Turning from testing and run-in to strategic cooperation

The discussion on the trend of cooperation in information services industry between China and Japanese

In 2006, Japan's information services industry developed with a rapid speed. The cooperation between China and Japan in the software and information services industry is also continuously deepening; the exchanges between enterprises from the two countries have been gradually strengthened. The next few years will be a critical period for the development and cooperation between the Chinese and Japanese software and information services industries.

Information Service Industry Development Overview of Japan in 2006

In 2006, the revenue of Japan's information services industry was 17.1 trillion Yen, equivalent to 1.132 trillion Yuan, with an increase of 17.5%, and it was the largest growth rate in the last five years.

Software professionals are still in short supply

Although the sales revenue of Japan's information services industry has maintained a continuous growth from 2001, but the number of software talents hasn't maintained an appropriate growth, which has been steady at 570,000. This situation was changed in 2006; the number of workers in Japanese software and information service industry reached 840,000, with an increase of 47.3%. But generally speaking, the gap in Japanese software talents had not been fixed, which was specifically performed by the continually decreased number of science and engineering graduates from Japanese colleges. Similar with the supply and demand situation in China's software industry, Japan also lacks skilled and senior management talents. For Japanese companies, with the development of information system outsourcing, market is in short of the BPO talents (Business Process Outsourcing, BPO).

According to a survey, 90.8% of Japanese enterprises said that they were in short of project managers, 60.5% of them said that there were lack of sales, marketing analysts, but the number of enterprises which lacked for specific operators was small, which also matched with the effect of Japan's software outsourcing. And we can find the cooperation between China and Japan in the future trend: in order to deepen the cooperation between the two countries, a number of high-end software talents will be needed to be responsible for the Sino-Japanese project management. This development trend has put forward higher requirements on the quality of software talents; the talented people should have the qualities as follows: the overall thinking, understanding of the bilateral commercial habits and culture, leadership ability, language ability, communication skills, technical capacity, management ability, and so on. If Chinese enterprises have such talents, then the scale of software outsourcing will reach a higher level.

Three major industries occupy half business

From the perspective of industrial distribution, manufacturing, finance and insurance industry, government agencies, are the top three industries in business sales. The sales revenue of the three sectors accounted for around 50% of the total industry income. Particularly, "the volume of transactions within the industry" in Japan information service industry accounted for the overall 16.1%, which fully reflected that the Japanese software and information services industries has formed a close production chain, and the cooperation and joint development between the upstream and downstream enterprises would contribute to a good growth of the whole industry.

The new trends of cooperation in software and information services industries between China and Japan

Three new changes in the market

Japan's major companies gradually increase the utilization on overseas resources.

For the internal reason of pursuing international growth strategy by Japanese enterprises, and the external factor of inadequate supply of domestic software talents, the Japanese software and information services industries has set up the concept of effectively using the overseas resources. In the next few years, Japan's major software enterprises will increase overseas expansion, such as NEC, Fujitsu and other companies will reach a total number of 10,000 employees in their overseas companies in 2010, and set up subsidiaries abroad, with main choices of China, India and Vietnam.

China remains Japan's largest entrusted offshore development country.

The survey by Japan Information Industry Association and the Association of PC Software shows that the proportion of Japan's outsourcing orders to China rose from the 49% in 2002 to 63% in 2004. As for China, Japan is also China's major software outsourcing business market, accounting for 60% of the overall revenue of China's software outsourcing. But it slows down the growth rate year by year, while the outsourcing exports to Europe and the United States grows rapidly, accounting for more than 20% of total export revenue.

Among the Japan's latest contract businesses with China, the rate of ONSITE (the employees from the outsourcing company to the clients' companies), is gradually increasing.

The competition of outsourcing market is intense; India and Vietnam gradually enter the Japanese market.

