mark.s_at_argo21.co.jp