trends in offshore software development in japan

All rights reserved Copyright © 2008 CICC 1

Trends in Offshore Software

Development in Japan

Senior Researcher, Research Div. CICCSenior Researcher, Research Div. CICCVisiting Researcher, Institute for AsiaVisiting Researcher, Institute for Asia’’s IT Strategy, s IT Strategy,

WasedaWaseda UniversityUniversity

Tomoko AsaiTomoko Asai

May 13, 2008

CICC


AgendaAgenda

1. CICC Activities

2. Software Industry in Japan

3. Trends in Offshore Development in Japan

4. Status of other countries (China, India, Vietnam, Philippines)

* All the Translation by CICC


AgendaAgenda

1. CICC Activities





CICC ActivitiesCICC Activities

Social and Public Information Systems in Asia Asian Forum for Information Technology (AFIT)Registration and dispatching of IT experts

IT standardization trend survey in AsiaTraining on International Standard Development

Training Programs（Invitational, On site, e-Learning)

Dispatch of representatives (Singapore Office）Support to JICA projectsCooperation and collaboration with related organizations

Holding seminars or lectures

Organizing the Asia OSS symposiumCooperation (HDR, Standardization, Localization)Research (Printing environment, Spread of OSS)

Improvement of Asia OSS Infrastructure

International Cooperation in the IT Industry

IT Standardization in Asia

IT Human Resource Development (HRD) in Asia

Other activities

Research on Asia informatization statusIT industry’s trend survey in Asia

(Asia IT Report)

Research and Information Provision


CICCICC'C'NetworkNetwork of the Organizationsof the Organizations bbased on theased on the AFITAFIT

MalaysiaMAMPU

VietnamMIC, MOST

CambodiaNiDA

JapanMETI

ThailandMICT, NECTEC

KoreaMIC, MOCIE

Lao PDRSTEA

IndonesiaDepkominfo

MyanmarMCF

BangladeshMOI, BSTI

ChinaMII

MongoliaICTA, NITP

PhilippinesCICT, NCC, DTI

Sri LankaICTA

PakistanMoIT

IndiaMIT

NepalHLCIT

SingaporeIDA

Hong KongHKCS


・MOI：Ministry of Industry ・BSTI：Bangladesh Standards and Testing InstitutionBangladesh

・MIC： Ministry of Information and Communications, ・MOST： Ministry of Schience and TechnologyVietnam

・MICT：Ministry of Information and Communication Technology・NECTEC：National Electronics and Computer Technology Center

Thailand

・ICTA：Information and Communication Technology Agency of Sri Lanka Sri Lanka

・IDA：Infocomm Development Authority of Singapore Singapore

・MoIT：Ministry of Information Technology Pakistan

・HLCIT：High Level Commission on ICT Nepal

・STEA：Science Technology and Environment Agency Lao PDR

・CICT：Commission on ICT ・NCC：National Computer Center ・DTI：Department of Trade and IndustryPhilippines

・MCF：Myanmar Computer Federation Myanmar

・ICTA：ICT Authority of Mongolia ・NITP：National IT Park Mongolia

・MAMPU：Malaysian Administrative Modernization and Management Planning UnitMalaysia

・MIC：Ministry of Information and Communication ・MOCIE：Ministry of Commerce, Industry & Energy Korea

・METI：Ministry of Economy Trade and Industry , CICCJapan

・Depkominfo：Department of Communication and Information Indonesia

・MIT：Ministry of Communication and Information Technology India

・HKCS：Hong Kong Computer SocietyHong Kong

・MII：Ministry of Information IndustryChina

・NiDA：National Information Communication Development AuthorityCambodia

OrganizationsEconomies

CICCICC'C'NetworkNetwork of the Organizationsof the Organizations bbased on theased on the AFITAFIT


AgendaAgenda

1. CICC Activities





Changes in Japanese IT Services IndustryChanges in Japanese IT Services Industry

Source：JISA (2008), Original：METI

Structure of Sales and Workers

0

5

10

15

20

1991 1994 1997 2000 2003 2006

Sales（trillion）

0

250

500

750

1,000workers（thousand）

sales workers

after the economic bubble

・Sales：decreased after the economic bubble, turned to growth in 1995. In 2006, 16.7 trillion yen

・Workers：decreased after 1991, turned to growth in 1996. In 2006, 820,000 workers