The Indian software industry gradually rises in the international market. In the past 10 years, the revenue of Indian information industry grew by 10 times; the revenue from 1997 to 1998 fiscal year was 4.8 billion US dollars, rising to 47.8 billion US dollars from 2006 to 2007 fiscal year. The Indian National Association of Software and Services (Nasscom) said in 2007, India's software and services exports reached 31.3 billion US dollars, with the growth rate of 32.6%. India's large software companies speeded up the process of internationalization through the establishment of exterior market institutions and recruiting overseas talents. Take TATA company for example, it has established sales organization in 36 countries around the world, and has development agencies in 11 countries. The revenue of TATA, INFOSYS, and WIPRO in Japanese market, has maintained a high growth rate of more than 40% from 2005 to 2007. India also set up subsidiaries in China in order to take effective use of the agency to enter the Japanese market. India has gradually become a major competitor for China in Japanese market.

Vietnam, the Philippines, Thailand are the representatives of Southeast Asian countries, who gradually attract contract from the Japanese enterprises. Data from the Japan Information and Communication White Paper (2007) shows that, in the survey of "the countries and regions promising to become the Japan / US's entrusted offshore development providers," Vietnam ranked first, China, India, the Philippines and Thailand ranked from 2 to 5.

The discussion on the trend of cooperation in information services industry between China and Japanese

China and Japan are in the transition to strategic cooperation

We can divide the cooperation between Chinese and Japanese enterprises into the following five stages:

The experimental stage: it is the stage to confirm the principle and potential of each other.

Trial stage: the two sides can cooperate and deepen mutual understanding, enhance efficiency, the Chinese companies can send employees to Japanese companies to study the working methods and business processes of large companies.

Expanding and growing stage: the two sides can study and master business skills, share development skills, Chinese companies will grow to be an indispensable development partners for Japan.

Integration stage: they can enhance the efficiency of cooperation and expand the scale of cooperation by selecting and focus on stable partners, for example, they can cooperate on large-scale projects.

Strategic cooperation stage: establishment of good cooperative partnership, forged strategic alliance.

China and Japan have strong complementary aspects in industrial development, cooperative relations between China and Japan has gradually matured, it is transiting from the "pilot" and "trial " stage to "integration" and "strategic cooperation" stage, and the next few years will be a crucial period of cooperation development.

We can divide a project into five parts, at present, China's enterprises still have not completed any part of them independent, the design and maintenance services stage which are the highest level of technology or the highest profits are all completed by Japanese companies. In the completion stage of a certain project, Chinese companies also have to cooperate with Japanese enterprises. After several years of accumulation, a number of outstanding Chinese enterprises have possessed certain strength, and established trust and understanding with Japanese enterprises. They have begun to participate in the detailed design of software solutions foot by foot, and taken a number of large-sized and complete projects.
There will be a significant change in the next three years, that is Chinese enterprises will have been able to accomplish a complete project independently, the solution will be fully implemented in China offshore. The Japanese enterprises will establish full trust for Chinese enterprises in their technology capability, management capability and overall strengths. Chinese enterprises will carry out detailed design solutions with Japanese companies, and some of the outstanding enterprises will even be involved in the outline design. Hence, the abilities of Chinese enterprises will be improved and abundant talents will be reached, which has significant meanings for the companies' development.

In the next 5 to 10 years, Chinese and Japanese companies will form a close strategic partnership to work together to exlore the Chinese and international markets. Chinese enterprises will participate at all stages besides the "project contract", they will fully participate from the architecture design to maintenance after the closure of system development, and the development efficiency and quality of projects will significantly improve. The two sides will also work together to develop products for China, Japan and the international markets.

New subject on Sino-Japan cooperation

The rapid appreciation of RMB, rising prices and the increased exchange-rate risk.

RMB has kept appreciating since July 21, 2005, when China began to implement the market-based exchange-rate system with floating rate management. China's rapid growth of economy and the 2008 Olympic Games expect sharp rise in prices, steady rise in labor costs, and the increased contract price.

