IT Offshore: Why Offshore to Japan

2024/1/29 (Update:2024/1/29)

IT Offshore: Why Offshore to Japan

Japan is increasingly attracting companies who wish to reduce costs by offshoring their business operations. While the world’s No. 3 economy has not been considered a destination for offshoring in the past, this is changing thanks to Japan’s comparatively low salaries and reputation for efficient, high-quality services.

While Japan’s technical prowess is well known around the world, the fact that its salaries are significantly lower than in many other developed countries is not. However, according to the Nikkei Business Review, in real terms, Japanese salaries in 2022, were 40% lower than they were in 2012. With the fall in the yen in the last 12 months, this difference has widened. The result is that for many countries, Japan is now seen as a low-cost labor market.

1. What is Offshoring?

Offshoring refers to the outsourcing of business to specialized overseas firms. It is particularly common in the IT industry and is widely used in areas such as software development, application maintenance, infrastructure management, data entry, and customer support.

2. Drivers for IT Offshoring

  • Cost reduction:
    • Cost savings are primarily realized by shifting business activities to locations where labor costs are lower. However, savings can also be achieved in terms of eliminating certain recruitment, HR management and training expenses.
  • Access to skills and resources:
    • Many areas of the world are experiencing a shortage of skilled workers. Offshoring allows businesses to access alternative talent pools, facilitating their ability to smoothly maintain and expand business operations.
  • Flexibility and Scalability:
    • Offshoring can give businesses the flexibility they need to respond to changing market conditions, allowing them to both scale up and scale down quickly.
  • Risk Diversification:
    • While all these drivers help to reduce a business’s exposure to risk, there is also the security of having operations in different locations. This mitigates the danger of disruption from local or regional events, such as natural disasters and geopolitical issues.
    • IT offshoring can become an important part of a company’s strategy for staying competitive in the global marketplace and keeping pace with the rapid evolution of technology.

3. Why Offshore to Japan

  1. Technology and Expertise:
    • Japan is one of the world’s most technologically developed countries with advanced infrastructure and know-how. Stable, high-speed communication networks provide smooth uninterrupted operations, while Japanese IT engineers are highly-skilled and have extensive knowledge.
  2. Cultural Understanding and Communication:
    • Good communication and cultural understanding are essential for any project’s success, particularly working across borders. Japanese offshore partners provide professionals with high-level language, interpersonal and cross-cultural abilities.
  3. Business development as well as operational efficiency
    • For companies that already have a business in Japan or have Japanese customers who need support overseas, offshoring to Japan enables them to outsource their customer-facing operations such as sales and support.
    • This is much more efficient and cost effective than finding Japanese-English IT staff in their domestic labor. Also, by using a local partner in Japan, on-site support can also be provided.
  4. Sustainability and CSR considerations:
    • Sustainability and corporate social responsibility (CSR) are becoming increasingly important considerations when companies choose a service provider. The SDG Report ranks Japan the highest among the Asia-Pacific countries for environmental, social and infrastructural sustainability, and Japanese companies place a lot of importance on social and environmental activities, as such they are a good choice for companies wishing to offshore and boost their own CSR.
    • When these factors are considered in totality, one can see why Japan is becoming the offshore destination of choice. It is not simply lower salaries that make Japanese offshore partners a superior choice to those in other countries; it’s also the technical capability, reliability, cultural understanding, and social conscience that they provide.

4. Future Prospects for Offshoring

Offshore solutions are becoming an important part of the IT industry. Cost reductions, access to international expertise, and the ability to respond to international market changes and technological advances are driving more and more companies to employ offshore solutions.

While it is true that Japan is not the cheapest option available, the balance between cost and the quality of service, ease of communication, and sustainability mean it is the best choice for many businesses.

5. ISF NET’s Global Offshore Solutions

ISF NET has been actively recruiting bilingual people since its establishment in 2000. We currently employ 300 bilingual engineers who are able to provide offshoring solutions for a wide range of business processes.

Please contact us for a free offshoring consultation.

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