IT Services Industry [Sales by Business Type]IT Services Industry [Sales by Business Type]

Sales Structure （2006）

other, 15.4%

facilitymanagemnet, 7.5%

data processingservice, 10.4%

software products,8.5%

other softwaredevelopment, 4.1%

customizedsoftware, 54.1%

・”Customize Software,” + “Software Products”：Sales 2/3



IT Services IndustryIT Services Industry [Sales by Customer Business Type][Sales by Customer Business Type]

Sales by Customer Business Type （2006）

2,357.5

996.1

1,095.8

1,160.7

1,295.2

2,779.4

3,232.8

0.0 1,000.0 2,000.0 3,000.0 4,000.0

IT services industry

other services industies

wholesale/retail

Telecoms（excluding IT services industry）

public service

finance/security

manufacturer

（billion）

・Main Customer Business type: ”Manufacturer,” “Finance/security” ：3 trillion yen

・IT Services Industry (between main contractors and subcontractors）：2 trillion yen



World Wide ICT MarketWorld Wide ICT Market

Worldwide ICT market（2006年）

U.S., 36.5%

Europe, 29.7%

Japan, 10.9%

China, 4.5%

Canada, 2.3%

Others, 16.1%

・36% by U.S., 66% by U.S.+ Europe・11% by Japan, mainly domestic trade

Source：JISA (2008)、Original：WITSA Digital Planet2006


AgendaAgenda

1. CICC Activities





What is Offshore Development?What is Offshore Development?

Source：JETRO (2008)、Mizuho Industry Focus

Other company Resource

Onshore Outsourcing

OnshoreShared Service

Within Own

company

OutsourcingOutsourcing--TypeTypeOffshoringOffshoring

InIn--househouse--TypeTypeOffshoringOffshoring

Japan（Onshore） Oversea（Offshore）


Background of Offshore developmentBackground of Offshore development

・Market needs of Low cost & Shorter development period・Expand of Software development size (incl. embedded software)・Shortage of HR in Japan (esp. PM level, about 100000 pax)

-Less popular of Science and Engineer (incl. IT) course at Univ.-Gov & Univ & Company cooperation to develop higher level IT HR

・Software industry and IT HR increase in Asia, CMM qualified

・Deduction of development cost・Securing IT Engineer (esp. middle-PM level)・Quality, Stability, Reliablity are important

Recently…

・Seeking local market (china)・Correspondent to Globalization-Japan’s software export is 1/10 than import (mostly from US)

-US, India embark on system development of Japanese Global companywith “Global Delivery Model”


LongLong--term Vision of term Vision of OffshoringOffshoring

PastOffshoring by taking advantage of wage difference※Main purpose is Cost reduction

PresentOptimizing the use of overseas resources※Make use of good resources efficiently※Keeping enough quality is challenge

Future

Structuring a global supply chain in the software/service field※Effective use of optimal resource in each region of the world※Using them as the based in the scope of global business system

【China】1st Phase:1994～98 “Beginning” – to find/develop local partner2nd Phase:1999～03 “Expansion” – to expand Lab-type offshoring

3rd Phase:2004～ “Mature” – to expand SI business,

to strength strategic partnership

Source：”Offshore Software Development”Presentation material of Mr. Ezaki, NEC, March2007


Expansion of Offshore development by each phaseExpansion of Offshore development by each phase

Source：”Risk Management at Offshoreing”Presentation material (Japanese) of Mr. Ezaki, NEC, Aug 2007

・To make sure partner policy and potential ability・Japan side: Outsource precise system with guidance・Partner side: High % of success with top engineer

Trial Phase

6 month-1 year

Phase Feature Period

・Mutual understanding though trial and error・Accumulation of know-how, improve efficiency※Possibility of partnership breakup by error

Trial & ErrorPhase

1-2 year[3-4 offshorecycle is Needed]

・Growth as essential partner for Japan side・Improvement of efficiency, development of

upstream parts※Countermeasure of HR drain and motivation decline

Expansion phase(Lab contract)

2-3 years

・Construction of Best partnership・Development of SI service in that country・Further strategic & upstream alliance

Strategic Cooperation

Phase(capital relation)

