Tata Consultancy Services Ltd. (TCS), India’s largest software exporter, is seeking alliances with companies in Japan as it aims to increase sales in the world’s third-largest economy 20-fold to $1 billion.

The software provider is talking to potential partners and building relationships with customers in a market where joint ventures are preferred, Vish Iyer, head of Asia Pacific at Tata Consultancy, said in a phone interview yesterday. It also plans to hire more Japanese nationals and win clients in industries including financial services and automobiles, he said.

Tata Consultancy and smaller Indian rivals are grappling with increased rejection of visa applications in the U.S., where the company gets more than half its sales. The software company expects to sustain 20 percent sales growth for the foreseeable future and is looking to add more business in markets such as Japan, according to Chief Financial Officer S. Mahalingam.

“Japan as a market is a bit more insular,” said Ankur Rudra, an analyst at Ambit Capital Pvt. in Mumbai. “A joint venture might be a route to accelerate the process.”
Japan, the largest market for information technology goods and services after the U.S., accounts for about 2 percent of India’s total software and outsourcing exports, the New Delhi- based National Association of Software & Service Companies said in March.

India’s software exporters have found it harder to win customers in Japan because of language and cultural barriers, Ambit Capital’s Rudra said.
‘Low Penetration’

Still, companies such as HCL Technologies Ltd. (HCLT) are trying to add business in Japan lured by the market’s size. Information technology spending by Japanese government and businesses will grow 6 percent to $136 billion in 2011, according to Cambridge, Massachusetts-based Forrester Research Inc.

“The attractiveness of Japan is that penetration is low,” Iyer said. “As a market they were not open to outsourcing as we understand it. Usually it’s been done through a subsidiary run by a former chief information officer, a joint venture with another company, where they hold a majority.”

Japan contributed about $50 million in annual sales and the company aims to boost that to $1 billion, Mahalingam said in an interview on July 15, without giving a timeframe. The Mumbai- based company, which opened an office in Japan two decades ago, now has 10 major clients in the country, he said.

“If in the U.K. I’m making $1.3 billion or 800 million pounds, there’s no reason why it should be less in Japan,” said Mahalingam. “It cannot be a different world altogether.”

Tata Consultancy fell 0.7 percent to 1,132.45 rupees at the 3:30 p.m. close in Mumbai trading after smaller rival Wipro Ltd. (WPRO) forecast revenue at its main information technology business would grow as little as 2 percent this quarter, dragging Indian software exporters lower. Wipro declined 3.9 percent while India’s benchmark Sensitive Index dropped 0.8 percent.

Local Teams

Tata Consultancy has more than 300 employees in Japan, based in Yokohama, Osaka and Tokyo. The software developer has tried to bridge the language barrier in Japan, Germany and France by building local sales teams, said Mahalingam.

“It’s a Japanese organization that we run there–we’ve created a good front-facing capability,” he said.

Tata Consultancy set up a Japanese-language capability center in Kolkata, India about eight years ago to work for customers in Japan, Mahalingam said. Now, it has 1,300 engineers in Pune, Kolkata and Chennai serving Japanese clients.

The software developer is betting that companies in Japan will step up outsourcing to cut costs and boost productivity.

“There increasingly is a mindset change,” said Mahalingam. “When you have an aging population and therefore when you want to increase the efficiency of performance, outsourcing adds to that efficiency.”

Source:http://www.bloomberg.com/news/2011-07-20/tata-consultancy-seeks-alliances-to-lift-sales-in-japan.html