INDIAN IT companies are gaining strong foothold in Japanese
market, particularly in last three years they have consolidated
their position considerably. Today the Indian software firms have
greater opportunities to penetrate in the world’s second largest
IT market than a decade ago, so feels Mr. APS Mani, President of
the India IT Club, Japan. The investment climate in Japan is
most attractive and investment-wise, most prefectures across Japan
have attractive schemes for Indian IT companies, he said in an
interview with Amitabha Sen. One of the main issues now
facing the industry, which is not favourable, is the withholding tax
issue which is expected to be resolved in near future.
The purpose of India IT Club itself is to build a bridge between
the two countries in respect of the IT industry. The voice of the IT
club is heard well in the Govt of India side as well it spreads
immediately to the Japanese Govt side. IIC will focus on stronger
relationship in the IT sector in Japan for newer applications,
research and development.
AS: Considering the expanding Japanese IT market, can you
please tell what is the prospect of Indian IT firms and to what
extent Indian companies could penetrate the Jap market?
APS: In the Japanese market, software was perceived earlier
as an extended part of the hardware. Hardware sales people used to
promote software. Only in last few years, the Japanese IT industry
and IT market have started giving special focus on software and
treating it as a separate business segment. Thus Indian software
companies have a much more opportunity to penetrate in the Japanese
market now than a decade ago. TCS is the pioneer to explore in to
Japanese market and they have succeeded to a large extent. They have
a long history in Japan. Language (Japanese language) poses a
problem to many new entrants. This is being overcome by the
excellent education in the language by Indian engineers and sales
force. Thus in the next few years to come, the prospects for Indian
companies in Japanese market are very good.
AS: A JETRO report says that the US companies are mainly
dominating the enterprise application market in Japan and these
companies are Japanese corporations owned by the US software
companies. In software, India today is name to be reckoned with.
Considering this sharp-edge of Indian software industry, do you
think the progress of penetration in the Japanese market is somewhat
APS: US too do not have a long history in Japanese software
market. With the problems mentioned above (clubbing hardware &
software), US companies also had a tough time in penetrating in to
Japanese market. They are slowly succeeding, like for example, IBM,
and that has not in any way made us (Indian companies) to slow down
the penetration. Also, there are few Indian companies who are
expanding their business through their US associates. Similarly,
there is a direct strong penetration into the Japanese software
market by Indian companies. With the Japanese mind being different
from the west, US companies too are having tough time with their
Japanese counterparts. Given the fact that the US companies are
present here for more than two decades in the software industry and
in addition the burst of Japanese economic bubble, the Indian IT
Companies find themselves competitive and not in any way slow to
catch up with the market in software industry.
AS: If to an extent it true, what steps, you feel, Indian
firms should take to correct the situation and come up the ladder?
APS: Branding India IT would be a first step to promote
Indian IT in this market. Embassy of India and India IT Club are
propagating India IT brand in a big way. The visit of Indian Govt
delegation (IT Minister, IT Secretary and others) and NASSCOM
delegation are bringing awareness to the Japanese side the
importance of Indian IT. Also, authorities like JETRO are helping
India in the dissemination of information among Japanese IT oriented
companies. This in itself is a good promotion of Indian IT in Japan.
AS: In an interview with indiaonestop.com, the JETRO chairman
Mr. Osamu Watanabe, Chairman of the Japan External Trade
Organization (JETRO) said India's exports to Japan in IT software
and services came 4th, they account for a mere 3%. There is still
room for potential growth in this area. At present, 50 to 60 IT
companies from India already have offices established in Japan. We
think that through technology developments and joint research
projects for the Japanese market, there are possibilities for
increased investments by Indian IT companies in Japan, Mr. Watanabe
said. Your observation please.
APS: Indian IT companies are gaining strong foothold in
Japanese market. Last three years have seen a strong foothold for
Indian IT companies in Japan. Also, apart from concentrating
operations in Tokyo area, our companies are now spreading their
operations to other cities like, Osaka, Kobe, Kyoto, Nagoya, Gifu,
Sapporo, Hokkaido and other cities. This itself is a good progress
as the cities outside Tokyo pose less competition from other
countries' players and Indian companies can capture the market
slowly in all these areas.
AS: The JETRO chairman claimed that IT investments are
relatively inexpensive, and the investment environment in Japan is
improving (for example, land costs in the metropolitan area have
been falling in the past ten years) so he does not think that high
cost of investment should be a barrier to India's investments in
Japan. If that be so, what measures, you feel, should be taken to
draw greater investment in Japan by Indian IT firms?
APS: Yes, investment climate in Japan is most attractive now
with the falling land prices and economical rent for office premises
as well residences. Indian IT companies now have excellent location
for their offices like in the heart of the city and this is possible
thanks to the slide in land prices and slow economy in this country.
Few of our companies like, TCS, Wipro, Infosys and others have
already invested in large development centres in this country.
Office spaces are already huge taking in view of the possible
expansion of future business. NASSCOM and other Indian agencies are
now interacting with Small and Medium Enterprises. The forthcoming
one-week visit to various prefectures conducted by Embassy of India
along with India IT Club itself is an indirect investment to explore
the market in Japan.
AS: Do you think that the Jap
Govt policy towards foreign
investment in IT sector is good enough for the willing IT companies
to set up ventures here or there are areas which call for Jap
government's immediate attention?
APS: Investment-wise, most prefectures across Japan have
attractive schemes for Indian IT companies. The slow speed is due to
the slowing market pickup outside the Tokyo area. This is being
remedied by Indian IT industry's penetration to cities outside
Tokyo. One of the main issues now facing the industry, which is not
favourable, is the withholding tax issue. Embassy of India,
successive delegations that come to Japan from India both
Governmental and Industrial (FICCI) are all taking up the matter
with Japanese Govt. We are sure that a favourable situation will
come in the near future for the Indian IT in respect of the
withholding tax issue.
AS: Business Process Outsource (BPO) is another issue that is
being talked about at almost every forum of IT industry all over the
globe. How it is being taken by the Jap industry, the IT industry in
APS: BPO is as much in vogue in Japan as in any other
country. Though there were initial resistance and problems in Japan,
it is getting headway and Indian IT industry is gaining momentum in
AS: In longer term perspective, to what extent India IT Club
can help both the Indian and Jap government to build a stronger
relationship in the IT sector, specially in identifying newer and
newer areas of application, research and development etc?
APS: India IT Club formed two years now, is already playing a
prominent part in bridging the gap between the two countries.
Members of the India IT Club are practically all the major Indian IT
companies. All Indian IT companies are automatically members of this
Club and thus the voice of India IT Club is automatically the voice
of the industry. We are having regular meetings to deal with various
problems faced by the industry. Also Focus Group meetings are held
regularly with a dozen of prominent Indian IT company heads
regularly in the presence of Deputy Chief of Mission of the Embassy
of India, Mr. Nanda who is a strong and staunch supporter of Indian
IT sector. Thus the voice of the IT club is heard well in the Govt
of India side as well it spreads immediately to the Japanese Govt
side. It builds a strong relation between the two countries. The
purpose of India IT Club itself is to build a bridge between the two
countries in respect of the IT industry. Indian IT Club is the very
representation of Indian IT industry in Japan and it will focus on
stronger relationship in the IT sector in Japan for newer
applications, research and development.