4 years above

Expansion


Flow of Offshore Flow of Offshore develpmentdevelpment

Decide policy of Offshore Make clear of policy, Notify inside the company

Research/decide local partner Mutual understanding by evaluation standard

Trial outsorcing Evaluate level: skill, quality and PJ management

Decide detail policyOutsourcing policy (business area, level),Schedule of HRD

Outsource each projects Mutual understanding of policy

Start/expand Lab contact Full scare cooperation

Lab contact：-Secure HR and location at local partner for certain PJ

-Secures same HR for certain period (need to offshore certain amount continously)

-Regular liason meetingSource：”Risk Management at Offshoreing”

Presentation material (Japanese) of Mr. Ezaki, NEC, Aug 2007


Offshore Development Market Size Offshore Development Market Size (each survey)(each survey)

Source：IPA (2007)

comparing survey figures on offshore development market

71.3

90.1

67.3

83.6

47.1

206.7

0 50 100 150 200 250

questionnaire

questionnaire + estimate

Nillei Computer

MIC

balance of payments statistics

Gartner

billion yen

・Offshore Development is 47-200 billion yen market according to each survey・The market would be 100 billion yen considering other companies

which were not included on this survey・Making up 6% of total Japanese IT services industry (16 trillion yen)


Offshore Outsourcing CountriesOffshore Outsourcing Countries

Source：IPA (2007)

[Offshore development transaction value]・61 companies - direct order of offshore development projects (28% of total）50 companies - indirect order (23% of total).

・Offshore sales account for about 4-6% of total Japan IT Services industry[Offshore Outsourcing Countries]・China is in first place, accounts for 68% (48.5 billion yen)・India is in second place, accounts for 20% (14.1 billion yen)・Vietnam grew twice from 2004 to 2006, though sales are only 430 million yen

Offshore development transaction value

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

2002年

2003年

2004年

2006年

（million yen）

China India Philippines Korea Vietnam U.S. Australia Others No response

Offshore Outsourcing Countries

82.3%82.3%82.3%82.3%

3.2%3.2%3.2%3.2%

30.6%30.6%30.6%30.6%

12.9%12.9%12.9%12.9%

4.8%4.8%4.8%4.8%

1.6%1.6%1.6%1.6%

3.2%3.2%3.2%3.2%

1.7%1.7%1.7%1.7%

1.6%1.6%1.6%1.6%

0%0%0%0% 20%20%20%20% 40%40%40%40% 60%60%60%60% 80%80%80%80% 100%100%100%100%

No responseNo responseNo responseNo response

EUEUEUEU

U.S., CanadaU.S., CanadaU.S., CanadaU.S., Canada

SingaporeSingaporeSingaporeSingapore

PhilippinesPhilippinesPhilippinesPhilippines

VietnamVietnamVietnamVietnam

IndiaIndiaIndiaIndia

KoreaKoreaKoreaKorea

ChinaChinaChinaChina


Offshore Development process by CountryOffshore Development process by Country

Source：IPA (2007)

（注）No. of respondents ：China 69、Korea 3、India 21、Vietnam 11、Philippines 3

・Development process differ by countries・China covers from detail design to integration test, while

India handles much upstream development compared with the other countries.

Offshore development structure

0

10

20

30

40

50

60

70

80

90

100

China Korea India Vietnam Philippines

requirement definition basic design detail design

programming unit test join test

integration test technology study/development others

no response


Trend of Offshoring by Big Japanese IT venders (2006)

---70B（59B）

Total of 7

（1B）

Vietnam(17)-83 2.5 1.2BTIS

(1.1B)

Vietnam(10)585 1.7 1.9BJapan Unisys

（2.2B）

Vietnam(19)180 8 2.5BHitachi Software engineering

（2.6B）

Vietnam(below 2%)Below 2%98 1.4 3B overNTT Data

（10B）

NANAOver9011.0 10～12BNRI

Korea(4)（11.3B）

Vietnam(6)2070 NA13BHitachi

Vietnam(1-2)（9.6B）

Philippines(2-3)20～2570～754～714.4BFujitsu

Vietnam(2)（21.6 B）

Philippines(10)880 8 24 BillionNEC

OhtersIndiaChina(2005 Result)

% by country% of total SIPlan of 2006 Company name

Source: Nikkei Computer（2006/10/23)


Trend of Offshoring by Big Japanese IT venders

NEC

Fujitsu

Hitachi

NRI

Japan Unisys

TIS

-4,000 people（2007/China）-Chengdu China, Subsidary company in Vietnam, India◇NEC software (Beijing/Jinan), Dalian, Shanghai, Guangzhou, Chengdu,Wuxi◇NEC Solutions Veitnam(06/5)◇NEC HCL System Technologies Limited, Inoda cisty(2005/12)

-3,000(2009/India) ◇Subsidary company of Rapidigm,Inc.(U.S. IT consulting and integration firm) and ZenSar, India

-2,000(2009(double from 2005)/China)◇Fujitsu (Xi'an) System Engineering Co. Ltd., etc.

