Japan is now open to outsourcing

Japanese tech companies in the past have rejected the notion of outsourcing. But now the slowing economic climate, aging Japanese workforce, and declining pool of skilled IT and business university graduates are challenging the country's executives to rethink outsourcing.

Japanese companies are beginning to engage in strategic outsourcing arrangements that retain employee commitment, augment internal technology and business process skills, and improve IT and business processes, all while reducing operating costs. The success of these arrangements hinges on developing innovative outsourcing agreements and selecting a provider with the right capabilities.

Three-pronged approach
The ideal Japanese outsourcing arrangement retains permanent workers, provides a channel to a flexible manpower resource pool and increases internal IT and business process capabilities.

Japanese companies are embracing outsourcing that delivers on defined business objectives:

Improve resources—Many Japanese companies supplement their employee base with contracted professionals. In some cases, the third-party suppliers can account for as much as 75 percent of resource costs. Through outsourcing companies can consolidate hundreds of contractors from one outsourcing provider.

Redirect employees to value-added roles—Outsourcing of routine and non-core tasks lets companies refocus retained employees on core competencies or direct employees into entirely new areas, such as R&D. In so doing, Japanese companies can honor employee commitments by empowering the staff to work on assignments that add value.

Evaluate alternate contract arrangements—To increase internal IT and business process capabilities, Japanese companies can create an arrangement that draws employees from the company and outsourcing provider into a co-sourced service organization. Such a setup lets executives leverage the skilled resources of the outsourcing provider while providing employees in-depth IT and business process training. When the contract expires, the company can either extend the arrangement or retrieve employees and absorb their knowledge back into the company.

Businesses must also determine whether the outsourcing provider's business offering is viable. Mid-level Japanese managers can make this judgment by examining how an outsourcing provider organizes and manages the project, transfers work and resources to an appropriate outsourced business model (near shore, onshore/offshore, offshore), re-engineers processes to improve application maintenance and development productivity, and sustains delivery excellence.

Executives at Japan's tech companies are finding that outsourcing, when approached strategically, can become a competitive differentiator and pave the way for achieving high-performance business status.

- Shinji Igarashi, Michael Heideman
Senior Executive, Communications and High-Technology Business Practice
Accenture Japan