Unlock Vietnamese-Japanese outsourcing potential

Published on: April 04, 2024
Last updated: April 09, 2024 Read in fullscreen view

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Japan is a great market for software companies, with its economy being the third largest and IT market in the world. Despite its closed business culture, it is quickly warming up to non-Japanese companies, making it an ideal time for startups to move into Japan. Misconceptions surrounding Japanese business culture, such as the importance of business cards and the belief that foreigners will not succeed if they go through a distributor already embedded in Japanese businesses, are often misguided. However, these nuances are just nuances and sometimes obstacles that can be bridged. To succeed in expanding operations to Japan, companies should set expectations with their Japanese teams and reconcile expectations from their offshore team vs. Japan team.

Outsourcing software development allows Japanese companies to optimize costs while accessing a global talent pool, leading to cost savings of up to 30-40%. The Vietnamese edge lies in the cultural synergy between Japan and Vietnam, with the Vietnamese workforce being known for its diligence, meticulousness, and strong work ethic. Additionally, Vietnam's growing technical expertise, particularly in software development, aligns well with Japan's technological needs.

Vietnamese IT firms earned over $2 billion from foreign markets in 2022, with 60% coming from Japan. Japan spends $30 billion on software outsourcing annually, with Vietnamese companies accounting for 6-7% of this. This contributed to Vietnam's $14 billion revenue in 2022, which is growing at 20-40% annually. Vietnam is the second-largest partner of Japan in software and IT services, with nearly 500 Vietnamese businesses supplying IT services to Japanese partners.

The Vietnamese IT services market has grown by 15-20% over the past five years, reflecting the burgeoning technical expertise within the country. Surveys indicate that 60% of Vietnamese IT professionals have proficiency in Japanese, facilitating smoother collaboration. The minimal time difference between Vietnam and Japan allows for real-time collaboration, as noted by 70% of Japanese firms engaged in outsourcing.

IT Services Overview in Japan Market

IT services refer to the application of business and technical expertise to enable organizations in creating, managing, and optimizing information and business processes.
High-level segmentation of the IT services market includes IT consulting and implementation, IT outsourcing, business process outsourcing, and other IT services and support.
The IT services industry serves multiple complementing technologies, including Application Development and Support (ADM), Cloud services, Data and Intelligence, Artificial Intelligence (AI), Intelligence Amplification (IA), Machine Learning (ML), and Cyber Security services.

Challenges

The global and Japanese domestic IT services market is undergoing rapid digital transformation, necessitating faster response to customer IT service requests.
The need for faster response to customer requests, along with domestic constraints, is becoming a challenge.
Japanese companies are increasingly outsourcing IT services due to a lack of skilled human power and technological advances.
Successful offshoring requires identifying challenges, risks, complexities, and nuances, adopting a global mindset, and ensuring transparency and understanding between the Japanese prime company and the sub-contractor/offshoring partner.

Conclusion

In conclusion, the trend towards Vietnamese software outsourcing partners is influenced by a blend of technical, economic, cultural, and geopolitical factors, reflecting the changing contours of the global software development landscape.

To test the waters with early-stage customers in Japan, companies should consider developer-centric and business user-centric software. Developer-centric tools may be easier to sell due to developers being more used to dealing with incomplete support, lack of product localization, a small Japanese community, and little Japanese documentation.

Learn more:

Entering the Japanese Market: Stacking the Deck and Setting Expectations
Japan Market IT Services Outsourcing

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