-1,000(2009/Southeast Asia)

-2,000(2006(up 15% from 2005)/China)-1,500(2006(up 15% from 2005)/India)※In India, mainly software which requires high technical skill◇Hitachi India Pvt.Ltd, Delhi（2006/8）

-3,000(2006(up 10% from 2005)/China)-Similar increase is estimated in 2007

-500(2008/China,Vietnam for each)※Its subsidiary in Vietnam is the software development office ◇USOL Vietnam(2006/6)

-100(2008 (up fivefold from 2005)/Vietnam) ◇Cooperation with FPT-400 (2008 (up fivefold from 2005)/China)

Source：Nikkei Business Daily（2007/1/11) and some materials


Purpose of Offshore DevelopmentPurpose of Offshore Development

Sources：IPA (2007)

Actual cost reduction effect:About 30%: 34%, About 20%: 24%Very few: 10%

Purpose of Offshore Development

0

10

20

30

40

50

60

70

80

90

100

China Korea India Vietnam Philippinesreducing development cost cutting development time

utilizing highly-skilled overseas personnel securing personnel

developing overseas markets response to business globalizationothers no response

・Overall purpose: “Securing HR”, “Reducing development cost”

・”Utilizing highly-skilled overseas HR” mark High lank in India and Korea・”Developing overseas market” accounts only for 18% in China and Vietnam・”Response to business globalization” is ranked in China, India and Phili


Challenges in Offshore Development

0

20

40

60

80

100difficulties in quality control

missing the delivery date

difficulties in communication (languages)

different cultures and business practices

difficulties in securing highly-skilled

personnel

increasing personnel cost

problems about information security and

management

concerns about intellectual property

protection

resulting the lack of techniques and

know-how in Japan

exchange risk

political uncertainty

others

China India Vietnam

Challenges in Offshore DevelopmentChallenges in Offshore Development

・”Difficulties in communication (languages)”, “different cultures and business practices” are ranked high.

・Notable concerns about ”increasing personnel cost” (China, India), “intellectual property protection” (China)

Source：IPA (2007)


Factors to Choose a Country for Offshore Development

・”Communication Skill in Japanese,” is top, followed by “Engineers skill and quality,”

“Price adequacy”,“sales performance with Japanese companies”

Source：IPA (2007)

Factors to Choose a Country for Offshore Development

others

repurtation in the industry of Japan

and the country

distance form Japan

speed to delivery

status of Japanese companies/sales

office in the country

referral from related parties and

business partners

management stability and ability of top

management

CMM/ISO management

sysytem

no response

sales performance with Japanese

companies

price adequacy

engineers skill and quality

communication skill in Japanese

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

1


Retained technologies, operation fieldsRetained technologies9

Counted results of project evaluations (24 items)

Project evaluation (only forexisting contracted vendors)

8

Levels of contract prices containing such as unit of man-month labor cost, etc.

Price levels7

QCD Levels

Training system, workforce system, Japanese language skills, etc.

Staff members and their skills6

Quality control, progress management, etc.Development processes5

Information security management statusInformation Securities4

ManagementSystem

Rate of sales increase, profit rate, etc.Management Indices3

Positive attitude to the Japanese marketApproaches to Japanese Market2

Qualitative evaluation on corporate manager and managerial staff members

Management stance1CompanyManagement

The existing contracted partners takeprecedence. Information on such asbackground of the company’s establishment

Appropriateness to businesspolicy (Only for new partner)

0

Observing Point for EvaluationEvaluation ItemNo.

