Accel North America: Japanese Language Skills, Long-term Perspective Imperative for Japan Business
August 2010 -- Accel North America is the North American subsidiary of a software development company in India called Accel Transmatic. Accel North America represents the parent company's technologies division, which was created in 2000 and had as its first client the Japanese consumer electronics powerhouse Toshiba. Since then, the company has been creating software for Japanese companies and recently established a branch office in Tokyo to better serve them. JETRO spoke with Accel North America's Vice President of Business Development, Mr. Aju Kuriakose, who described the office establishment process and noted some important factors for doing business in Japan.
Opportunities in Japan
Aside from the company's first client being Toshiba, Japan was "the right market"? for Accel North America, said Mr. Kuriakose. Since the company focuses on developing software for consumer electronics, "Japan was a natural choice for us,"? he said. "Some of the most leading companies in that industry are based in Japan."
Working with Japanese companies also gives Accel North America a competitive advantage when working in other countries, he said. "Generally, the high-end technology work is more in Japan, so that gives us an upper edge when we talk to people in other geographies,"? he said. "A couple of companies we are working with here [in the U.S.] chose us just because we were working with Japanese companies. They know the market in Japan is a lot more difficult, a lot more stringent; the delivery has to be absolutely perfect."
Establishing the office
Although Accel North America works with partners in Japan to serve its customers, there was still a need for the company to interact directly with customers. To fill this need, Accel North America established a Japan branch office in January 2008. "Our partners needed support from somebody within the company--front-end people--to help them talk to the customers, so having an office was the only way we could do it," said. Mr. Kuriakose.
To establish the office, Accel North America trained a country manager in Japanese and then sent him to work from the office of one of its partners in Japan. While there, the country manager assessed the potential of having a full-time office, and based on his findings, the company decided to open a branch office.
To gain more information on the formalities involved in setting up an office, Mr. Kuriakose spoke with JETRO. "We got pretty much all the information which was needed to set up a branch office," he said. "I was very impressed. I've worked occasionally with a few other similar institutions, but JETRO was very proactive." Eventually, the country manager in Japan resumed office setup responsibilities, having found it easier to do locally.
Business in Japan
From his experience, Mr. Kuriakose provided insights into doing business in Japan and also drew some comparisons to doing business in the U.S.
- Having Japanese language skills is the most important thing. Knowing Japanese is of utmost importance when doing business in Japan, Mr. Kuriakose says. Every year, the company trains at least 25% of its workforce to take each level of the Japanese Language Proficiency Test (JLPT) to be able to speak at least basic Japanese so they can live in Japan for some time if they have to, he said.
- Cold-calling and mailings don't work; networks do. Business development methods in Japan differ quite a bit from those in the U.S. "Cold-calling and mailings don't work,"? he says. Most of the company's business comes from its network. "Building new accounts can be challenging in Japan. You have to build a network. People have to trust you."
- Companies in Japan not as used to outsourcing as those in U.S. Japanese companies are still in the initial stages of getting accustomed to outsourcing software development, said Mr. Kuriakose. He says there is less clarity in the specifications received from Japanese companies and that the customers they work with are not accustomed to the more frequent interaction that is often required in software development. "What happens is, a customer would give us a piece of work, and they would come back after six months and say, '[Ok, what happened?' But a lot of the work we do is more joint development, where you need weekly calls, daily calls. These do not happen in Japan, so when we have somebody work with our Japanese customers, we train them to do a lot of upfront planning."
Also, Japanese customers often prefer to work through fixed-bid projects, rather than time-and-material. "In our industry, requirements keeps changing, based on how the market becomes, so it becomes really difficult for us to negotiate [as work progresses] if a project is fixed-bid."
- Higher quality, more documentation. "The expected quality of deliverables is much higher than we see in the U.S.," said Mr. Kuriakose. "And a lot more documentation is needed in most of the cases that we've seen."
- Have a long-term perspective. "The typical lead time for us is nine months to at least get entry into a business."? he says. "And most of the time, it takes a couple of more months before you're actually able to make them into a long-term profitable account, so the entry barrier is very high."
"Also, one thing we have learned over the years is that account profitability cannot be measured on a short-term basis; it has to generally be long-term."
Results and Outlook
Over the past few years, Accel North America has been able to achieve its goals in Japan: develop business partners, have a legal entity, and build a good network. The company is engaged with several partners who are helping to gain larger accounts. Ultimately, the company's goal is to have Japan contribute 30% of revenue for Accel North America and around 15% for the parent company. They are also looking to grow their Japan office. "Japan has been a very important market for us, primarily because it helps us stay ahead of the technology curve,"? said Mr. Kuriakose, "so we do expect Japan to play a major role as we go forward."
Japan Company Profile
Japan Company: ACCEL NORTH AMERICA - Japan Branch
Established: January 2008
Business: software development for consumer electronics (outsourcing)
Location: Amanuma Bldg 201, 1-29-5 Sekiguchi
Japan - 112-0014
Parent company: Accel North America
*Note: The opinions contained in this article are based on the experiences of the interviewee. They are not representative of all experiences in Japan or working with Japanese companies, and do not reflect the opinions of JETRO.
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"Setting up a Business" flowchart