The Japanese cloud market is growing rapidly, by 30 percent in 2015, driven by a highly developed infrastructure and increased awareness. According to Euromonitor, demand will continue to grow in the future as more and more Japanese SMEs adopt cloud-based services to reduce IT costs. The growing shortage of IT experts represents a challenge here. The Japanese Ministry of Economy, Trade and Industry (METI) estimates that the current number of 190,000 vacant positions will grow to 590,000 by 2030.
The case of Swiss company ITPC AG shows how even foreign SMEs can use this situation to their advantage. In addition to SAP technology consulting, the company began offering the operation of SAP system landscapes in 2007. The CEO, Vincenzo Boesch, quickly realized that they had to grow: “Operations also means that you have to have people who are always available. That’s why we founded a subsidiary in India.”
Since 2010, ITPC has been pursuing a local/offshore delivery model in India. Local project managers and SAP technology consultants foster contact with clients, plan and assist in the projects, but the main operations are in India: This allows for the majority of the project work and the help desk to be operated around the clock by offshore staff located there. “These days, international customers in particular expect companies to have a local/offshore model,” Boesch stresses, because it allows for a competitive price level.
Market entry through existing clients
ITPC’s decision to venture into Japan was the result of a happy coincidence. Japan Tobacco International (JTI), a long-time client of ITPC AG from Geneva, attracted the attention of its parent company in Japan through its efficient IT processes and was asked to provide information in Japan on the factors leading to its success. Vincenzo Boesch was called in to report on ITPC’s contribution to these achievements. In his discussions in Japan with Japan Tobacco (JT), he met Harumi Shibata, an external Japanese consultant, who was assisting JT with its IT analysis.
Shibata liked ITPC AG’s model and suggested to Boesch that he should take it to Japan. The two businessmen stayed in touch. “We felt that we had a similar background, and it just clicked between the two of us,” says Boesch. He traveled to Japan several times and developed several scenarios with Shibata as to whether and how ITPC could be brought there.
Local partners as a necessity
With the support of the Swiss Business Hub Japan, Boesch carried out discussions with different companies in Japan to assess the market. “We are a small company, and that feeling is a big part of it. We didn’t follow the classic approach and say, ‘We’re going to put together a business plan and then a market analysis.’ Instead, we did it more casually, as SMEs do,” Boesch explains.
He had a good feeling, and Microsoft with the Azure Cloud and SAP were also showing strength in Japan. That is why, together with Shibata, he founded Value Consulting Services Ltd. as a joint venture in April 2016. It was obvious to the Swiss manager that he couldn’t tackle the Japanese market alone: “It’s important to have a Japanese partner who knows the customs and knows how to deal with people. I can’t presume to go to Japan as a Swiss person and be able to strike a deal, and if I have those expectations, then things get difficult,” he stresses. This is something he learned in India.
Boesch chose a partnership in the form of a joint venture to give responsibility to the partner and develop ownership. He says that establishing the joint venture is no more complicated than in Switzerland. “It’s only difficult because we’re two very different cultures. You have to have someone to draw up a neat contract who can understand our mindset and the Japanese one so that both can be included,” he explains. Here, help came from a German lawyer in Japan who is familiar with both Swiss and Japanese law.
Boesch considered it a great success that he managed to find the right partner and draw up a good joint venture contract – even if it doesn’t bring in money right away. He now wants to use Shibata’s network for the joint acquisition of customers for the joint venture. Acquiring initial customers is not easy in Japan, because Japanese customers are usually only interested in Japanese references, and projects in other countries count for little. “That’s why it takes time in Japan,” Boesch emphasizes. But ITPC can score points with its Japanese customers outside of Japan: First, through JTI in Switzerland, by way of which they want to approach the parent company, JT, and second, in India they have another possible entry point to a Japanese group through their customer Brigestone India.
Expanding existing partnerships
As another source of leads, ITPC is counting on a powerful player in the Japanese market: Microsoft. In Switzerland, ITPC has already been a Microsoft partner for several years and has a good relationship with the software giant in the area of cloud services. “Of course, we have tried to take advantage of the head start we got in Switzerland here in Japan,” Boesch explains. After all, SAP and the cloud are still in their infancy in Japan, and Microsoft appreciates every competent partner that can help customers move SAP to Microsoft Azure. Before and after founding the joint venture, Boesch tried to engage with Microsoft Japan several times. And he was successful: Value Consulting Services Ltd. recently entered into a partnership with Microsoft in Japan and is now a certified Cloud Solution Provider. Microsoft will now recommend Value Consulting Services Ltd. as a partner to customers in Japan who want to migrate SAP to Azure.
Currently, ITPC AG and Value Consulting Services Ltd. are working on developing skills at the SAP and Microsoft levels in order to receive additional certifications. These are important in the Japanese market. Vincenzo Boesch plans to travel back to Japan soon and visit potential customers with his partner. “In the next six to twelve months, the first customers will come. I’m convinced of that,” affirms Boesch. He is already thinking about the next step in his vision of establishing SAP on Cloud in Japan: learning what expectations the customers in Japan have and then gradually expanding local staff.
This article was first published in JapanMarkt Magazin in March 2017.
