TT-679 -- Interesting New Outsourcing Trends, ebiz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, September 23, 2012, Issue No. 679


- What's New -- Interesting New Outsourcing Trends
- News -- 90% of disabled feel discriminated against
- Upcoming Events -- Entrepreneur seminar
- Corrections/Feedback
- Travel Picks -- Cape Kamui, Hokkaido and Fuji in Nagoya
- News Credits

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Some interesting things going on in the world of
outsourcing recently. What with the persistently high yen,
the government increasingly pressuring employers to choose
between full-time workers or nothing, and the overall
increase of employee social welfare compulsory
contributions -- changes in this sector shouldn't be

First up, the expansion of Japanese companies producing
garments in Myanmar. In 2010 Japan became the largest
destination for that country's apparel exports, accounting
for about half the output of its 250 or so factories. The
Nikkei covered the experience of casual clothing
retailer Honey's, which in April this year inaugurated its
first self-owned apparel factory outside Japan. The new
Honey's plant is located in Mingalardon Garden City in
Yangon, employs 600 people, and turns out trousers that
sell in Japan for just JPY1,400 each.

What's notable about Honey's is that the company is a
dyed-in-the-wool user of outsourcing suppliers,
producing 30m pieces of clothing (90% of its total output)
annually with this model. However, after one of its prime
suppliers in China went belly up due to rising wages, the
company embarked on a China-Plus-One strategy that would
revolve around setting up its own factories elsewhere.
Thanks to good timing and a zero import tariff incentive
program for Myanmar, they settled on Yangon for their new
off-shore production center.

Whatever you may think of first-world companies exporting
jobs to low-cost locations, the profit motive for Honey's
is very compelling. The Nikkei said that the average
salary for machinists in Myanmar is just US$95 a month.
This is an amazing 80% cheaper than machinists in China and
also cheaper than producing in Bangladesh -- the other
major destination for many apparel makers wanting out of
China. Uniqlo produces in Bangladesh. With costs like this,
it's not hard to see a huge trade boom happening between
Myanmar and Japan over the next 3 years. Also, with 62m
citizens, Myanmar is likely to become a major export
market for Japanese goods in the mid-term as well -- sort
of like what has been happening in Vietnam...

[Continued below...]

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Next up is the August 26th acquisition by Fujifilm of the
direct mail Business Process Outsourcing (BPO) operations
of Salmat in Australia. Fujifilm paid AUD375m for Salmat
Document Management Solutions Pty. Limited (SDMS) and its
various related entities, which apparently were earning
around AUD49.5m in EBITA -- not a bad deal for Fujifilm.
Now, you might wonder what an imaging and pharma
conglomerate wants with an Australian BPO firm?

According to the press release put out by Fujifilm, and
getting past the "synergies" part, Fujifilm really wanted
SDMS' customer base and know how in profitably monetizing
offshore BPO services. SDMS will help Fujifilm expand its
BPO business in China and elsewhere in Asia, piggybacking
on SDMS' existing clients, data systems, service offerings,
and outsourcing centers. It looks like Fujifilm sees BPO as
the logical next step in evolving from a struggling printer
business (we covered this downtrend in TT676, where we discussed potential threats
in the printer business to Seiko Epson).

Given that Fujifilm is not the only Japanese conglomerate
building a BPO business in China for processing office work
in Japan, their acquisition marks an acceleration of the
trend. It may also be a sign of how Japanese worker
demographics will change over the next 5-10 years. Our take
is that it's not just manufacturing jobs that will
disappear -- back office positions will probably evaporate
as well.

In the next news item last week, IT behemoth (US$54bn in
sales) Fujitsu announced that it is launching a global IT
outsourcing service for Japanese firms expanding abroad.
The new service is dubbed Workplace-LCM and is an
end-to-end cloud-to-work desk support service for users no
matter where they are. With its 170,000 employees in over
100 countries, Fujitsu's claim that it will tie all parts
of their client's organization into a single service
delivery platform is no small thing, and could remove some
of the hesitancy that some Japanese firms are having about
expanding abroad. At very least it will allow clients to
avoid having to bulk up on foreign and bilingual IT staff.

The devil is in the details of course, and there is no
indication of what the service will sell for, but it will
probably be competitively priced, if only because they
will have competition from Indian firms. We do wonder where
Fujitsu will get its own bilingual staff from, given the
ongoing shortage of bilingual IT people in Japan. However
we can guess that they will leverage existing resources by
using a pyramid-style service offering -- comprising of a
few front-end Japanese-speaking service desk personnel who
flow out work requests and system specifications in the
various local languages. Fujitsu's revenue target for its
Workplace-LCM service is a cool JPY100bn.

It goes without saying that a major reason for companies
like Fujifilm and Fujitsu expanding abroad is because their
home market is shrinking -- partly due to intense
competition, but mostly due to the fact that companies are
pulling back in terms of manpower. You don't see it in the
unemployment statistics, but then, given how people are
taken off the job seeker rolls after just 6 months or are
settling for temporary jobs, the unemployed and
underemployed are nonetheless increasing. As of 2011 the
number of people in the overall workforce fell by 4m people
-- and this is not just due to the baby boomers starting
to retire. Further, of the 49m employees in Japan, only 32m
were regular staff and 17m were irregular (read,
underemployed, willingly part-time, short-term contracted,
or outsourced).