Evaluation Standards for Evaluation Standards for

Overseas Overseas PartnersPartners(from(from Japanese side)Japanese side)

・Partners are evaluated comprehensively by each points based on Company Management, Management System (Information security, Development processes) , QCD Levels

Source：”Offshore Software Development”Presentation material of Mr. Ezaki, NEC, March2007

It is important for offshore side to make sure who has powers to decide at Japan side


Types of Types of OffshoringOffshoring and HR Flowand HR Flow

Japanese Company (SIer)

Local subsidiary Software Company

in Japan

(China, India, Vietnam, Phil)

Order

IndirectOffshore

①Off-shore

②ODC=Lab.type

Local Software Company

③ＪＶ

（Local+Japan)

④Local

Japanese subsidiary company

Japanese HR dispatching

Company(hire, procedure to dispatch, pre-training)

Japanese HR dispatching

company

・dispatch IT HR(on-site)・Global recruitment

Local Univ.Experienced HR

Securing HR

BridgeSE

Competitive market of

Securing IT HR

Supply of HR Supply of HR

Securing HR

JapaneseCustomer

Order

・dispatch IT HR(on-site)

Direct Offshore


Expected Future Offshore Market SizeExpected Future Offshore Market Size

・Offshore development will be 257billion yen market in 2011. Workers 60 thousand.・There is a possibility to account for 1%+ of Japanese overall IT services industry

Source：IPA (2007)

changes in offshore development market and personnel

71.3

90.9

116.7

151.0

256.8

196.4

59,169

45,251

34,783

26,896

20,93516,424

0.0

50.0

100.0

150.0

200.0

250.0

300.0

2006 2007 2008 2009 2010 2011

billion yen

0

10,000

20,000

30,000

40,000

50,000

60,000

person

offshore development market （billion） workers （person）


AgendaAgenda

1. CICC Activities





Software Industry Comparison with India, Philippines, Vietnam & Japan (1)

Mainly affiliated firm, SMEs

FPT - only big local player. （1,675 pax）Some are 100-50 pax,

Large-foreign / Filipino conglomerite. Most local -SMEs.

Share of the Top 5 is 40%

Share of the Top 5 is less than 10%

N/A21.8 billion yen

N/A7,92 billion yen*

997.5 billion yen*

Software Market size

N/A90.2 billion yen

N/A1.7 trillion yen*

8.5 trillion yen*

IT market size

IT/Software Industry Size

U.S. 36%, Europe 21%, Japan 21%, Others 22%

38%(2005)

275 billion yen (2005)(18% of total)(47% up vs. 2004)

154 billion yen (2005)

Vietnam

N/A

About 7%

16.7trillion yen*(43% up vs. 2005)

25 trillion yen (2004)

Japan

U.S.40%, Europe 38%, Japan 12%, Others 10%

U.S. 64%, Europe 25%, Japan/Korea 3%, Others 8%

Japan 59%, Europe and U.S. 20%, Asia 14%, others 7%

Destination for export of software

0.5～1.8%About 65% (20% of overall export in India)

About 10% or less

% of Software Export

230 billion yen(2005)(12% of total(280% up vs. 2004)

3.2 trillion yen*(80% of total)(about 30% up vs. 2005)

7.2 trillion yen*(10% of all IT）(23% up vs. 2005）

SoftwareIndustry Size

266.2 billion yen (2003)

5trillion yen* (2006)

71 trillion yen* (2006)

ICT Industry Size

PhilippinesIndiaChinaAspect

（2005, *2006)

Source：CICC


China Software Industry Size

Source: MII

1,1001,600

2,780

3,900

4,800

38.20%45.50%

73.80%

40.30%

23.00%

0

1,000

2,000

3,000

4,000

5,000

6,000

2002年 2003年 2004年 2005年 2006年

売上

高（億

元）

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

成長

率（%）

□Details51% Software Service & SI40% Software Products9% Software ExportSales

(Chinese RMB) Growth (%)


Size of Chinese Software company

78

10 12

70

13 17

212

19 21

250

20 27

0

50

100

150

200

250

300

1-5億元 5-10億元 10億元以上

2002年 2003年 2004年 2005年

（Unit: Number of the company)

Source: China Software Industry yearbook 2006

（above 15 B Yen）（7.5-10 B Yen）（1.5-7.5 Billion Yen）


Software & Service Industry Size in India

1.7 1.9 2.5 2.6 3 3.9 4.8 6

14

2.6 46.2 7.7 9.6

12.817.7

23.6

60

0

10

20

30

40

50

60

70

1999

年

2000

年

2001

年

2002

年

2003

年

2004

年

2005

年

2006

年

2010

年

国内市場輸出

CAGR 26-27%

CAGR 24-25%

2000-2006 CAGR：

・Domestic Market 18%・Export Market 33%

Unit：Billion USD

出典；NASSCOM

Domestic Market

Export



Software Companies and Software Parks

Some Software parks are in main cities (Hanoi, Ho Chi Min,Danang etc.)

