While establishing a "cause & effect" here seems very hard, from my personal experience working in software field in Japan, I think the winning concept here is actually the combination of removing middleman and paying good salaries.
Japan is very very behind in IT/digitalization compared to most western countries. This doesn't just mean it's behind in product portfolio and quality, but that perception of software engineer & managers and still quite behind. The respect that a lot of software engineers enjoys in US/EU is not quite there yet in Japan(and salary often reflect this).
The C-suite usually doesn't have a firm understanding of software/IT world, and instead ends-up hiring a lot of "Scrum-experts/Agile coaches" and hires software engineers from consultancy or recruitment companies for cheap. There's ofc companies that doesn't fall in this category, but for middle-sized companies in Japan (which is the bulk of the economy), this is the true state of things. Middle-men in Japan have therefore been way more encroaching on this, and they have the incentive to not improve the respect/social standing the software engineers have.
"Removing managers" in this article does not mean the same thing as it would in US/EU, conditions are different.
In my last full-on japanese company it was basically impossible to find any developer with more than 3 years experience by accidental design because:
1: No applicants studied computer science in university so they started learning when they joined the company and were assigned a development role.
2: After 3 years they they got promoted to a "manager" level role and stopped doing development. There was no concept of junior developer -> developer -> senior developer progression. If you wanted promotion you went from developer -> manager; it was the same for sysadmins. Their IT and development suffered heavily for it.
A team of 10 "western" style trained senior developers and sysadmins would have been able to do the work of 50 current employees at least for a large overall cost saving even with higher salaries.
Just the way things worked. Japan is indeed very different when it comes to how the workplace works in relation to tech in traditional companies.
Very true, especially hiring "Scrum-experts/Agile coaches" and cheap engineers from outside.
Based on my experience, they don't have good understanding of the business, so business people need to write up word-for-word documentation (e.g. Take this column from spreadsheet and multiply by 100 to show the numbers in percentage).
At this point, business people who have programming skills wonder why they have to work with corporate IT.
On the other hand, don't many western companies outsource IT work as well? Having never worked in US/EU tech industry, I don't see much difference when it comes to outsourcing. (hiring temp engineers is obviously different from outsourcing, but the concept must be the same)
Do we get respect as SWE in EU? In every eu state I have been, except maybe uk in some sector, there was the meme that we are "the new blue collar workers" and indeed in a lot of places salaries were pretty much aligned
> Japan is very very behind in IT/digitalization compared to most western countries. This doesn't just mean it's behind in product portfolio and quality, but that perception of software engineer & managers and still quite behind.
Have you used anything digital in Japan? I find the interfaces to be fast, user friendly, and energy dense. Far better quality than what most of the western software people put out. You might need to clarify what you mean by behind - just business culture?
> Tange, 46, says his business model is an attempt to remove inefficiencies in Japan’s software industry, where layers of subcontractors take cuts on orders before passing the work to another company below.
This reminds me of a role I once had back in the late nighties.
I was hired on contract by a multi-national consultancy firm to help out on one of their projects. The need someone to come in with good C programming skills.
When I started I was amazed to find a 70 developers and testers workforce working on the project, most of whom were straight out of university.
A nice earner for the consultancy firm; they were charging their development team out at $150.00 per hour, yet only paying graduate salaries.
It must have been $100+ profit per hour per developer.
This is basically the bread and butter of large parts of the consulting industry in Norway as well, although not quite as dysfunctional. Always be recruiting promising young engineers from university, pay them graduate salaries and bill them out at senior rates. Keep enough experienced engineers around to mentor them and ensure that the delivered product is good. Profit margin for each of these developers is excellent.
When they get enough confidence and experience to realize they're underpaid, they'll jump ship to a company that pays senior-level salary (but still bills at very similar rates!), or to a consulting firm that mostly pays commission.
Don't quite agree with myself whether this is an example of a gross inefficiency or just the logical way to train people.
Want to say that this model is still alive and well in Japan (like anywhere else obviously), and these days it looks like charging $10k/month (a lot to companies here for a single developer) for $2-5k/month developers in APAC or eastern Europe, with the guarantee that the project will be looked after based on the sensibilities of someone local/from the US (this person is usually the face of the business or extremely high up, etc).
At it's worst this pattern is parasitic but at it's best it's mutually beneficial symbiosis -- if we look at the reality of whether the developers could clear the trust barrier (whether it should be there or not is another question) to getting the roles, it becomes a question of what that barrier skip is worth.
