Japan Market IT Services Outsourcing
Last updated: April 09, 2024 Read in fullscreen view
Recommended for you
- 07 Jul 2024
Top Fintech Companies in Vietnam Driving Innovation Across Digital Banking & Investment 57/133 - 08 Oct 2024 Vietnam: The Rising Star in Global Outsourcing – Trends and Costs for 2025 32/370
- 12 May 2021 The Real Cost Between Outsourcing IT vs In-House: A Quick Comparison 27/454
- 21 Aug 2025 Top 30 Oldest IT Outsourcing Companies in Vietnam 26/125
- 11 Mar 2024 Why You Should Hire Odoo Developers from Vietnam to Customize Your ERP System 25/126
- 24 Nov 2025 Top Blockchain Companies in Vietnam 24/65
- 05 Aug 2025 Why Doesn’t South Korea Outsource Its IT Projects Like Other Developed Countries? 23/111
- 02 Feb 2026 What Is the Total Cost of Web Development for Small & Medium Businesses? 23/39
- 03 Oct 2020 Outsourcing Your MVP Development - Streamlined Solutions for future 23/440
- 22 Mar 2022 8 Mistakes Marketing Agencies or Consulting Firms Make When Outsourcing Web Development 20/358
- 24 Nov 2021 What is the Actual Cost of Hiring Cheap Developers? 19/392
- 03 Dec 2025 IT Outsourcing Solutions Explained: What, How, Why, When 18/40
- 04 Apr 2024 Unlock Vietnamese-Japanese outsourcing potential 18/244
- 21 Oct 2021 Advantages and Disadvantages of IT Outsourcing 17/357
- 15 Oct 2022 Project-based team model for one-off and pilot software development projects 16/806
- 11 Mar 2023 Common Pain Points in Software Development Outsourcing 16/260
- 31 Oct 2025 The True ROI of Software Development Outsourcing for Tech Startups 16/88
- 25 Sep 2025 A Practical Guide to Secure Online Work for Outsourced Teams 15/90
- 14 Dec 2021 The Top 10 Problems with Outsourcing Implementation and How to Solve Them 15/406
- 15 Aug 2021 TIGO Rate Formula - Things the partners should know 15/491
- 10 May 2021 Project Audit and Second Opinion Services 15/257
- 05 Jan 2022 What Outsourcing Engagement Model is Right For You? 15/322
- 01 Sep 2019 Outsourcing Software To Vietnam: Facts, benefits and limitations 14/453
- 09 Jan 2021 How can outsourcing enable business agility? 14/202
- 07 Nov 2024 Outsourcing Crisis Looming: Will Trump's Policies Transform the Global IT Landscape? 14/176
- 16 Oct 2024 Building a Software Outsourcing Startup: Strategy Through Two Canvases 13/38
- 19 Mar 2021 Selective Outsourcing of IT Functions - a new trend in business outsourcing 13/541
- 16 Dec 2021 Why outsource Python development of your project? 13/474
- 12 Jan 2023 Top 10 Trustworthy IT Outsourcing Companies in Vietnam 13/285
- 02 May 2021 Outsourcing Software Development: Avoid 8 Mistakes 12/111
- 09 Sep 2022 Close Collaboration and Communication Can Overcome the Challenges of Distributed Teams 12/194
- 06 Oct 2021 Intellectual property issues with outsourcing software development 12/389
- 01 Mar 2022 Top 5 reasons why outsourcing to Vietnam is a smart move 12/285
- 01 Jan 2024 Software Outsourcing Questions for 2024 11/157
- 03 Nov 2021 7 phases of Odoo Implementation and Development: Can they be outsourced? 11/406
- 01 Jan 2024 Tech Partnerships: Choosing the Right Software Outsourcing Firm in Vietnam 11/181
- 01 Jan 2023 4 New IT Outsourcing Pricing Models to consider in 2023 11/362
- 10 May 2021 What are things you should look for in a good IT outsourcing company? 11/431
- 03 Nov 2022 Top questions and answers you must know before ask for software outsourcing 11/292
- 03 Jan 2023 IT Outsourcing Costs: Is outsourcing really cost-effective? 10/210
- 06 Feb 2026 How Much Does a CPA Cost for a Small Business? 10/16
- 01 Jan 2024 12 reasons for software development outsourcing 10/175
- 21 Oct 2022 Outsourcing Billable Rate 9/270
- 01 Jan 2023 Software Development Outsourcing Trends to Watch Out for in 2023 9/321
- 08 Feb 2022 Software Development: Fixed Cost or Opportunity Cost? 9/468
- 13 Jan 2023 What are the Hourly Rates in Offshore Software Development? 8/242
- 04 Jan 2021 VIETNAM AS A BIG ATTRACTIVE DESTINATION IN THE FIELD OF OUTSOURCING 8/311
- 16 Mar 2021 Outsource Data Engineering Services - TIGO Streamlined Solutions 8/251
- 08 Aug 2021 Why Nearshore Software Development is better than In-House Development? 8/199
- 13 Oct 2021 Why Outsourcing Software Development Services Is Gaining Traction With Non-Technical Leaders? 8/310
- 01 Jan 2023 Top 5 IT outsourcing countries in 2023 7/272
- 02 Mar 2021 Estimate the Cost of Software Development 7/335
- 16 Feb 2026 Education App Development Cost in 2026: Benchmarks and Key Cost Drivers 7/13
- 01 Jun 2025 10 Sustainable & Unique IT Outsourcing Companies in Vietnam 6/79