CMM 3： 1CMM 5： 2CMMI5：1

720

Vietnam

Some Techno parks and Science parks are in local cities

108 companies in 17 PEZA (Philippine Economic Zone Authority)

Government own = 35

Private = 25

They contribute greately to software export.

National level software parks = 11 parks

All = 300+

Software Parks

ISO9001:390CMMI Level5:9

CMM 3： 7CMM 5： 5

CMM/CMMI Level5：73

CMM 3： 200CMM 5： 30*

ISO/CMM

12,0006003,300*※4,000 by BPO

More than

10,000

Software Companies

JapanPhilippinesIndiaChinaAspect

（2005, *2006）

Source：CICC



Language Skill

IT Human Resources

○ 8,045

△hard to listen

-

183

about 9,000

35thousand*(10thousand/NA)

Vietnam

-

△lowest TOEFL scores

40%

-

7,500人(IT)

340thousand(2005)

Japan

△2,550○5,368◎163tousandJapanese （No. of applicants)

◎fluent American English

◎peculiar accent

○increase studying in U.S.

English

30%5.8%10%(2000)20%(2004)

Rate of college education

86 (univ),643IT polytech,400 IT voc

343389（univ）、550(Softwarepolytech)

No. of ITColleges

80thousand240thousand (IT)

340thousandIT Related College Grads.

160thousand[software 12thousand](software5thousand

/500)

1.3million*[ITES 410thousand](900thousand/27thousand)

450 thousand*(200thousand/120thousand）

No. Of Software engineers(offshore/for Japan,estimated）

PhilippinesIndiaChinaAspect

（2005, *2006）

Source：CICC


HRD by Company and GovernmentHRD by Company and Government

HRD by Company・India TCS and Infosys: 4 month training for freshman (equal 2 years outside)

-Hitachi dispatch 50 pax for 3-4 month to Infosys for training・China NEU soft, Vietnam FPT soft: establish own university・Japan Meitec:6 month training at own technical school (teamwork/skill/Japanese)→half will dispatch to Japan

Policy by the Government・Each country settle IT HRD policy, increase IT HR number at technical/vocational school, mutual skill standard by International cooperation→Result is… increase too many lower programmer who cannnot get job

Trend of IT area job・Student leave from IT area is happening with time-lag?Singapore→Japan→China→IndiaVery top get job at Finance or US IT company (google, IBM, Microsoft)

・very top Univ. graduate get job in IT area due to low Univ. entryFrom now, what will happen???


IT Skill StandardIT Skill Standard・Publish IT skill standard ver3(2008.3), correspond to IT test・60% of Big IT company utilize as “standard”

・FE tests in Phil, Vietnam, Thai, Malaysia, Myanmar, Mongolia in Asia

Source；IPA


Number of IT Engineers of China & India

7 8 1020

404543

52

67

83

106

129

0

20

40

60

80

100

120

140

2000年 2001年 2002年 2003年 2004年 2005年

中国インド

(Unit：ten thousand)

□Detail of India (2005)・Domestic 360000・IT-ES Export 410000・IT Export 510000

Source:MII,NASSCOM

China India


(REF) Japanese Language Proficiency Test (JLPT)

No. of Examinees per Country (Total of Level 1 to 4)

82,773

3,837 3,905 966

165,353

70,499

49,571

11,881 8,045 7,1082,9135,8552,7217,273

31,572

55,692

2,5502,8353,7125,368

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

中国

韓国

台湾タイ

ベトナ

ム

イン

ドネ

シア

イン

ド

シン

ガポ

ール

マレ

ーシ

ア

フィリ

ピン

2003年 2006年

Comparison of 2003 & 2006

Source:JEES

China ThaiChineseTaipei

Korea PhilVietnam India Singapore MalaysiaIndonesia


Software Industry Comparison with India, Vietnam & Philippines (4)

