Japanese S/W developers - outsourcing to China, India
Japanese S/W developers - outsourcing to China, India
Outsourcing to keep up
Terrie Lloyd
July 31, 2007
Recently, NEC and Fujitsu announced that they each plan to increase the number of foreign software developers they employ to more than 10,000 people over the next three years. For NEC, this will mean doubling its foreign workforce, adding 3,000 people to the 4,000 already in China, another 1,000 people in India, and more in the Philippines and Vietnam. For Fujitsu, it means increasing its China workforce from 1,000 to 2,000 engineers, and tripling its Indian staff to 10,000.
These are both significant increases, and obviously comprise a major trend, following as they do a number of other companies such as Hitachi and Matsushita who have already this year announced ambitious off-shoring targets. The impetus to suddenly go global with their coreworkforces is the same, though — a drastic shortage of IT engineers in Japan, and the increasing demand for smarter consumer electronics products and services infrastructure.
Although there are about 700,000 qualified IT engineers in Japan, according to METI only 190,000 — less than 1/3 — are software developers. The number of new software engineering graduates coming out of Japanese universities each year numbers just 20,000, creating a current needs gap of more than 90,000 positions. In contrast, India graduates 230,000 IT people a year and has more than 1.6 million software engineers — not including the tens of thousands working in the U.S. and elsewhere around the world.
Compared to Western SI firms, the Japanese are well behind in off-shoring their workforces, although they have been experimenting with it for quite some time. Among their foreign counterparts, IBM already employs 53,000 engineers in India, and Accenture has around 30,000.
So why are Japanese companies so behind the curve?
My take is that the problem is three-fold: 1) an increasing requirement for smart devices, 2) global competitiveness forcing Japan as a nation to implement proper infrastructure (ranging from e-government to Suicadebit cards), and 3) language and culture. Let's look at these points a bit closer.
According to a recent article in the Nikkei, the level of software now appearing in HD-DVD video recorders is around twice as complex and costly to develop as it was in earlier generation devices. Further, METI says that 70% of the cost of developing a new cell phone model these days is due to software complexity. This pace of increasing sophistication is impacting production schedules for factories turning outthe hardware, and thus is impacting companies across the board. Indeed, both NEC and Fujitsu have said that cell phone development was a major motivation for them to expand their engineering teams overseas. Quite simply, companies are finding out that the software component can't be ignored any longer.
Global competitiveness is another deciding factor pushing Japanese firms to get IT help abroad. In the consumer electronics sector, although the Japanese have long been manufacturing hardware off-shore, the costs that can be coaxed out of the system are now being matched by competing firms from other nations who are using the samemanufacturing centers. Although there is always another lower cost destination (e.g., Vietnam), the ability to compete on lower manufacturing costs alone is starting to disappear. The new frontier now is improving usability and functionality.
The problem for Japanese firms, though is that they have traditionally hard-coded functionality into their devices, with drivers servicing all the buttons and flashing lights. But with the lowered costs of display screens and the appearance of superior functionality from competitors(think Apple's iPod and iPhone), Japanese firms are now being forced to use standard operating systems on these devices and write proper applications to drive them. But with a shortage of such people, off-shoring is the only quick answer.
Additionally, on an infrastructure level, Japan is going through a major transformation in computer systems — all of which need substantial programming. Although you may have already taken it for granted, the move by JR and various other transportation operators in March this year to create a single commuter card (Suica/Pasmo) has been a huge achievement in software compatibility and data interchange. Then there is Seven-eleven's new Nanaco e-money system, which was rolled out to 11,750 stores in April and already in June has recorded an amazing 30 million transactions — making it the most widely used e-moneysystem in Japan today. Big complex systems like these need global-class architecting and rigorous quality control techniques, all of which India is well known for.
Then there is language and culture. Ah, yes, reader already know my take on what I think of Japanese companies' ability in this area. If there was ever such a basic and obvious reason holding up the development of a nation — this would be it. While there are indeed truly multinational companies, such as Sony and Fujitsu, the vast majority are not able to integrate their local R&D teams and marketing people with those overseas. Just look at the cell phone debacle in Europe and the subsequent loss of Japanese leadership to Samsung and Nokia to see the extent of this problem.
