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Japan’s own Indian tech boom

Foreign companies make presence felt in growing IT sector

by Trevor Clarke

Seven years ago, Harikrishna Bhat thought it was about time he did a little something for his country.

Having arrived from India some 26 years ago and worked for local companies for over a decade, Bhat decided to join one of a growing number of Indian IT companies fashioning a strong presence in Japan.

Now vice president of Wipro Japan, Bhat says the transition was natural.

“I wanted to work for India. We are really proud of being number one in the world in IT.”

However, Bhat is not the only Indian venturing into the Japanese IT industry. In the past five years, the number of Indian IT companies and engineers operating here has skyrocketed.

Although official statistics are hard to come by, few in the industry doubt Japan is in the midst of an Indian IT boom.

The Ministry of Foreign Affairs puts the number of Indians in Japan at 16,988 (as of December 2005), and estimates suggest that some 10,000 of these are currently working in the IT sector.

“When I joined (Wipro) four years ago, we had less than 100 engineers in Japan. Today we have more than 350,” says Bhat. Other companies report similar growth in the number of engineers on their payrolls.

Relative newcomer Naga Anjaneya Kumar, a systems analyst at Satyam, has observed a similar swell in labor.

“When I came here (a year ago), even in my office I used to see very few Indians. Around that time we had about 100 people. Now we have 300 plus.”

The opportunity to help Japanese companies — which are traditionally slow to change — is one reason Kumar has decided to stay.

“Now these companies have started seeing the potential saving of outsourcing services,” he says. “Companies are now really exploring India.”

Although the U.S. and Europe are still first choice for many Indian IT specialists, Japan is increasingly becoming a popular destination for companies and individuals alike.

Fidel Technologies president Sunil Kulkarni believes this is due to Indian IT companies’ broadening their horizons.

“After 9/11, many Indian companies were wiped out basically because of dependence on the U.S. economy,” he says. “So, for the first time, the Indian industry realized we have to hedge.”

In the last few years the influential Indian IT body NASSCOM has also made three missions to Japan in order to boost trade.

The resulting Indian expansion is conspicuous. “I think there were about 10 or so companies five or six years back. In the last four or five years, since 9/11, there has been a dramatic increase,” Kulkarni says.

Now roughly 100 Indian companies operate in Japan and they have started to make their mark.

The Indian share of Japan’s $200 billion IT market has quickly grown to about four percent and most predict that this, along with the number of engineers working here, will continue to increase.

“I think in the next five years, there will be a continued increase in the number of Indian engineers,” Kulkarni says. “Both sides have reciprocated really well. I think historically there has been friendship between India and Japan.”

Indian IT Club director of strategy Harsh Obrai, who first came to Japan six years ago because of the IT boom in India, believes medium-size companies constitute the biggest growth area.

Obrai, however, takes a different view as to why it has taken Indian IT companies, and the large numbers of associated engineers, so long to make an impact in Japan.

Generally it takes a long time to achieve a return on initial investments in Japan so Indian companies had been hesitant to take the first step and instead looked to other markets, particularly the U.S.

But companies are increasingly willing to establish strong roots. This, combined with the local industry transformation to “solution provision” rather than system integration (providing hardware and software as a package), has created the current favorable conditions.

“This transformation happened in Japan a bit late compared to other parts of the world. That is why Indians are now finding their way in,” Obrai says.

But due to the difficulty of developing relationships quickly and the perceived aversion to change within many Japanese companies, Obrai predicts many Indian IT companies will take the M&A path in future to further their interests. “Such news you will definitely hear in 2007,” he claims.

For individuals, Obrai points to the economy, social climate and infrastructure as reasons Japan is a viable option.

“Japan does give you a level playing ground,” he believes.

Satyam’s Arun Kulkarni, who first came to Japan in 1995, agrees with this sentiment, particularly of Japanese society today.

Kulkarni notes that the IT boom has provided many Indian residents with benefits and more reasons to seriously consider Japan as a long-term option, though “people back in India still prefer Europe and America,” Kulkarni says.

However, he believes the warm reception in Japan, combined with other social developments such as the recent building of two Indian schools, will lead to more Indians staying here.

“One of the reasons why I might want to continue here is that we now have Indian schools in Japan,” he says. “One of the problems we were facing earlier was education. Now the life is easier, we can continue here.”

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