Large-scale system, Middleware package, Consulting, BPO, Embedded

・Many are CMMI Level 5・High quality IT HR・Global Offshore model・Proficient in English and U.S. and European market oriented.・Japan has become target in recent years・Lots of foreign invest

①Mumbai, Delhi, Bangalore, Hyderabad②Pune ③Gurgaon, Chennai, ④Asian countries including China

India

BPO、CAD-CAM

・AmericanEnglish+ friendly customer support brings rapid growth of call Centres and BPO・Filipinos areflexible, and follow the instructions andrequirements by the customer.・Brain drain to outside

①Manila②Cebu③9 otehr districts

Philippines

・Low cost oflabour, hardworking, low turnover・Relativelyhigh interestto Japan market.・Both gov. and private sectors are eager to Expand Jap.market. ・Shortage of high skill HR

・6 key industries of 11th 5year Plan(30% up annualy, (2010))・Priority Policy for Export・Many Japanese speaking IT HR・Take over of small company・Entrepreneurial・Lack of Security and Intellectual property・Lack of PM

Characteristics

Customized Software, Lower programming

Customized software (Japanese OK), Embedded system

Outsourcing area

①Hochiminh, Hanoi②Danang

①Costal areas(Beijing, Shaghai, Dailian)②Inland areas

Changes of region

VietnamChinaAspect

Source：CICC


Moving local city for cheaper cost

Dalian

Chendu

Jinam

Beijing

Xian

Shanhai

Manila

CebuDanan

Hanoi

Guangzhou

Suzhou

Chenmai

BKK

HCM

Kolkata

Chennai

Bengalure

Mumbai

Gurgaon


Software Parks in each country

China11 of national scale, 300+ including small size Picture：Dalian Software Park

VietnamEstablished one after another, mainly in Hanoi and Ho chi minhPicture：e-Town, Ho chi minh

MongoliaTrying to gain offshore outsourcing projectPicture：National Information Technology Park of Mongolia

17 was registered to Philippine Economic Zone AuthorityPicture：Cyber Park, Eastwood

Philippines

・Seek employment・Technology Transfer・Acquisition of Foreign currency→try to invite foreign company


Location of Software Parks

Dalian

Shanghai

Hangzhou

Nanjing

GuanzhouZhuhai

Chengdu

Xi’an

Changsha

Beijing

Chengdu


Chronology of China's Software Promotion and Software Parks (Policies)

Software Industry Promotion Action Plan(2002-2005): (No. 47 Document)：：：： Clear policy is set to prioritize locally developed software in government procurement.

Nov. 2002

Policies for Encouraging the Development of Software Industry

And Integrated Circuit (IC) Industry (No. 18 Document)：：：： Target

is set to catch up with the developped countries' level by 2010 in the

area of software industry's R&D and production capability

Jun. 2000

Decision made to set China's 3 major software industry hubs, Beijing, Shanghai Pudong, Zhuhai)

1992

Vice Minister Ceng Pei Yan of Ministry of Information Industry proposed policy of establishing software parks.

Early 1990's

State High-Tech Torch PlanPromotion of high-technology industry（disignation of

national high-technology industry development areas)

Aug. 1988


Software Park Incentives1. National Policy (Applicable to all Software Firms)

Tax Incentives

� 14% of the 17% VAT to be refunded (until 2010)

� 2 years Income Tax Holiday, 50% tax deduction in the 3rd year

� Exemption of Import Tarrif / VAT on imported equipment / technology

� Salary and training expenses of software companies are tax deductible

� 10% lower income tax rate on government accredited China's National Priority Software Enterprises (updated yearly, 172 companies in 2003)

� Other incentive policies addresses: Investment & Loan, Export, Revenue Sharing, Human Resource, others

2. Local Government Incentives / Software Park Incentives :

� Individually different

� Lots of Incentives in each Parks, but importantly, prompt & punctual procedure and reliable management


� Establishment of branch of in Japan –China, India, Phil, Vietnam, working as a bridge of offshore development.

� Visiting Japan from local city of China, or other countries, to call for investment with priority policy

� Difficult to find the job at programmer level in each country

Recent TrendRecent Trend


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財団法人国際情報化協力センターCenter of the International Cooperation for Computerization

www.cicc.or.jpasai＠net.cicc.or.jp

trends in offshore software development in japan

Documents