BTW, Japan is rife with middlemen taking cuts. If you want to have a chuckle, look into property purchasing in japan/proptech. There are usually 3+ middlemen in the apartment purchase flow here, and fees that you do not see in most other places, ex. "reikin" (AKA "Key Money")[0].
In 2003 or so, I was 4 years out of grad school and making a solid $85k or so doing software integrations. My company billed me out at $250/hour and my typical week was about 40-60 hours of billable time (yes, that's real, and that's why I quit!)
Hello everyone, this is my company and in the newly created dev department we are looking for Japanese speaking full-stack engineers, designers, Project managers etc based in Japan.
Japanese is almost definitely needed, but may make an exception for rockstar level engineers.
Remote work (inside Japan), visa support, good salary, even 1 million yen present for joining are in the package.
Having had experience in a company that acts as middleperson/outsourcing company, many of the employees where working for company A and then outsource to work for company B. They would be hired as full time employees at company A and let us say in my example start with a salary at around 30k USD per year and the company A would receive around 120k USD per year by letting that employee work for company B.
I thought it felt strange to know(although they tried to keep it secret) that one received about 25% of the work one did in terms of salary. This was a hugely profitable business model for a company and in a more competitive economy, such models would be difficult. Apparently, this gentleman realised that if you can cut off these middlepersons there are great opportunities for business, you could double and triple the salaries of the employees and probably still make a profit.
Paying someone X and charging 3X for their time is not "hugely profitable". Employing someone is pretty expensive. You have to account for all the costs of employing them (payroll, admin, HR, project management, etc), the fact you still need to pay them for the time they're not being charged to a client, the cost of an office for them to work from and equipment for them to do the work, and so on. It's common in business admin to account for at least 2X of someone's salary as the cost of employing them. If you charge less you'd be making a loss.
I used to work for a company that did this. After two years of asking for a pay raise, I left to be a freelancer. I found out how much they were charging the client and I made the decision to leave.
If you pay slightly above average and treat your employees well you will get the best talent, they will be motivated and they will stay longer. Caveat is that only a fraction of the companies can run this strategy or the average pay rate will start to rise continuously.
Chances are that Tange hired well qualified employees tht fit the corporate culture (and fired the ones who didn't fit in), and continued to reward as objectives were met.
Some context on the japanese job market from what I've seen:
- The entire japanese job market's wages are depressed[0]
- In 2019, pressure had to come from the PM (not the local unions) to raise the minimum wage to 1000 yen/hour (~$9/hour)[1]
- Engineers are underpaid here, possibly more so than the EU in relation to the US. This is amplified for japanese companies (whether "black"[1] or not)
- With nationalized healthcare and generally low cost of living (even in Tokyo, a "world city"), most workers do not feel the pain of being underpaid sharply. Cultural differences and a propensity to save (more ant than grasshopper, let's say) generally feels like the backstop behind the economy (other than the BOJ's enormous purse and very active involvement).
- There is a sort of inbuilt trust in the society that expresses itself in economic transactions (loan companies can be very trusting, risk is considered low with Japanese applicants, etc) and greases the wheels of commerce most of the time, if all participants are local. There are other factors (sometimes the same ones) that make it difficult/slow down japan but those are well discussed generally.
- "Super Salaryman" is a colloquial term here (I can't find it on wiki or elsewhere) for a salaryman[3] that makes 10 million yen (~$90k) per year
- Japanese companies often provide "free" company housing to new grads to enable them to save while being paid relatively little. Many live with for a bit after graduating (women more so than men) as well without much stigma.
- Company standing/appearances mean alot -- $60k at [large conglomerate] is far and away more prestigious than $80k at [unknown startup] in the eyes of many.
[EDIT] Added some more from a different comment that might be useful.
[EDIT2] - fix the super salaryman yen estimation, confused with 10 million
Competitors: "Why is the stock in that company going up?"
CEO hiding real reason: "I raised all the salaries in my company!"
Other CEOs: "Even if that's the real reason, we aren't going to try that."
The article left me with the impression that he was acquiring companies in order to acquire qualified engineers (and, likely, clients) while finding efficiencies by reducing the number of managers. Presumably there will be room for growth as long as there are companies to acquire, but it will suffer from diminishing returns.
