Japan set to be Indian IT's next big Market

With the economic meltdown in US the Indian IT companies are suffering a lot due to the loss of the clients. The share of financial sector as the client percentage in the Indian IT sector is about 1/3rd. The crisis has made it essential to the Indian IT companies to look beyond US, Europe too being in the financial crunch Japan looks to be good market.

The Indian IT exports to Japan stand at a mere 4 2 billion as of now. With a huge market availability due to the opportunities in the market, it also comes up with the threats that the Indian IT companies have to face.



Opportunities:

1. Second biggest economy:Japan is the worlds second biggest economy after US. Japans economy is highly technology dependent, giving a good chance for the companies to develop the market.
2. Application Development: Japan has low overall IT spending with spend/sales ratio being around 1-1.5 per cent for most industries as compared to around 3.5- 4 per cent in the US. BFSI and manufacturing are the highest spenders amongst all industries. Embedded systems development and engineering and R&D services are the prospective quick win service offerings for Indian vendors. Application development and maintenance are the next big opportunities.
3. Application implementation : Japanese companies are still working on the legacy systems so the Indian IT companies can help them implement new applications like SAP, Finnacle.
4. Shortage of Human resources: Japanese population is fast aging creating a shortage in the manpower, this is forcing companies to look out for alternatives in the emerging markets.

Challenges:

1. China:China is the biggest off shoring partner of japan. China has an advantage of having the cultural similarity with japan.But recently their have been problems due to off shoring to China.
2. Keiretsu model: The Japanese service industry is based on the keiretsu model, where in the supply chain in vertically integrated. The Oligopolistic control on the vendors and clients is high in the japanese IT sector.

Japan should be seen as along term partner and investment and not as the temporary solution to the present economic crisis in the west.