- 15 Nov 2023 IT Staff Augmentation Types and the Best Choice for Your Business 6/190
- 10 Jan 2024 Facts Chart: Reasons for outsourcing 6/152
- 21 Aug 2022 Forbes: IT Outsourcing Hotspot: Vietnam, A Small But Mighty Powerhouse 6/257
- 10 Mar 2021 The 7 Biggest Mistakes to Avoid Before Outsourcing a Web Development Project 6/237
- 12 Oct 2021 Vietnam outsourcing path - the silk road connecting ASEAN with the developed countries (EU, US, Japan...) 6/302
- 17 Oct 2020 How Outsourcing can Improve Time Management for Better Business 6/270
- 19 Oct 2020 The hidden costs of outsourcing software development 6/449
- 25 Nov 2021 Low-Cost Software Development: Buy Nice or Buy Twice? 6/338
- 28 Oct 2022 Expect the unexpected in 2023 - How Outsourcing Can Help? 6/199
- 01 Oct 2022 Vietnam is a favorite supply of IT outsourcing services to Japan 5/234
- 01 Jan 2023 Why is Vietnam the Top IT Outsourcing Destination of 2023? 5/234
- 17 Jan 2024 What are the benefits and challenges of using multi-sourcing or single-sourcing strategies? 5/187
- 01 Jan 2024 Hiring Tech Talents in Asia: An Overview of Skills, Costs, and Potential 5/162
- 01 Apr 2021 IT Outsourcing to vietnam: Why It Is A Good Choice? 5/292
- 01 Jan 2023 Top Software Development Challenges in 2023 5/298
- 01 May 2023 Streamline Your Business with Outsourcing 5/193
- 01 Jan 2024 What The World Is Flat Means to IT Outsourcing 4/166
- 08 Jan 2024 Outsourcing on an As-Needed Basis 4/158
- 02 Nov 2023 What are the pros and cons of iIT outsourcing? 4/188
- 01 Feb 2023 [InfoWorld] Is your outsourcer agile enough? 4/193
- 15 Aug 2025 Quantum Technology: Global Challenges and Opportunities for Innovators 4/100
- 31 Dec 2021 Outsourcing Software Development to mitigate the impact of COVID-19 2/320
In this article let's understand the overview of the global and Japanese domestic IT services market followed by details specific to the Japanese IT market.
With the speed of advances in digital transformation technologies, the need for faster response to customers’ IT service requests beside domestic constraints is becoming a challenge.
In this article we will focus on offshoring and global IT outsourcing to find out a few most often-asked questions like, how Japanese IT services market is? What are the existing challenges at hand? How to deliver quality to our customers? How is Vietnam as an offshoring and global outsourcing destination? etc.
Traditionally Japanese companies used to emphasize in-house development. The major attention continues towards quality over quantity. But with the advances in the software field, Japan could not adapt at pace like Western countries adapted. Now with technological advances like Digital Transformations, Big Data, Artificial Intelligence, Machine Learning and Cloud and demand from domestic and global customers, Japanese companies have started facing lack of skilled human power. So, the companies started looking for opportunities to outsource IT services work.
To accomplish global delivery, one needs to identify challenges, risks, complexities, nuances. Need to adopt a global mindset and bring agility to be successful in offshoring. A global delivery mindset brings multiple opportunities as well as trade-offs. Top management commitment and directions are vital parts for success of global delivery for any organization. The expectations from both parties, the Japanese prime company (who is outsourcing / offshoring) and the sub-contractor / offshore partner must be very transparent and clearly understood by both.
1. IT services market overview
"IT services refer to the application of business and technical expertise to enable organizations in the creation, management, and optimization of or access to information and business processes."
At high level segmentation of IT services market is as follows:
- IT consulting and implementation,
- IT Outsourcing,
- Business process outsourcing (i.e. Call Center),
- Other IT services and support
2. Japanese IT Services
In this process integration of cyberspace and physical space is being facilitated. Looking at the prospective movement from physical space to cyberspace, the government has started with multiple initiatives like "Society 5.0", "Beyond 5G promotion strategy" which drives the digital transformations.
3. Japan Market Map
The market is divided into professional services, products services in B2B and B2C/C2C. These are some of the key players in IT services in the Japan market. We can group professional services and B2B competing players in three categories: Domestic SI-ers, Foreign MNCs and Big4.