Replicating his approach would be difficult since it is based upon the premise that engineers are actually creating value for the company and acknowledges that management is a cost centre. That seems to be diametrically opposed to the culture of many businesses. (That's not to dismiss the value of managers since they are necessary for the operation of a business. It's simply a recognition that clients pay for the engineer's product, rather than the management's labour.)
He didn’t just raise salaries... he cut out management too. It makes sense to me the bottom feeder testing companies might not be running very profitably and this strategy could work... pay better people marginally more and have fewer managers.
I guess it would depend on how underpaid the groups where profits are created are. Absent any other catalyst a random event of paying people more followed by a marked increase in productivity would be enough correlation to say "hey, I think this is probably the cause"
>How confidently can you associate cause and effect here?
You cannot. It depends if you’re buying commodified labor and selling commodity products. Walmart and McDonalds franchisees are not going to see much difference other than higher labor expenses and reduced sales due to higher prices at competitors.
I’m thinking it would be a rare CEO who both knew what they did to cause the stock price to go up, and not be involved in gaming the financials to make the stock go up.
Sounds good but does this scale in the long term? Looks like a resource placing firm.
Not sure about japan, but in India it is expected that on average as an employee you get a 10 to 15% hike year on year primarily due to inflation pressures.
How would this company be able to afford this if they are both reducing prices for customers while simultaneously increasing base salaries. Wouldn't the employees leave after 2 or 3 years as the hikes would not be possible after sometime?
Historically that was extremely true. A salaryman would not be hired by a company that would let him retain his social status if he were fired or left. Poaching was uncommon practice. It's becoming much less true today, but it's not over yet.
Looking around the internet, it seems Shift Inc. is paying around 4.5-5.0 (full range: 3.8-7.8) million JPY / year total comp.
This is about 40k-45k USD/year. It's somewhat better than what engineers would get on a black companies and local consulting companies and perhaps on par with some of the traditional blue chip companies.
But this doesn't come anywhere close to what a software engineer can earn on the highest paying companies here, like Google or Indeed (levels.fyi pegs Google L4 as earning 14-23 million JPY per year, though the dataset is a little bit small).
Even the large local IT-focused companies are competing for talent: Yahoo, Line, Rakuten, Works Applications, Mercari etc. will all pay up to 11m-13m for non-manager software engineers (even though they won't necessarily pay much higher for entry-level engineers). Many well-funded startups are also paying 7m-10m salaries to their engineers.
In short, if Shift Inc. is paying around 5m for their engineers, it might help them fight high turnover, but it won't be enough to bring the best engineers. There are companies which are both more well-known and stable and are still paying higher salaries.
Checking again, their official recruitment page[1] is actually listing "example salaries":
These are higher, although probably not representative:
Security Engineer (in their 40s): 13 million yen
Automation Architect (in their 40s): 10 million yen
Q.A. Engineer (in their 30s): 9 million yen.
These salaries are on par with the top paying local companies, but it's quite suspect none of them are registered on a third party site. They might be rather new.
[+] [-] NalNezumi|4 years ago|reply
Japan is very very behind in IT/digitalization compared to most western countries. This doesn't just mean it's behind in product portfolio and quality, but that perception of software engineer & managers and still quite behind. The respect that a lot of software engineers enjoys in US/EU is not quite there yet in Japan(and salary often reflect this).
The C-suite usually doesn't have a firm understanding of software/IT world, and instead ends-up hiring a lot of "Scrum-experts/Agile coaches" and hires software engineers from consultancy or recruitment companies for cheap. There's ofc companies that doesn't fall in this category, but for middle-sized companies in Japan (which is the bulk of the economy), this is the true state of things. Middle-men in Japan have therefore been way more encroaching on this, and they have the incentive to not improve the respect/social standing the software engineers have.
"Removing managers" in this article does not mean the same thing as it would in US/EU, conditions are different.
[+] [-] rurounijones|4 years ago|reply
In my last full-on japanese company it was basically impossible to find any developer with more than 3 years experience by accidental design because:
1: No applicants studied computer science in university so they started learning when they joined the company and were assigned a development role.
2: After 3 years they they got promoted to a "manager" level role and stopped doing development. There was no concept of junior developer -> developer -> senior developer progression. If you wanted promotion you went from developer -> manager; it was the same for sysadmins. Their IT and development suffered heavily for it.
A team of 10 "western" style trained senior developers and sysadmins would have been able to do the work of 50 current employees at least for a large overall cost saving even with higher salaries.
