As Japanese clients shift toward more localized operations, local personnel are taking over as decision-makers, replacing Japanese representatives. As a result, projects that previously would easily have been received using connections at the clients’ Japan head office are now being placed with local IT solutions providers, whose local staff have strong connections. One of the reasons for this is that Japanese enterprises tend to lag behind local IT solutions providers in terms of technical capabilities, price competitiveness, and/or ease of work in terms of language or customs. Consequently, Japanese IT solutions providers are finding that whether they win or lose orders comes down to strategic pricing. While this may not necessarily be the case for supply chains, accounting, or infrastructure, where the global linking of transactions is essential, this trend is more pronounced in sales and other domains that are firmly rooted in local areas.

The US is a leading IT market, home to many of the world’s most advanced IT personnel and companies, and a hub of intense competition. As Japanese IT solutions providers become increasingly displaced by more locally competitive IT solutions firms, a shift is emerging toward models that entail the global expansion of existing systems used by Japan head offices.

For instance, Japanese manufacturers are transitioning from traditional service models focused on selling tangible products to offering "experiences." In the US, their digital divisions are partnering with local IT solutions providers to leverage advanced technologies and the abundance of highly skilled IT personnel to develop innovative, client-focused services. In these cases, as clients expand their operations globally, these service platforms—developed in the US under the direction of Japan’s head offices—are being rolled out as global platforms, with the US locations collecting usage fees from overseas subsidiaries.

At the current rate, Japanese IT solutions providers might be unable to maintain their longstanding positions overseas. To stay competitive, they must rapidly strengthen their overseas businesses to guard themselves against the changes in their overseas business environment.

Many executives of Japanese IT solutions providers are highly capable leaders who have grown their companies’ domestic businesses over many years and they are deeply familiar with the strategies that brought success in Japan. However, compared to the executives of Japanese manufacturers who are highly experienced at doing business overseas, there are conspicuously few with the same abundance of hands-on overseas business experience. As a result, when seeking to strengthen their overseas operations, they often default to “expanding successful Japanese models.” Their strategy typically involves bringing products, services, and know-how tailored to the Japanese market to foreign markets, with minor localization adjustments. This approach forms the core of their efforts to grow internationally.

At Japanese IT solutions providers, very few personnel have amassed much hands-on overseas business experience, such as living abroad for five years or longer. Those with such experience tend to be transferred between overseas sites, forming a small minority within their companies. These individuals may already have promoted “expanding successful Japanese models” to the overseas counterparts of their Japanese clients, only to face less favorable reactions than expected, leaving them in desperate need of change.
In addition to language barriers, they have encountered the difficulties of value alignment in those local settings. For instance, one individual shared that “I’d wanted to have a conversation with my foreign clients and colleagues as we looked at the same situation in front of us, but we were focusing on different things and talking past each other, leading to frustrations and disappointments on both sides. After that, I felt strongly how important it was for us to take the time to understand each other’s values better”.
This illustrates a broader issue: Japanese IT solutions providers, having grown steadily in the domestic market, often adhere too closely to their successful experiences in Japan. The lack of personnel with substantial overseas experience creates a divide within these companies. On one side are those ensnared by their domestic successes, and on the other are those who, having experienced failures abroad, are more cautious about relying on past successes. Not only does this imbalance in overseas business experience among management exacerbates decision-making challenges, but when most corporate executives have little to no international experience, it further slows the decision-making process, especially in global operations.

While successful examples of Japanese IT solutions providers like NTT Group and Hitachi Group expanding their overseas businesses are well known, many have also drawn lessons from Japanese manufacturers, such as Toyota’s Lexus brand or Daikin in North America. These companies initially entered overseas markets by “expanding successful Japanese models” but later pivoted by deeply understanding market characteristics and client needs. They anticipated changes in these needs and introduced new products leveraging their technical expertise from Japan. This client-oriented approach enabled them to achieve remarkable growth abroad.

The key takeaway here—one that addresses the gap in overseas business sensibilities—is the importance of being relentlessly client-oriented. To achieve this, Japanese IT solutions providers should focus on the following:

1. Engage Directly with Clients: Visit clients in overseas markets, ideally meeting with local decision-makers, to understand their position and challenges. Conduct thorough discussions to anticipate changes in their near-future needs.
2. Align Strengths with Client Needs: Identify which strengths from your domestic successes can address client challenges and determine what internal changes or new focuses are necessary to meet their evolving requirements. Develop a clear strategy by recognizing your business’s unique core value—and be prepared to adapt, even if it means overhauling your entire approach.
3. Collaborate Closely: Stay near your clients, execute strategies alongside them, and grow together.

By fully embracing a client-oriented approach—focusing on the client’s needs as the foundation for decision-making when internal opinions differ—Japanese IT solutions providers can achieve greater success in overseas markets.