Summary
Professional surveys usually state Asia-Pacific region - excluding Japan -
However Japan still ranks second largest economy Worldwide with huge untapped potential for daring BPO vendors
Cultural barriers and lack of local knowledge explain this.
Analysis
Japan BPO services market is potentially huge but one need to try hard.
Looking at global outsourcing 100 there is not a single Japanese player mentioned. Top 25 players are mostly US, India, China. Japanese market represent no more than 3 to 4 % of worldwide BPO market due to 4 important reasons.
1- Lack of knowledge: exception made of ITO and call centers there are not that much companies seeking to outsource specific operations in Japan.
2- Service quality: companies are very concerned about service quality. There is not that much BPO vendors able to offer the quality of service required by Japanese companies. BPO vendors have certainly accumulated expertise and know-how however very few are capable of offering a full Japanese language service to Japanese customers. In the end this is not just related to Language but it is highly cultural problem. Japanese companies feel obliged to dispatch staff locally as Japanese customers needs cannot be satisfied based only on standard procedures.
3- Employment concern: If domestic industries outsource offshore BPO operations then this translates into an employment problem with the company itself. There are lots of Japanese companies who set up shared services subsidiaries to increase profitability however few companies are ready to entrust external vendors with shared services operations.
4- Work standardization is a problem. Non-standardization of work in Japan is a big hurdle to any outsourced operation even if Japanese corporate are seriously looking into this. Compared to Europe and US industries Japanese industries do not have such a clear distinction between different jobs. Frontier is extremely vague and fluctuant between assigned jobs. Business is divided between direct and indirect divisions within the company itself so it seems difficult to quantify a specific business and outsource it. Standardization of business would be a pre-requisite before activating BPO
Viewed from Indian BPO vendors - 4 - is a key challenge as Japanese companies emphasize personal relationship building which makes it difficult to outsource knowledge to third parties. Staff employment is the next hurdle: after having outsourced non-core business to vendors Japanese companies are burdened with surplus staff pushing costs higher. Japanese companies stress high touch communications above everything and are concerned that non-Japanese speakers cannot handle the job.
This said Japanese BPO vendor’s number setting up BPO centers in China increased but this barely reach Y20b. In 2008 Japan domestic market was roughly Y900b (3 to 4% world market share). However Japanese market should reach Y1.65trn by 2011 (5% growth on average).
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