Just the way things worked. Japan is indeed very different when it comes to how the workplace works in relation to tech in traditional companies.
[+] [-] kh1|4 years ago|reply
On the other hand, don't many western companies outsource IT work as well? Having never worked in US/EU tech industry, I don't see much difference when it comes to outsourcing. (hiring temp engineers is obviously different from outsourcing, but the concept must be the same)
[+] [-] yulaow|4 years ago|reply
[+] [-] eecc|4 years ago|reply
And then you go on describing the average attitude towards software developers I perceived in the Netherlands… :)
[+] [-] taurath|4 years ago|reply
[+] [-] fukmbas|4 years ago|reply
[deleted]
[+] [-] taurath|4 years ago|reply
Have you used anything digital in Japan? I find the interfaces to be fast, user friendly, and energy dense. Far better quality than what most of the western software people put out. You might need to clarify what you mean by behind - just business culture?
[+] [-] jussij|4 years ago|reply
This reminds me of a role I once had back in the late nighties.
I was hired on contract by a multi-national consultancy firm to help out on one of their projects. The need someone to come in with good C programming skills.
When I started I was amazed to find a 70 developers and testers workforce working on the project, most of whom were straight out of university.
A nice earner for the consultancy firm; they were charging their development team out at $150.00 per hour, yet only paying graduate salaries.
It must have been $100+ profit per hour per developer.
[+] [-] marvin|4 years ago|reply
When they get enough confidence and experience to realize they're underpaid, they'll jump ship to a company that pays senior-level salary (but still bills at very similar rates!), or to a consulting firm that mostly pays commission.
Don't quite agree with myself whether this is an example of a gross inefficiency or just the logical way to train people.
[+] [-] Tade0|4 years ago|reply
They would go a step further and lie that:
-They can quickly expand that team of three mid-level developers to eleven, adding mostly seniors.
-A team of junior to mid developers is comprised of seniors.
-The team is working at FTE on this project and has no other responsibilities.
Currently stakeholders often have to resort to requesting the CVs of all the people involved, but that doesn't shield them from that last trick.
Of course the client is billed $100+/h, while developers can count on around 25-30% of that.
A lot of people got rich like that around here.
[+] [-] max_hammer|4 years ago|reply
They told client, I have 2 years of experience as Informatica developer and charged $50 per hour.
Before joining the project, I had never seen the Informatica tool.
[+] [-] hardwaresofton|4 years ago|reply
At it's worst this pattern is parasitic but at it's best it's mutually beneficial symbiosis -- if we look at the reality of whether the developers could clear the trust barrier (whether it should be there or not is another question) to getting the roles, it becomes a question of what that barrier skip is worth.
BTW, Japan is rife with middlemen taking cuts. If you want to have a chuckle, look into property purchasing in japan/proptech. There are usually 3+ middlemen in the apartment purchase flow here, and fees that you do not see in most other places, ex. "reikin" (AKA "Key Money")[0].
[0]: https://en.wikipedia.org/wiki/Key_money
[+] [-] fatnoah|4 years ago|reply
[+] [-] hattori31|4 years ago|reply
You can find more and contact us if interested https://topics.shiftinc.jp/recruit-daae/
[+] [-] benatkin|4 years ago|reply
https://www.theregister.com/2015/09/03/apple_wagefixing_clos...
[+] [-] koilke|4 years ago|reply
I thought it felt strange to know(although they tried to keep it secret) that one received about 25% of the work one did in terms of salary. This was a hugely profitable business model for a company and in a more competitive economy, such models would be difficult. Apparently, this gentleman realised that if you can cut off these middlepersons there are great opportunities for business, you could double and triple the salaries of the employees and probably still make a profit.
[+] [-] onion2k|4 years ago|reply
[+] [-] norin|4 years ago|reply
[+] [-] etdev|4 years ago|reply
I gathered up a ton of data points to try and prove this here:
https://japan-dev.com/blog/software-developer-salaries-in-ja...
I'm also attempting to keep track of modern companies that operate in Japan and pay globally competitive salaries here:
https://japan-dev.com
It's an exciting time for Japan (especially Tokyo).
[+] [-] threatripper|4 years ago|reply
[+] [-] SMAAART|4 years ago|reply
Chances are that Tange hired well qualified employees tht fit the corporate culture (and fired the ones who didn't fit in), and continued to reward as objectives were met.
Remind me of Netflix and GE 20 years ago.
