By Supriya Singh,
Japanese companies are rushing to tap India's wealth of highly skilled IT talent, with the latest being flea market app operator Mercari Inc. which established a technology development center in Bengaluru in late June.
Mercari's center will open in July in the south Indian city, considered the country's answer to Silicon Valley, with an outlay of 30 million rupees ($380,000) in capital investment. The company aims to hire 50 to 60 people within the first 12 months to develop services provided in Japan and the United States, it said.
Mercari's entry into India comes after many other Japanese companies opened IT operations in the South Asian country during the pandemic. They include MUFG Bank, which started a subsidiary for system development in February 2020, and Sony Group Corp., which opened a center for developing artificial intelligence in July 2020.
In April, Fujitsu Ltd. also opened a research hub in Bengaluru to jointly work with leading Indian universities in the fields of AI and machine learning.
While most businesses experienced a lull during the pandemic, "deep tech-related services became crucial during that time, causing India to attract more global attention for its technology and talent," said Takashi Suzuki, director general at Japan External Trade Organization's Bengaluru office.
Suzuki, who has been assisting such companies, noted that unlike establishing factories, "it is possible to set up IT offices remotely to an extent and could be one of the reasons why Japanese companies did the same during the pandemic."
Government data shows Japan's tech market is expected to suffer a talent deficit of some 790,000 people by 2030. India, on the other hand, has approximately 1.5 million engineering students graduating each year, according to a report by JETRO.
For Mercari, the move to open its first office in India, following development bases in Japan and the United States, is aimed at hiring engineers on a larger scale. In 2018, the company enlisted a cadre of 29 engineers from different branches of the top Indian Institutes of Technology and brought them to Japan.
"We want to expand our capability in such a way that it provides a scale to the number of businesses we are growing...and Mercari India is one step for that," said Mohan Bhatkar, head of engineering at the development center in Bengaluru.
Opening a new office will also enable Mercari to retain talent by providing its employees the flexibility of working in India and Japan, 34-year-old Bhatkar explained.
Currently, 50 percent of engineers at Mercari are non-Japanese, and many are Indians.
"Earlier, companies used to outsource work to India or relocate a few engineers from there, but with improving quality Indians are becoming an integral part of any IT company," he said, adding a sharp rise in highly investable "unicorn companies" in the South Asian country is another appealing factor for outside firms.
In 2021, India ranked third globally for the number of unicorns, or unlisted startups valued at more than $1 billion, according to a report by Hurun India.
E-commerce giant Rakuten Group Inc. also employs many Indians. An official said that of the 20 percent foreign staff at its Japan offices, around 1,000 hail from India.
After opening its first office in Bengaluru in 2014, the company has established research and development centers in the city of Indore in central India and the capital Delhi following the announcement of the launch of Rakuten Mobile in 2018 and Rakuten Symphony, its cloud-based business-to-business offering, in 2021.
"India is a vibrant growth market and a great source of top talent and ideas...We continue to invest in our operations in India to attract top IT professionals" to drive the development of mobile, internet, fintech and e-commerce services, Yasufumi Hirai, group executive vice president and chief information officer at Rakuten told Kyodo News.
A dire need for software engineers, however, is not the only reason why Japan has become an attractive lure for such talent.
The flexible nature of Japan's tech industry, which has fewer entry barriers such as language, along with progressive human resource policies compared to non-IT companies, makes it attractive, Bhatkar said.
Kaustubh Hiware, a 25-year-old Indian backend engineer at Mercari, said the flexibility of "when and where to work" adds to the allure of his industry. His company also encourages its employees to pursue side jobs such as speaking at events, angel investing and consulting.
Fewer and fewer tech companies require staff to operate in Japanese as compared to a decade ago, says Vaibhav Kumar from India, who has been working as a software engineer in Tokyo for around 10 years.
But the IT industry in the world's third-largest economy still lacks an innovative streak partly "due to lack of global talent, which includes not only engineers but also managers and leaders who can understand and adopt data-driven, agile product development strategies," Kumar, 34, added.
A lack of competition and experimentation in Japan's tech industry is also causing the country to lag.
Comparing the situation in India, Kaustubh said, "India has a lot of competition because of a large population and diversity. More people need more innovation, resulting in more companies," and even faster adoption.
"Somehow, if Japan harnesses the power of 'taking a swing,' the IT sector here can go as high as countries like India, U.S., China or some European countries," he added further.
To attract more foreign talent that can bring innovation to Japan, Kumar suggests firms "support engineering teams to keep updating their skills, improve compensation and support English in the organizations, to name a few."