At the core of this inability to operate globally is the lack of bilingual engineers who can interface Japan client specifications with the foreign development teams. Not only is the skill-set hard to fill, but the conditions that such people have to work under are also really tough. The work typically involves long hours and lots of cultural friction.
By virtue of the need for accurate communication, it also requires someone who is really smart. However, smart people don't want to work in a cultural pressure cooker for peanuts. And as a result, the turn-over for project interfacing people is high.
Japanese companies trying off-shoring need to realize that just as you protect your key performers in other parts of the company, so too, these interface people are worth rewarding well. Further, these positions should be held up to other employees as being desirable, so as to create future supply from within to fill them. Instead, sinceoff-shoring is usually intended to reduce costs, typically everyone involved in the project finds themselves getting squeezed financially. For example, recently I interviewed an older engineer who, upon agreeing to move to China, suddenly found his salary being "normalized" to match the living standards in that country.
One way to deal with the shortage and keep costs down is to employ foreigners with Japanese skills. Increasingly, in Dalian (China) and Pune (India), such people are starting to appear. I know of a number of companies and schools in Pune, for example, turning out hundreds of Japanese-speaking engineers. From this base, they can be brought to Japan and their skills further polished. But even after 3-4 years of such programs being in place, we're still only talking hundreds, not thousands of bilingual engineers. So one wonders where NEC and Fujitsu are going to get their language people from.
Private recruiting companies such as Recruit, Caplan, and Softbridge Solutions, are hoping to be part of the solution. Last year Recruit started a web site for companies wanting to recruit foreign students working part-time in and around Tokyo. According to the Justice Ministry, the number of foreigners either studying in college or technical trainingwas about 180,000 in 2004, and is expected to hit 1.2 million by 2015. Japanese firms are certainly a lot more willing to take on foreign employee than they were. A recent survey by online recruiting firm DIP Corporation found that about 40% of the companies polled had a favorable view of hiring foreigners.
http://tinyurl.com/2twqdx
Outsourcing to keep up
Terrie Lloyd
July 31, 2007
Recently, NEC and Fujitsu announced that they each plan to increase the number of foreign software developers they employ to more than 10,000 people over the next three years. For NEC, this will mean doubling its foreign workforce, adding 3,000 people to the 4,000 already in China, another 1,000 people in India, and more in the Philippines and Vietnam. For Fujitsu, it means increasing its China workforce from 1,000 to 2,000 engineers, and tripling its Indian staff to 10,000.
These are both significant increases, and obviously comprise a major trend, following as they do a number of other companies such as Hitachi and Matsushita who have already this year announced ambitious off-shoring targets. The impetus to suddenly go global with their coreworkforces is the same, though — a drastic shortage of IT engineers in Japan, and the increasing demand for smarter consumer electronics products and services infrastructure.
Although there are about 700,000 qualified IT engineers in Japan, according to METI only 190,000 — less than 1/3 — are software developers. The number of new software engineering graduates coming out of Japanese universities each year numbers just 20,000, creating a current needs gap of more than 90,000 positions. In contrast, India graduates 230,000 IT people a year and has more than 1.6 million software engineers — not including the tens of thousands working in the U.S. and elsewhere around the world.
Compared to Western SI firms, the Japanese are well behind in off-shoring their workforces, although they have been experimenting with it for quite some time. Among their foreign counterparts, IBM already employs 53,000 engineers in India, and Accenture has around 30,000.
So why are Japanese companies so behind the curve?
My take is that the problem is three-fold: 1) an increasing requirement for smart devices, 2) global competitiveness forcing Japan as a nation to implement proper infrastructure (ranging from e-government to Suicadebit cards), and 3) language and culture. Let's look at these points a bit closer.
According to a recent article in the Nikkei, the level of software now appearing in HD-DVD video recorders is around twice as complex and costly to develop as it was in earlier generation devices. Further, METI says that 70% of the cost of developing a new cell phone model these days is due to software complexity. This pace of increasing sophistication is impacting production schedules for factories turning outthe hardware, and thus is impacting companies across the board. Indeed, both NEC and Fujitsu have said that cell phone development was a major motivation for them to expand their engineering teams overseas. Quite simply, companies are finding out that the software component can't be ignored any longer.