[+] [-] lupire|4 years ago|reply
[+] [-] DennisP|4 years ago|reply
[+] [-] hardwaresofton|4 years ago|reply
- The entire japanese job market's wages are depressed[0]
- In 2019, pressure had to come from the PM (not the local unions) to raise the minimum wage to 1000 yen/hour (~$9/hour)[1]
- Engineers are underpaid here, possibly more so than the EU in relation to the US. This is amplified for japanese companies (whether "black"[1] or not)
- With nationalized healthcare and generally low cost of living (even in Tokyo, a "world city"), most workers do not feel the pain of being underpaid sharply. Cultural differences and a propensity to save (more ant than grasshopper, let's say) generally feels like the backstop behind the economy (other than the BOJ's enormous purse and very active involvement).
- There is a sort of inbuilt trust in the society that expresses itself in economic transactions (loan companies can be very trusting, risk is considered low with Japanese applicants, etc) and greases the wheels of commerce most of the time, if all participants are local. There are other factors (sometimes the same ones) that make it difficult/slow down japan but those are well discussed generally.
- "Super Salaryman" is a colloquial term here (I can't find it on wiki or elsewhere) for a salaryman[3] that makes 10 million yen (~$90k) per year
- Japanese companies often provide "free" company housing to new grads to enable them to save while being paid relatively little. Many live with for a bit after graduating (women more so than men) as well without much stigma.
- Company standing/appearances mean alot -- $60k at [large conglomerate] is far and away more prestigious than $80k at [unknown startup] in the eyes of many.
[EDIT] Added some more from a different comment that might be useful.
[EDIT2] - fix the super salaryman yen estimation, confused with 10 million
[0]: https://www.japantimes.co.jp/news/2021/03/17/business/lowest...
[1]: https://www.japantimes.co.jp/news/2019/06/07/national/japan-...
[2]: https://en.wikipedia.org/wiki/Black_company_(Japanese_term)
[3]: https://en.wikipedia.org/wiki/Salaryman
[+] [-] Rzor|4 years ago|reply
[+] [-] magneticnorth|4 years ago|reply
[+] [-] shp0ngle|4 years ago|reply
That actually fools a lot of websites - like NYTimes and I think WaPost.
[+] [-] Mengkudulangsat|4 years ago|reply
Just clear everything upon exit. Works like a charm so far.
[+] [-] prometheus76|4 years ago|reply
[+] [-] ironmagma|4 years ago|reply
[+] [-] savant_penguin|4 years ago|reply
Based on what can he guarantee that raises in salary caused the company to grow?
If the formula is so simple couldn't other companies copy that and grow 5500%?
[+] [-] II2II|4 years ago|reply
Replicating his approach would be difficult since it is based upon the premise that engineers are actually creating value for the company and acknowledges that management is a cost centre. That seems to be diametrically opposed to the culture of many businesses. (That's not to dismiss the value of managers since they are necessary for the operation of a business. It's simply a recognition that clients pay for the engineer's product, rather than the management's labour.)
[+] [-] andrewljohnson|4 years ago|reply
[+] [-] economusty|4 years ago|reply
[+] [-] lotsofpulp|4 years ago|reply
You cannot. It depends if you’re buying commodified labor and selling commodity products. Walmart and McDonalds franchisees are not going to see much difference other than higher labor expenses and reduced sales due to higher prices at competitors.
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] quantum_state|4 years ago|reply
[+] [-] ayushchat|4 years ago|reply
I think having equity incentivizes employees to focus more on the welfare of the company than a fixed salary. I may be wrong though
[+] [-] spfzero|4 years ago|reply
[+] [-] krishvs|4 years ago|reply
Not sure about japan, but in India it is expected that on average as an employee you get a 10 to 15% hike year on year primarily due to inflation pressures.
How would this company be able to afford this if they are both reducing prices for customers while simultaneously increasing base salaries. Wouldn't the employees leave after 2 or 3 years as the hikes would not be possible after sometime?
[+] [-] MattGaiser|4 years ago|reply
[+] [-] iratewizard|4 years ago|reply
[+] [-] unscaled|4 years ago|reply
But this doesn't come anywhere close to what a software engineer can earn on the highest paying companies here, like Google or Indeed (levels.fyi pegs Google L4 as earning 14-23 million JPY per year, though the dataset is a little bit small).
Even the large local IT-focused companies are competing for talent: Yahoo, Line, