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 slow?

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 particular.

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 this regard.

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.