DJ Selects: What You Need to Know To Sell Services (and Saas) in Japan

Selling services in Japan is very different than selling products or software.

Everyone knows that relationships are important in Japan, but not many people understand why they are so important, and how you can use that understanding to build a successful business here.

Today Sriram Venkataraman explains how he grew InfoSys Japan from a one man operation to over 1,000 employees and how understanding why Japanese enterprises must trust their vendors far more than companies in other developed countries.

And we dive into what that means for the new generation of SaaS startups.

Our conversation is basically a blueprint for how to grow a startup from nothing to thousands of people in Japan, and I think you’ll enjoy it.

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Transcript Welcome to disrupting Japan straight talk from Japan’s most successful entrepreneurs.

I’m Tim Romero and thanks for joining me.

I’ve got another great Disruption Japan Selects show this week. And this show, well this was one of those conversations that have really stuck with me over the years. In fact, if you are interested in selling to large Japanese enterprises, then this might well be the most insightful conversation that’s ever happened on the topic in English.

Over the course of a decade, Sriram Venkataraman grew Infosys Japan from one employee to well over 1,000 before retiring to work with startups. In this episode, we cover why so many foreign companies have trouble selling to Japanese enterprise, and the one critical thing you need to do if you have any hope of building a long-term business.

And afterward, I’ve got an update for you. I caught up with Sriram the other day and I mentioned that the recent popularity of SaaS products seems to contradict some of the advice he’s about to give. But it turns out it doesn’t.

The successful Japanese SaaS companies are playing by very similar rules to those we outline in our conversation. and I’ll give you that update at the end of the episode.

So please enjoy the show. First Intro Today we’ve got some amazingly good advice for anyone who wants to sell services in Japan. Selling products or software is challenging enough, but selling services where relationships mean everything and where the quality expectations for service is perhaps the highest in the world, that provides a host of very special challenges.

Today we sit down with Sriram Venkataraman, as he explains how me manages to scale Infosys, which provides outsourced Indian development services, from 2 people, to over 1,000 people in Japan. In a very real sense, he did it with a strategy that is pretty much the opposite of what you would expect from an Indian software services company.

This is a real insight into the mind and the buying decisions of Japanese enterprise customers and Sriram has a different, very compelling perspective, on why so many foreign companies have trouble gaining real trust in the Japanese market. We talk a lot about finding the right people here in Japan, and how to avoid the hiring traps that western firms commonly fall into. Really, this interview is basically a blueprint of how to grow from nothing to 1,000 people in Japan.

But, you know, Sriram Venkataraman explains that much better than I can. So let’s hear from our sponsors and get right to the interview. [pro_ad_display_adzone id="1411" info_text="Sponsored by" font_color="grey" ]

Interview Tim: I’m sitting here with Sriram Venkataraman, of Infosys, and you have been with Infosys from the very beginning in Japan, and you’ve seen it grow from a tiny team to over 10,000 employees here now, haven’t you?

Sriram: Not 10,000.

Tim: No? That was on the website.

Sriram: Our total Japan business is probably about 1,000 people today. But given the business model, not all of them are here. Roughly 65 to 70% of the teams are in India and the balance are here.

Tim: Okay, let’s actually back up a bit to 20 years ago. The Japanese market is obviously a very big one but system integration is always a very local game, so what attracted both you and Infosys to the Japanese market in the first place?

Sriram: So Infosys was founded by 7 people. The senior founder, I think he’s a true visionary. So one of the important dimensions for Infosys was, “How do we move away from a large dependence on the market of the United States?” Because our business is quite dependent heavily on the mobility of people’s ideas. If you are dependent only on one market, if there is a regulatory change, or if there is something else that happens, then you are not going to be able to sustain the productions that you make.

Tim: And back then, what percentage of the revenues were coming from the US?

Sriram: The year I joined, this company had a global revenue of $26 million. I was I think sales employee number 10.

Tim: But that was—so this was ’96?

Sriram: And ’97.

Tim: So this was at the very start of this global outsourcing—

Sriram: Absolutely. And at that time, we were at what, 78% of our revenues, or something like that, was from the US. We had just started Europe a couple of years ago, and we had just started some stuff, and the next extension was to figure out Asia. Japan, obviously, was of interested, just given the GDP size. And the company tried to do some experimentation through some remote sales, if you will. People came, then they realized it was simpler to have somebody here. And that was in ’96. Through a strange set of circumstances, I got introduced to this company.

Tim: How strange? Is this something you want to talk about?

Sriram: Yeah, I can discuss. So I was doing very well in another Indian company, and I had been there for almost 6 years, and I was responsible for new product development and new businesses. We were developing the computer peripheral business in India and India deregulated in ’91, and then the economy really started picking up. I think IT is the only industry where India has always kept pace with the global level. Every other industry, we started from behind. I think it was just perfect timing that when India started to open up, computing was also getting democratized thanks to the PC and stuff like that. So my job was to manage our technical partner, who was over in Japan. And I visited Japan a couple of times, and when I came to Japan, one of the things that really struck me was how is it that a country, which lost everything in two wars, come up like this in 50 years? It is not that Indians, on an average lack an intellect—also, they work very hard. What is it that makes this county so successful that we are not able to duplicate in India?

Tim: I’ve got to ask, did you manage to figure that out?

Sriram: Yes and no. lot of it has to do with how well they work with the cultural context that they have. And the notion of common good being more important than a private good, I think drives this place pretty well. Economically speaking, I think METI did a brilliant job of figuring out what this country identity is going to be from from an economic sense. They went from ship building, steel, automobiles, electronics, semiconductors, and so on. But all of it I think was a very carefully planned, orchestrated resources allocation, managing the industry in such a way that there is limited competition, which is incentive enough for everybody to stay competitive, but at the same time, not so unlimited that nobody is making money.

Tim: And they were highly competitive in the global markets.

Sriram: And they would go together as Japan Inc.

Tim: It worked incredibly well until about 1990 or so.

Sriram: When I was doing this printer business, obviously we had a relationship with one of the Japanese companies and there was this other Japanese company that had something very interesting. And it is almost sacrilegious to even think that you would even talk to the other company, but I did, just to explore because the technology was changing, and the other company was a little ahead in the new stuff. But before I knew, the other guys knew that I had met these guys. And it goes on from our side.

Tim: The relationships in Japan are so important. And actually, let’s dig into this because I think what Infosys was selling, these relationships and services—it’s fundamentally different from coming into Japan and trying to sell hardware or consumer brands, or enterprise software. When you first came to Japan, how big was the team and what did your first deal look like?

Sriram: Before that, let me just finish the moving story. I was doing very well and because India had deregulated a whole bunch of multi-nationals who were coming in, one of my customers actually left his job and started a headhunting firm. And this guy was calling me every day, saying this company wants somebody, that company wants somebody. And I kept telling no to this guy and one day he called me and he said, “What do you want to do?” And I thought I would get him off my back by saying, “The next thing I want to do is I want to work overseas, and in Japan only, thinking that this guy would never call me. The next morning, at 6:30, he calls me. He said, “Infosys was looking to do something in Japan, you promised me, so you will go and meet these people.” I said, “Yeah, a promise is a promise; I will go and meet these people.” And usually people say you should never change your job, your home, and city all at the same time, and I did all of that. And I also changed industries. I had no idea about what the software business was. But I just had this foolish energy in me that said, “How bad can it be? How hard can it be?”

Tim: I think in some ways, coming to Japan with no preconceived notions at all might be an advantage.

Sriram: Yeah. Then I joined the company and I was told that,