Japan may be the next port of call for the Indian IT services industry, which is currently facing lot of uncertainties from its prime bread-winning market, the US. The attempt now is to widen the scope of operations to destinations like Europe and Japan.

Apex IT industry body Nasscom is currently working on a study to evaluate the outsourcing opportunities from Japan, the world's second largest economy. Given its stronghold in the automobiles and consumer electronics space, Japan's IT spending on engineering design and services is high.

Says Nasscom vice-president Ameet Nivsarka: ?Revenue from Japan hardly contributes to 3% of our total software services exports. We believe Europe and Japan offer huge potential for Indian vendors.?

Some Indian players are ready to carve a fair size of the Japanese outsourcing market. Infosys, for instance, entered into a pact with Nihon Unisys to combine its global delivery model with the latter's strength in the Japanese market. Similarly, Wipro Technologies, the global IT services business of Wipro gets around 3% of its revenue from Japan. It also has key alliances with some of the leading Japanese corporates including NEC.

Infotech Enterprises has announced its entry into Japan with offerings in engineering design services. Infotech has also hired local talent, Kazuya Fujinaga (formerly with IBM Japan) and Masamichi Migita (earlier with Dassault Systems Japan), to spearhead its foray. Patni Computer and KPIT Cummins also have substantial presence in the Japanese market.

An IT analyst says, local talent and understanding of IT buying behaviour of corporations in Japan are critical to make a foray into this market. Unlike the US market, which has been more open to IT outsourcing, in Japan it takes a considerable period of time to build the relationship and get a contract.

According to a Japan market study by neoIT, an offshore advisory firm, the total IT services sector is estimated to be around $50 billion. Less than 2% of this market is offshored, with China getting the majority share. China, with its large talent pool and a cultural and language compatibility are better able to serve the Japanese market.

However, currently Japan's outsourcing requirement is for embedded software and solutions and a lot of low-end work (testing and coding). When it opens up for more complex solutions Indian services majors will see a traction coming from this region, says neoIT senior director S Sabyasachi.

Some of the major Japanese companies already offshoring include NEC, Nissan, Sony, Toshiba, Hitachi, TIS, NTT, Japan Telecom, Toyota, Panasonic, MKISS Co. Ltd, NCS, Fujitsu, Kawasaki among others.