So that brings us to the last outsourcing news item for
this Take, which comes from the outsourcing sector itself.
The world's largest outsourcing firm, and one of the top 5
players in Japan, Adecco, announced this last week that its
Japan revenues dropped 10% year-on-year, to EUR379m.
Although Adecco Japan managed an EBITA increase of 8% to
EUR23m, put into context, the 10% sales fall came only
after including the new VSN business revenues, which
Adecco acquired in Q1 this year for EUR90m. Given that
Adecco is one of the world's most accomplished outsourcing
firms, this result is not a particularly good sign.


Finally, a last call for next weekend's Entrepreneur
Handbook Seminar, our quarterly workshop on how to start,
run, and sell a company as a non-Japanese in Japan. See the
listing below in Events, or go direct to for details.

...The information janitors/


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+++ NEWS

- Speech training device gets Ig Nobel award
- Japan-related publishing suspended in China
- 90% of disabled feel discriminated against
- Anti-Japan protests come with high cost

=> Speech training device gets Ig Nobel award

Whether or not the Ig Nobel awards are worth making, some
of the inventions they recognize are nonetheless a lot of
fun to read about. Apparently two Japanese researchers
from the Institute of Advanced Industrial Science and
Technology (AIST) were recognized this year for a side
effect of an invention they created to help public speakers
enunciate and time their presentations properly. The
SpeechJammer comes with a 100ms reverb function that causes
people to become distracted as they listen to themselves
and thus they stop talking. A very handy device to have
when you're visiting a mother-in-law! ***Ed: Actually, we
notice this effect all the time when having someone do
simultaneous interpretation and if the interpreter's booth
is not properly sound insulated.** (Source: TT commentary
from, Sep 22, 2012)

=> Japan-related publishing suspended in China

Anti-Japanese feeling has been running deep in China, and
is being extended across all areas of bilateral relations.
Publishing became the latest casualty this last week, when
Beijing city officials ordered publishing houses to suspend
the release of books about or related to Japan. The
expectation is that the ban will spread beyond Beijing to
other locations. ***Ed: Actually, it already has spread. On
Friday our sister company Metropolis tried to post in
Chinese on a major blogging site an article about ancient
fossils in Gifu, only to have the posting removed a mere 10
minutes later by the hosting firm itself. Not sure why
fossils are politically sensitive, but this little anecdote
goes to show how deep the censorship runs.** (Source: TT
commentary from, Sep 21, 2012)

=> 90% of disabled feel discriminated against

The ugly side of Japan is its lack of empathy for the
disadvantaged in society, be they single moms, foreigners,
or in this case the disabled. A Cabinet Office survey of
3,000 disabled adults found that 89.2% of them felt
discriminated against, an increase of 6.3% from a similar
survey conducted back in 2007. After seeing the results of
the survey, the government is apparently going to table a
bill to ban discrimination of the disabled as well as to
increase the number of ramps, Braille signs, and other
forms of assistance. ***Ed: Now, if only they would view
foreigners as disabled, then we could ask them to ban
discrimination according to race as well.** (Source: TT
commentary from, Sep 22, 2012)

=> Anti-Japan protests come with high cost

Japan's major auto makers Toyota, Nissan, and Honda
estimate that collectively they have lost about US$250m in
output due to the anti-Japanese protests in China.
However, while this number is a direct estimate, the makers
are also highly concerned about potential lost sales due to
the fact that some owners of Japanese cars are scared to
drive their vehicles in public. Nissan has apparently
already resumed production in China, but Toyota and Honda
have still suspended activity at their factories. When all
three halted production, their collective output fell from
14,000 cars a day to zero. ***Ed: Given that Nissan hopes
to sell 2.3m cars in China annually by 2015, this is a big
problem for them if it gets worse.** (Source: TT commentary
from, Sep 20, 2012)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.


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Entrepreneur's Handbook Seminar 29th of September, 2012

If you have been considering setting up your own company,
find out what it takes to make it successful. Terrie Lloyd,
founder of over 17 start-up companies in Japan, will be
giving an English-language seminar and Q&A on starting up
a company in Japan.

This is an ideal opportunity to find out what is involved,
and to ask specific questions that are not normally
answered in business books. All materials are in English
and are Japan-focused.

For more details:



In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

=> No corrections or comments this week.



=> Cape Kamui, Shakotan peninsula, Hokkaido
Soak up the beautiful coastal scenery

Cape Kamui, on Hokkaido's Shakotan peninsula, is great stop
for any sightseer, assuming you come by car or bus. From
the parking lot, a maze of trails weaves its way to a
series of viewpoints overlooking the Sea of Japan. Hints
of historical intrigue begin at a signboard noting an
area that was once off limits to women. The legend has it
(clumsily summarized) that a native Ainu chief's daughter,
devastated over the sudden departure of a man she loved,
shouted a curse dictating that any woman passing the cape
on a ship would die; she herself then jumped into the sea.
For the whole story, search online for the legend of Kamui
rock, but for now, enjoy the pictures...

=> Fuji, the Floating Antarctic Museum, Nagoya
Retired ice breaker that plied the South Pole

Sitting in the Port of Nagoya’s Garden Wharf, opposite the
Nagoya Aquarium, is a large, bright orange and white ship
with a large Sikorsky Sea King helicopter riding piggy
back. This is the Japanese Antarctic survey ship, Fuji, a
retired ice breaker that plied the South Pole for 18 years
starting it’s first journey in 1965.

100 meters long, 11 meters wide and 22 meters high with a
displacement of 5,250 tons, the diesel electric powered
Fuji boasted a speed of 17 knots, (about 35 kilometers an
hour) and carried a 245 capacity full crew and research
team. The Fuji could break through ice as thick as 80
centimeters. After many successful missions, Fuji was
finally retired to its current location.



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