Thank you, Hitoshi Suzuki, for taking the time to answer some of our questions regarding the Japanese HR Tech market.
Q: Can you please tell us a little about yourself and how you got involved in HR Tech in Japan?
A: I am the Co-Founder and CEO of Hackazouk which provides Official-Alumni.com, Alumni Relationship Management System, in Japan and the Philippines to help companies stay connected with their alumni. I also frequently write and speak on HR Tech (examples here, here and here).
The turning point for me was after I moved to Singapore in 2011, having completed several HR/recruiting (Google) and consultant roles for a couple of years in Japan. I shifted from consulting to tech, since the government there was more supportive in digitalization of HR operations in terms of grants, etc. That’s also when I started looking more into HR trends in the US and found out that HR Tech in Japan was lagging even more behind than I thought. Upon my return to Japan last year, we launched the Alumni Relationship Platform in Japan and in the Philippines.
Q: How big is the Japanese HR Tech Market?
A: The HR tech market in Japan is said to be somewhere around 80 billion US dollars, but the majority of this applies to traditional job portals, temp staffing, and recruitment agencies (note that agency fee is averaged at 30-35% of annual compensation in Japan, and agency still is the one of the top sources in Japan even for the entry level; more about that below).
It’s hard to say how big the HR Tech market in Japan is because the definition of HR Tech isn’t so clear.
According to MIC Research Institute Ltd., a Japanese research company, the HR Tech market size in Japan for 2017, ATS, HRMS, payroll and LMS sum up to somewhere around 200-300 million USD. This figure is only for SaaS, and I suspect this doesn’t include non-Japanese enterprise ERP/HRIS like Oracle, SAP. It also excludes on-premise software. And that is one of the reasons that keeps the HR Tech in Japan lagging behind.
I will explain myself: for quite a long time, large conglomerate enterprises have had a huge market share in all industries, and most of them would have a system integrator within their conglomerate group. These system integrators develop tailor-made software for their group companies. This led to companies getting used to software adopting to their operation workflow and not the other way around, resulting in low productivity of Japanese workforce. As a result, many large enterprises were not giving HR Tech startups a chance. This is changing now and there are more and more opportunities for HR Tech startups to work with large enterprises.
A: It has always been recruiting and it still is, as companies are allocating a significant part of their budget for that. However, employee engagement has been a hot topic in Japan for the past few years, as they are trying “to plug the hole in the bucket”, as good old Japanese customs of lifetime employment are collapsing. Automation, including RPA, is also growing very strong. The market is craving for innovative HR Tech products and is changing rapidly. 3 years ago, for example, the market wouldn’t have been ready at all for alumni related services, as it is now.
Q: What would you say is special to the HR Tech market in Japan?
A: The language barrier keeps Japanese HR Tech vendors in Japan and we have a decent market size. It’s not that easy for non-Japanese HR Tech vendors to enter the market. This increases the importance of finding the right local partner when foreign HR Tech vendors are to enter the Japanese market.
Another interesting thing about Japan is that recruiting was always more about employers assessing job seekers rather than both assessing each other. Partly because of that (although this mindset is changing too), many Japanese still prefer looking for a job “under the radar” so that their friends don’t see them seeking and applying for jobs. Therefore, the referral recruiting app in Japan is designed with an emphasis to protect the candidate’s privacy and candidates prefer sending resumes through this app rather than sending a CV via their friends.
Being active in the job market is considered a breach of psychological contract with your employer who expects long-term employment.
For the same reason, candidates prefer recruiting agencies, unlike perhaps, other international markets, where the trend is exactly the opposite.
Traditionally, companies don’t specify the roles they are hiring new grads for, and new hires don’t know whether they will start in HR, accounting, sales, etc. This created a situation where the companies are the ones to plan the career of their employees.
This is where Ministry of Economy, Trade and Industry and Ministry of Health, Labour and Welfare are playing a big role trying to change the mindsets of companies, individuals and educational institutes to empower individuals to take over and plan their own careers. This is already taking place and heading in the right direction, but the majority is still playing by the old rules.
Q: What is the status of adaptation of HR Tech applications? Are HR managers keen to try them out? Do they prefer local apps or international ones?
A: I would say many HR managers definitely have preferences for local apps even if they don’t say it out loud. For some, it’s a matter of preference, but in some, for example like HRMS with payroll, they sometimes have no choice but to choose a Japanese app since Japanese payroll is way too complex and localization of an international app just isn’t enough. Having said that, more and more HR managers are keen to use effective apps regardless of whether they are local or international. Sadly, another reason companies use a new HR Tech service would be ‘because everyone is using it”. I’m sure this also happens in other markets, but this is more so in Japan.
I understand how this may sound conservative or negative to the Western world, but this is more of a cultural thing. This can apply in a good way too…If you manage to penetrate the Japanese market and do well with your first clients, many will follow exactly because of that reason.
Q: What are the activities (Meetups? Conferences?) of HR Tech in Japan?
A: There are many small HR Tech Meetups. One of them is “HR Tech 90”, run by Ryoka Sakuragi, who also runs an online media website called HR Tech Navi.
There are few large annual conferences, part of which are HR Tech, but no large HR Tech specific conferences.
Q: And a question for you too Ryoka, can you perhaps recommend a few Japanese HR Tech applications?
(Editor’s note: Many of these sites do not have an English version. This is when Google Translate kicks in..;-))
A: MOTIVATION CLOUD, WEVOX , Geppo, CYDAS, kaonavi, HR Brain,
Smart HR – Smart HR is cloud human resources work software that aims to automate procedures of social insurance and labor insurance that companies conduct.
Scouty – The Japanese version of people aggregation service like Entelo, Connectifier or TalentBin
Editor’s note: We have also covered LUDO here.
And a very cool idea –
Unipos – It’s a tool that enables PEER BONUS, which is like a “third salary” and is paid on a daily basis.
The system enables to see the day-to-day achievements that have been overlooked by management and HR. There’s a mobile app and Slack is being used for it (among other platforms). Basic salary is paid from the company every month. Performance bonuses are paid several times a year and PEER BONUS is paid on a daily basis, as a thankfulness from colleagues! Achievers and Fond are similar
Hitoshi Suzuki can be reached at firstname.lastname@example.org
Ryoka Sakuragi can be reached at email@example.com