Japan: Business Opportunities

Experience of Indian Companies

FICCI JETRO DIPP

Tata Consultancy Services02 November, 2007

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Japan: Key Business Trends in IT

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Global/Japan IT Services Market SIze Global/Japan IT Services Market SIze

IT Services Market Size

Japanese IT Services Spend expected to grow at CAGR of 3.2% from 2005 through 2010

624

81 95

827

-50

50

150

250

350

450

550

650

750

850

Worldwide Market Japan

(in

US

D B

illio

ns

)

2005

2010

Source: Gartner 2005

Worldwide IT Services market is expected to grow at a healthy Rate of 5-6% with Japan keeping its momentum at 3-4% CAGR between 2005 and 2010

13% of Worldwi

de IT Market

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Japanese Outsourcing Market

Market size is $32B - Manufacturing and Financial Services companies expected to continue leading the outsourcing bandwagon

8

2

8

4

1

2

0.3 2

5

1 1

10

2

10

6

1

2

0.3 2

5

2

1

02468

1012

Man

ufact

urin

gTra

nspor

tatio

n

Finan

cial S

ervic

esSer

vice

sHeal

thca

reReta

il Tra

deEdu

catio

n

Comm

unica

tions

Gov

ernm

ent

Whol

esale

Tra

deUtil

ities

(in

US

D B

illi

on

s)

2005 2010

Source: Gartner 2005

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Japan Offshoring DestinationsChina and India are preferred destinations for Japan offshoring Offshore volumes are likely to reach $5B by Year 2010

Japan Offshoring = $1.4B

YoY +40%China - $1.1B

YoY +43%

India - $0.29B

YoY +24%Other APAC - $0.03B

Embedded Appl.Dev.

100%

Source: Gartner 2006, TCS GCP Research Desk

TP, Others5%

Enterprise Appl. Dev.

65%

Embedded Appl. Dev.

30%

Transaction Processing

20%

Enterprise Appl. Dev.

20%

Embedded Appl. Dev.

60%

Offshoring - Current Growth Engines

• Embedded Appl. Dev• Enterprise Appl. Dev.

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Japan Offshoring Trends across Services segmentInfrastructure operations likely to be the next offshoring

growth engine

High

High

Offshoring Maturity

(History Adoption)

Low

LowAffinity

(Language – Culture - Knowledge)

CallCenter

App Dev& Maint

PackageImplementation

BPO

Appl.Mgmt

Infrastructure Operations

TP

NegativePromising

Positive

EmbeddedR&D

QA

Note: Size of the circle indicates market size

Source: Gartner, 2006

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Key Emerging Technology Trends

Key emerging technology trends are driving opportunities for enterprises to gain competitive advantage

Service Oriented

Architecture (SOA)

Service Oriented

Architecture (SOA)

• Today, more than 70% of large enterprises and 50% of SMBs adopt some form of SOA in their organizations

• By 2008, SOA will provide the basis for 70 percent of new development projects

Infrastructure VirtualizationInfrastructure Virtualization

• Its use is well under way in financial services and in pharmaceutical firms

Web 2.0 and SAAS

Web 2.0 and SAAS

Open SourceOpen Source• Through 2010, open-source products will account for 10 percent of the overall software portfolio in Global 2000 companies. This catalyst will restructure the industry, producing higher-quality software at lower cost.

• The intent of SaaS (Software as a Service) is to deliver a service that has the attributes of an application utility (on-demand and one-to-many). It helps clients forgo customization for speed to implementation, agility and greater control of ongoing costs

RFIDRFID• RFID will enter broad use in business processes during the next 20 years because of continuous reductions in cost, improvements in performance and the development of standards

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Experience of TCS in Japan

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Everyone agrees that …

India* Brilliant SW Engineers* Among Developing World’s Largest Market

Global “Win-Win” PartnerIndia (SW) + Japan (HW)

Japan * Need for SW Cost Reduction* Strong in HW

* Language, Culture* Business Rules * Requirements, Contracts* Time, Distance etc.

