Japan Firms Outsourcing IT Work Amid Downturn

17 December 2008
Nikkei Report

TOKYO (Nikkei)--Amid the economic downturn, increasing numbers of Japanese companies are shipping information technology work overseas, attracted by the promise of saving money while still receiving quality service.

Partly as a result of this, sales at Japan's IT companies rose only 0.3% year on year in the July-September quarter, sharply down from the previous quarter's 5% increase.

Many Japanese firms are seeking out value for their IT spending, and one of the most popular means of doing so is to locate call centers and other IT-related facilities overseas.

In Dalian, China, a call center established by Hewlett-Packard Co. of the U.S. provides technical support to more than 10 Japanese corporate clients that use HP computers.

The call center's operating hours are set to Japan Standard Time, magazine racks offer access to Japanese reading material, and the Chinese personnel speak fluent Japanese.

"We also impart upon our staff an understanding of Japanese culture," said one executive officer in Hewlett Packard's Japanese unit. Such training seems wise: a rival company that set up a China call center subsequently closed it because staffers failed to grasp the nuances of the Japanese language.

All new recruits at Hewlett Packard's call center undergo three weeks of intensive language training.

Cheaper services, quality results

As of the end of November, the Tobacco Institute of Japan had issued 8.6 million electronic identity cards to adult smokers. To obtain the card, smokers must submit an application containing such information as name and date of birth, along with an ID photo.

The institute consigns the processing of such information to Transcosmos Inc., which receives as many as 200,000 applications on busy days.

Transcosmos scans the documents and transmits them to its three offices in China, where some 1,000 local staffers input applicants' personal data into the Tobacco Institute of Japan's computer system. When the data is transmitted back to Transcosmos' head office, it is checked for accuracy.

"Chinese staffers, who understand 'kanji' characters, work as fast as Japanese employees -- at half the cost," said a Transcosmos executive director. This enables the company to keep overall costs down significantly.

Omron Corp. (6645) consigns the processing of data related to production, sales and accounting and other matters to IBM Japan Ltd.

To reduce costs further, the worldwide operating centers of IBM Corp., the U.S. parent firm, are now used. Omron data is stored in IBM Japan's data center in Osaka Prefecture, but it is actually processed and managed at a center in Shenzhen run by IBM's Chinese subsidiary.

Similarly, data for Omron's European operations is transferred to an IBM facility in Belgium, and it is subsequently handled by an IBM center in South Africa, where multilingual staffers are hired at lower cost.

Omron has further expanded its outsourcing efforts to include systems development and maintenance, both of which are time-consuming. "Our firm's own IT engineers can thus focus on developing advanced software," said one company official.