4. Project Formation
Subcontracting in multiple layers is quite common in Japan and you may easily see 3rd or 4th tier subcontracting happening. There are advantages as well as disadvantages for this kind of project formation. However, this is the way the Japanese IT services industry functions. It’s a complete eco-system established and way of business working in Japan. The prime vendor and sub-contractors are selected based on trust and for long term collaboration, partnership.
Prime Vendor (SI-er: System Integrators) acts as the channel or an arm of Japanese corporations for their all-IT related needs. Existence of Prime Vendors is a crucial part of Japanese corporations. Prime Vendor provides all advice and services required by corporates like IT strategies, software adoptions etc.
Overall outsourcing / offshoring model work as follows:
- Project Basis order: when corporates require an IT service/solution, they initiate a customized order to their affiliated SI-er. This is treated as project.
- Prime Vendors mostly have in-house capabilities to provide these IT services/solutions.
- Based on the complexity and external speciality requirement, decision to outsource to sub-contractors will be decided.
- Sub-Contractors based on their specific know-how in software development will take it further in-house/next level delegation.
- Subject to the complexity of the work, there may even be subsequent delegation to downward sub-contractors as outsourcing.
- This is the way the value chain is maintained, and kind of interdependency is established.
- Coherency as main responsibility of the Prime Vendor. They are mainly responsible for all communication, collaboration, coordination to deliver integrated functionally working, secured service/solution to the corporate.
5. Advantages and Disadvantages of Subcontracting
Advantages:
- Low Cost: lesser fixed costs to Prime Vendors.
- Flexibility: to ramp-up/ramp-down resources.
- Multiple Options: flexibility to have multiple options/rates/capabilities.
- Strategic Alliances: possibility to create strategic alliances with different partners.
- Risk Sharing: efficient risk-sharing mechanism.
Disadvantages:
- Consumes a lot of coordination/management/integration efforts.
- Compliance / governance is a challenge for Prime.
- Prime vendors need to comply with complicated sub-con laws.
- Sub-cons cannot grow much independently (leading to Kobanzame tendency)
6. IT Resources
- Structural problem: In Japan, young people population is declining due to the declining year on year due to decline in birth-rate and increase in aging population. Each industry continues to compete for excellent new graduates in the new graduate recruitment market.
- Economical boon vs shortage: Shortage situation is spurring mainly as the continuation of the "seller's market" in the booming economy. Expansion of IT needs and Japan specific structural issues widening this issue of skilled IT human resources.
- Attractiveness vs capability: With global and domestic demand growing, the "attractiveness" of working as an IT human resource in a Japanese company is mainstream. But the question is are the domestic excellent IT human members active enough to play a role at global level? Such capability problems can be behind the lack of "quality" in IT human resources.
7. Summary
In this article we tried to explain about the Japanese IT services market, business structure, challenges for offshoring or global sourcing. Customers are actively trying to find outsourcing opportunities. Global sourcing and global business expansion should be the centre of the strategies for offshoring.
FAQ - Understanding Subcontracting in IT projects
What is sub con?
Subcontracting refers to the practice of bringing in an outside company or individual to perform specific parts of a contract or project. In most cases, a company subcontracts another business to perform a task that cannot be handled internally.
What are the three types of sub contract?
When you are looking at supply chain procurement, there are three types of subcontractor:
- Domestic Subcontractors.
- Nominated Subcontractors.
- Named Subcontractors.
What is the difference between Subcontractor (sub con) and General Contractor (gen con)?
General contractors are individuals or organizations hired by owners to oversee the execution of a project (construction, IT...). Subcontractors are then hired by general contractors to work on specific areas of implementation.
What are the levels of subcontracting?
Subcontractors work at a variety of levels. The primary, or general, contractor works directly with the customer. The primary contractor hires first-tier contractors to perform work on the customer's project. The second-tier contractor is hired by the first-tier contractor to perform specific tasks.
What is the risk of subcontractor?
Financial risk: The subcontractor may experience financial difficulties during the project. Rising input costs and high interest rates have squeezed subcontractor margins. And, with growing uncertainty in the business environment, there is a high risk of subcontractor insolvency.
What is the difference between subcontracting and outsourcing?
Outsourcing is mainly a cost-cutting strategy wherein a business allocates out entire business functions within their firm to a third party on a permanent basis. Subcontracting is a process where a business hires an outside individual or organisation to perform a specialised task that cannot be completed internally.
What is software subcontractor?
A software subcontractor is a professional or a company who is hired by a primary contractor to perform specific tasks related to software development. These tasks can range from coding and testing to system design and project management.
What is the difference between a freelancer and a subcontractor?
Freelancer: a person who works with/for you as an assistant. They're under your supervision, doing what you'd otherwise do, possibly using your equipment. They're there to lighten your load. Subcontractor: a person who works with you doing something outside your area of expertise.
Explore more on these topics
Guest Blogging: The Definitive Guide
Top Trending Topics
Share This
Link copied!
Recently Updated News