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Offshore Development Center is Right Model for Japanese Companies

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Talent Shortage Survey (2016/2017) of ‘Manpowergroup’ shows that Japan is facing the highest talent shortage of 86% which is more than double of the average global talent shortage. The shortage of skilled labor is very much acute in the field of software engineering. Japanese young generation is losing their interest in science and engineering. The demand for custom made software has increased to more than double whereas the number of local skilled worker added is very insignificant in last 10 years causing a huge gap in demand-supply chain.

“The bamboo that bends is stronger than the oak that resists.”

The only option for the Japanese companies is to come out of the national boarder and search for foreign skilled workers. Japan has slowly accepting more foreign engineers but it’s nowhere near the number that industry needs. According to the Ministry of Economy, Trade & Industry, Japan will face a shortage of 369,000 IT engineers in 2020. To meet the talent gap the companies can choose any of the following engagement models though Offshore Development Center seems the most effective.


Foreign Development Branch

Japanese companies can set up their development wing/branch to other countries (like Bangladesh, India, Vietnam etc.) where there is sufficient current and future supply of skilled engineers. Few Japanese companies already working on this model. But this model may not be feasible for many companies due to huge upfront investment and operational risk factors (cultural, political and environmental).

Hire Foreign Engineers

Japanese companies in collaboration with foreign companies can hire, train and deploy foreign skilled engineers into their companies. This model may seem preferable as the engineers will be under full control and supervision. But this model will not work as simple as it sounds. Though Japan is a very good place to live but due to the language and Japanese closed corporate culture many good engineers would prefer US & Europe over Japan. Also, there are many good engineers have lack in language skill. The upfront investment and uncertainty risk of this model is also high. This model may not be feasible for the small and medium sized companies.  

Offshore Development Center (ODC)/ Remote in-sourcing

Offshore Development Center is a globally well accepted concept especially for software development and related activities. There are different variations in offshoring but overall this is a proven and successful model across the globe. This model is more appropriate for Japanese companies. Not only the upfront investment is low but also the associated risk factors are low too. In this model the offshore team will work as the extended team of the Japanese company. It may seem challenging to find a suitable offshore team but there are a lots of examples from which Japanese companies can learn and engage easily.

It was the engineering competency which has made japan the economic superpower. Today they are in deep engineering talent shortage. Japan can full fill the gap by engaging foreign skilled engineering resources, other wise they may face stunting economic growth in near future!

“Tomorrow’s battle is won during today’s practice.” – Samurai Maxim


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Guest Wednesday, 20 January 2021