Global competitiveness is another deciding factor pushing Japanese firms to get IT help abroad. In the consumer electronics sector, although the Japanese have long been manufacturing hardware off-shore, the costs that can be coaxed out of the system are now being matched by competing firms from other nations who are using the samemanufacturing centers. Although there is always another lower cost destination (e.g., Vietnam), the ability to compete on lower manufacturing costs alone is starting to disappear. The new frontier now is improving usability and functionality.
The problem for Japanese firms, though is that they have traditionally hard-coded functionality into their devices, with drivers servicing all the buttons and flashing lights. But with the lowered costs of display screens and the appearance of superior functionality from competitors(think Apple's iPod and iPhone), Japanese firms are now being forced to use standard operating systems on these devices and write proper applications to drive them. But with a shortage of such people, off-shoring is the only quick answer.
Additionally, on an infrastructure level, Japan is going through a major transformation in computer systems — all of which need substantial programming. Although you may have already taken it for granted, the move by JR and various other transportation operators in March this year to create a single commuter card (Suica/Pasmo) has been a huge achievement in software compatibility and data interchange. Then there is Seven-eleven's new Nanaco e-money system, which was rolled out to 11,750 stores in April and already in June has recorded an amazing 30 million transactions — making it the most widely used e-moneysystem in Japan today. Big complex systems like these need global-class architecting and rigorous quality control techniques, all of which India is well known for.
Then there is language and culture. Ah, yes, reader already know my take on what I think of Japanese companies' ability in this area. If there was ever such a basic and obvious reason holding up the development of a nation — this would be it. While there are indeed truly multinational companies, such as Sony and Fujitsu, the vast majority are not able to integrate their local R&D teams and marketing people with those overseas. Just look at the cell phone debacle in Europe and the subsequent loss of Japanese leadership to Samsung and Nokia to see the extent of this problem.
At the core of this inability to operate globally is the lack of bilingual engineers who can interface Japan client specifications with the foreign development teams. Not only is the skill-set hard to fill, but the conditions that such people have to work under are also really tough. The work typically involves long hours and lots of cultural friction.
By virtue of the need for accurate communication, it also requires someone who is really smart. However, smart people don't want to work in a cultural pressure cooker for peanuts. And as a result, the turn-over for project interfacing people is high.
Japanese companies trying off-shoring need to realize that just as you protect your key performers in other parts of the company, so too, these interface people are worth rewarding well. Further, these positions should be held up to other employees as being desirable, so as to create future supply from within to fill them. Instead, sinceoff-shoring is usually intended to reduce costs, typically everyone involved in the project finds themselves getting squeezed financially. For example, recently I interviewed an older engineer who, upon agreeing to move to China, suddenly found his salary being "normalized" to match the living standards in that country.
One way to deal with the shortage and keep costs down is to employ foreigners with Japanese skills. Increasingly, in Dalian (China) and Pune (India), such people are starting to appear. I know of a number of companies and schools in Pune, for example, turning out hundreds of Japanese-speaking engineers. From this base, they can be brought to Japan and their skills further polished. But even after 3-4 years of such programs being in place, we're still only talking hundreds, not thousands of bilingual engineers. So one wonders where NEC and Fujitsu are going to get their language people from.
Private recruiting companies such as Recruit, Caplan, and Softbridge Solutions, are hoping to be part of the solution. Last year Recruit started a web site for companies wanting to recruit foreign students working part-time in and around Tokyo. According to the Justice Ministry, the number of foreigners either studying in college or technical trainingwas about 180,000 in 2004, and is expected to hit 1.2 million by 2015. Japanese firms are certainly a lot more willing to take on foreign employee than they were. A recent survey by online recruiting firm DIP Corporation found that about 40% of the companies polled had a favorable view of hiring foreigners.
http://tinyurl.com/2twqdx
bin66 - 1. Aug, 00:20
