COLOMBO (EconomyNext) – Sri Lankan software exporters have set their sights on penetrating the lucrative information technology service market in Japan whose firms are beginning to look overseas for suppliers, officials said.
Just over a quarter of Japanese information, communications technology (ICT) industry sales are by software service providers, said Hidemi Yamamoto, Senior Executive-Global Affairs of Japan Information Technology Service Industry Association.
"Sales of hardware are falling while IT services and packaged software sales are growing," he told a forum Tuesday.
Of IT services sales, 55 percent are for customised software development with the major customers in the IT services industry itself and financial sector.
Growth is anticipated in cloud computing and data linkage technology.
"If you do business with Japanese companies, bear in mind that it takes time to build trust," Yamamoto told the forum of officials from software export and BPO (Business Process Outsourcing) firms.
Many Japanese ITC firms have subsidiaries in South East Asia which need support for system implementation and operations and maintenance, he said.
"Japanese managements want to reduce IT costs. They want more expertise on digital technology. Customised software development could be an opportunity for Sri Lankan firms."
Dinesh Saparamadu of the Sri Lanka Association of Software and Service Companies (SLASSCOM) said the aim of the forum was to create awareness of Japan’s ICT industry and how Sri Lankan companies should look at Japan.
"Our IT industry has penetrated other international markets but not Japan which has the world’s third highest software spending," he told EconomyNext.com.
"This is the first step in building a long term strategy to do business with Japan and finding out what Sri Lanka’s IT industry needs to do to get into the Japanese IT market."
SLASSCOM has been looking at Japan’s market for over 10 years, having sent its first mission to Japan in 2004.
"Japan is a very interesting market but a very long term, sustainable market," he told he forum organised by the Export Development Board and SLASSCOM. "You need to have resources within you to be able to sustain that market."
Tsuyomu Tsuchiyama, Corporate Officer, Strategic Planning Division of Nippon RAD Inc. a Japanese R&D firm, said Japanese firms still prefer domestic sourcing but that "the trend is changing" with more firms looking overseas.
But he said there were difficulties for overseas suppliers caused by cultural and language differences.
"We’re yet not so globalised and not much familiar with English. So we have barriers to team up with overseas developers and offshore partners. But I think we have to change."
He said almost all of Nippon RAD’s business is domestic but added that in Sri Lanka "we are looking for mutual market opportunities and tie-ups. It is possible for both business and systems integration in form of JV or BPO/outsourcing.”
ICT exports are emerging as a significant source of earnings for the island, being the fifth largest revenue earner and largest value-added service earner, the Ministry of Industry & Commerce said in a statement.
Sri Lanka’s ICT export revenues reached 720 million dollars in 2013, were estimated at 815 million dollars in 2014 and could cross a billion dollars in 2015.