Constraints

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Source: Gartner 2006 (CIO Survey of 550 Organizations in Japan)

• 70-80% of IT budget spent on Operating Expense

• High Cost Structure – Low ROI on projects

• Skills Shortage – Severe Supply-Demand gap

• Lack of Internal Project Management Skills

• Disintegrated IT – Too many isolated applications

Japan CIO Challenges

Optimizing Operational costs and investing in Business Transformation programs are key focus areas of Japan CIO’s

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Challenges faces by Indian IT Industry in JapanJapanese projects tend to pose special challenges to IT project managers primarily due to:

Cultural Gap - Different business etiquettes, long working hours, process of collective

decision making leads to delay

Communication – Understanding what is NOT told in words, shortage of bilingual

technical persons

Unclear Scope – the initial statement of requirements from customers is not adequate,

scope tends to increase as the project continues.

Changing Requirements – requirements do not get finalized till the very end, some new

requirements are found during UAT

Ambiguous contracts (warranty clause, work locations, etc..) – typical Japanese

contracts have lot of implicit assumptions

Language Dependency – Documentation, testing, integration, change in DB, UI

Maturity of Onsite-Offshore Model – most Japanese customers are not familiar or

comfortable with the onsite offshore model

Extended UAT (High expectation of quality) – it is quite usual to have multiple rounds

even at UAT

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Learning: Do it differently – Example of modified SDLC

Customized Software Development Life Cycle for Japan

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TCS Network Delivery Model for Japan

J-ODCHub,Kolkata

Yokohama

Shanghai

Pune

Bangalore

JapanCustomers

J-ODCSatellite Sites

J-ODCSatellite Sites

• Centralized Japan Delivery Organization• PMO – Planning and Key Initiatives• Nihongo KM Portal• Language Training/ Cultural Initiatives• Japan Delivery Training

Single Japan Delivery Owner

Better encapsulation of Japan specific learnings - leading to improved Service Delivery & Customer Satisfaction

Better encapsulation of Japan specific learnings - leading to improved Service Delivery & Customer Satisfaction

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TCS Japan – An Overview

Setup Operations in 1987 – 1st Indian IT Services firm

Near-shore facility setup in 2002 at Yokohama

Currently 1600 associates serving Japanese clients,

including 300+ associates onsite in Japan 200+ Bilingual associates (English & Japanese),

including 100+ Native Japanese

J-ODC (Japan Offshore Development Center) Hub at

Kolkata, India satellite sites at Bangalore, Pune,

Hangzhou, Shanghai (China)

Customers include leading Investment Banks,

Automotive major, Manufacturing and Insurance

Corporations.

Enhancing value for Japanese Corporations through Global Network Delivery ModelTM and Global Best Practices customized for Local needs

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BPO• Back Office Support• Engg, DB Services• Clinical data management,

statistical analysis

TCS Products• Financial Solutions• Insurance,• Manufacturing• IT Productivity Tools

Consulting• IT Consulting• Business Consulting• Quality Consulting

Business Intelligence• Data Warehousing• Enterprise Application Integration• Knowledge Management

Engineering & Industrial Services

• Product & Process Engineering• Embedded Systems• Plant Automation Services• Enterprise Asset Management

Enterprise Solutions• ERP, CRM, SCM• Mobile Computing, eCommerce• eLearning

Infrastructure Services• Assess (Consolidation, ITIL,

ESM, Security…)• Manage (DC Facility, DB Services,

Middleware, Server, Network, Telecom, Helpdesk Services…)

• Build, Migration/ Upgrade, ESM

Application Development, Maintenance & Assurance

• Application Development• Maintenance & Support• Migration/ Re-Engineering• Testing & Performance Engg.

ERP

CRM

SCM

TCS Japan - Our Services

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Talent Management in TCS for Japan• Talent Retention & Experience sharing

• Effective Recruitment & Training– Academic Japanization Program– Hiring from Japanese & American Universities– Japanese Language, Business, Culture training

• Global Workforce– 23% Onsite associates Japanese– Dedicated Japanese staff at J-ODC, Kolkata

• Up-skilling– Program Management

– Domain Competencies

– Certification (including JLPT & JETRO)

• Structured Leadership Development– Customized Project Leaders Training Program for Japan market

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Arigato Gozaimasu Thank You