How to Bring Your SaaS Business to Japan: Essential Points to Consider
Thinking of bringing your software as a service (SaaS) business to Japan? This article takes a brief look at the current climate of SaaS businesses and key concerns to think about when considering entry into Japan’s SaaS marketplace.
According to the Ministry of Economy, Trade, and Industry’s 2018 Specified Service Industry Survey (Japanese PDF), the number of establishments in the software industry was 21,953 (down 2.9% from the previous year). However, annual sales for this industry sector were up by 5.2% from the previous year, with demand expected to rise.
The need for software solutions in Japan to speed up business efficiency is clear and present, underlined by government subsidy programs supplementing the purchase of software to improve business’ labor management systems and automation.
Additionally, with the Suga administration focused on pulling Japan out of its print-and-paper habit to operating more fully online, these indicators point to ideal timing for bringing your SaaS company to Japan. What precautions should you take? What should you know before you begin? Let’s take a look.
1. Fully remote vs. going local?
There are no particular regulations on selling software in Japan or to a Japanese audience. But the usual incorporation procedures apply for opening either a Kabushiki-Kaisha (KK) or a Godo-Kaisha (GK). Yet, some experts caution against setting up a physical office in Japan, pointing to the financial risks of doing so.
“Opening a Japan office is obviously a significant undertaking and can be a distraction from your core business. If you can find native speakers of Japanese in your area and have them join your team, that would be ideal. However, you may want to consider having them on a contract that is somewhat flexible in nature in case you later need to pull out of Japan to save costs. This has happened to several SaaS vendors in times of financial crises. The ones who survived often came back to the Japanese market years later to resume the process.” (Source: “Localizing Your SaaS into Japanese: A Primer,” Xtra)
Instead, they propose you hire freelancers who can understand the Japanese market, speak Japanese, and serve as your proxy in marketing and sales. Since you are selling a digital product, you won’t have warehousing needs. You will be able to operate with a fully remote freelance workforce, keeping costs minimal and pushing investment toward other essentials, such as localization and marketing—the two primary issues facing selling your software in Japan.
Still, if you are creating or have created software that addresses a Japan-specific need, then there’s a strong case to incorporate a company here. MakeLeaps co-founder Jay Winder writes about his journey doing so in this article, “Everything I’ve Learned about Selling SaaS in Japan.” MakeLeaps, an invoice software tool that helps businesses in Japan, won the Good Design Award in 2019.
Winder summarizes his experience as follows: “[Much] of what we’ve learned has only been possible because we’re on the ground and able to directly contact and interact with our customers. For a SaaS product targeting the Japanese market, you will absolutely need a team on the ground to get you the information you need for your build/measure/learn cycle. Success in Japan is very rarely achieved accidentally. In our experience, your realistic options are either to build a team in Japan, or to partner with a company in Japan experienced in market entry.”
Whether you establish a company here yourself or hire a remote team that will be your eyes and ears on the ground—building a competent bilingual team will be a definite challenge in either case, which we cover further below.
2. Localization and marketing considerations
Localizing your software will be one of the primary goals you must initially tackle. The difference between translation and localization is as follows: translation finds an equivalent meaning from one language to the next; localization addresses cultural and non-textual aspects to provide messaging that is meaningful to a local audience.
Machine translations might be sufficient for some aspects of your software as a service. Still, for marketing endeavors that aim to clinch sales—such as advertising, website copy, social media posts, direct sales letters, etc.—you will need to localize to suit Japanese business and consumer needs. Some localization sites to consider are LingoHub and Crowdin.
Marketing is another crucial consideration, and you may wish to hire an agency to help you with running ads or a social media campaign. You may find agencies out of your budget range. If you are attempting to remain light on your feet, then consider hiring contractors in the copywriting, graphic design, and marketing fields, selecting those who are bilingual in English and Japanese.
Take note: Top-talent contractors who are also bilingual are rare because individuals with English and Japanese fluency get snapped up quickly into full-time positions.
Of course, if you are willing to hire full-time, pay industry-average salaries, and are prepared to incorporate your business in Japan, then your chances of finding and hiring bilingual top talent will further improve. In either case, establishing a strong team in Japan—full time or as contractors—is essential to winning sales and making sure that your service is meeting consumer needs.
An alternative solution to staffing issues is to use a bilingual virtual assistant service as a liaison point between your needs—as you direct from overseas—and your Japanese contractors. This setup will widen your talent pool considerably.
Further reading resources
Localizing Your SaaS into Japanese: A Primer, Xtra.global
Cloud computing in Japan (Regulations), Lexology
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