Japan pays increasing attention to information security/information leakage.

Japan proposed that with the gradual deepening of cooperation of Sino-Japanese software outsourcing business, Chinese partners have increasing opportunities to visit the personal and confidential information, so they anticipate the Chinese enterprises to strengthen information security management, implement the measures to prevent the leakage of information, enhance CSR (Corporate Social Responsibility) awareness, and they also hope that China's software companies will build up law-abiding business and CSR management system similar with Japan's development and commitment.

The establishment and improvement of personal information protection

With the advent of the Internet age, privacy protection and security is a major issue. How to protect personal information from knowing, guarantee personal data not to be used illegally have become the emergent issues for some relevant departments at the moment. Since Japan began to implement the "Personal Information Protection Act" in April 2005, they have made basic principles to protect personal information, and clearly stated the responsibilities of local and national public organizations. Meanwhile, they defined the obligations to be abided by the enterprises and institutions that need to use the personal information.

The discussion on the trend of cooperation in information services industry between China and Japanese

Suggestions for Sino-Japanese cooperation

First, we should continually improve software outsourcing capability, expand the scale of software outsourcing industry, gradually develop towards the middle and high-end level, and ultimately change the current unhealthy structure of Sino-Japanese cooperation in low-end and with low-value.

Secondly, from the perspective of lowering costs, our priority is to enhance productivity, implement safety management.

Thirdly, we should combine the experience and technological advantages of Japanese IT partners with the advantages of Chinese market, increase the inputs for personalized IT services to enhance the ability to create values for customers.

Finally, we should establish the Sino-Japanese cooperation community to meet the needs of personalized IT services for Chinese customers, make a good use of the two sides' advantages to upgrade the level of Sino-Japanese cooperation.

Japanese information service industry policy list

After entering the 21st century, Japan has actively promoted the strategy of IT as the foundation of the nation, and has issued three major national strategies successively in the information industry field --- e-Japan strategy, e-Japan Strategy II and u-Japan strategy. These three strategies focus on the development policies and priorities of Japanese information industry, and even the entire national economy in different periods, forming a coherent system following in proper sequence.

On December 8, 2005, the Japanese IT Strategy Headquarters held its 34th meeting to discuss and pass the latest Japanese information national strategy - "IT Reform Strategy." The "IT Reform Strategy" is the basic program for Japanese government on information construction from 2006 to 2010.

From the e-Japan strategy to the e-Japan Strategy II and u-Japan strategy, and the later "IT Reform Strategy", it shows Japan's new development thread for the information industry applying information technology.

e-Japan strategy

The goal of e-Japan strategy was to complete the Internet environment of 30 million household broadband and ultra-wideband （30Mbps～100Mbps）for 10 million families throughout Japan till 2005. The goal was achieved in 2003, ahead of the schedule. As the target of the first phase in the e-Japan strategy - IT infrastructure had been completed, so the e-Japan strategy's focus turned to the second phase target from 2003, which shifted from infrastructure reform to positively improving Japan's social and economic systems.

u-Japan strategy

In this conception, Japan will build an Internet environment capable of hosting "at any time, any place, with any item, anyone" to be online by 2010. The Japanese ministry hopes to promote the development of Japan's economy by the push of u-Japan plans.

"IT reform strategy"

"IT Reform Strategy" package policy demands the Japanese government to build the central and local integrated electronic administrative services., it will promote the manufacturing, services and other economic, industrial productivity and strengthen the international competitiveness of ICT industry by information technology; it also demands that the Japanese government to establish a flexible application for the national health information infrastructure to provide people with appropriate social security services. It also demands to construct the world's leading safety rescue system in order to reduce traffic accidents; besides, it demands that the Japanese government build a safe, simple mobile life infrastructure of the next generation to provide diversified services, a community that every one can enjoy all the time at any place; it demands to built a training mechanism targeting high-level IT personnel in a virtuous circle.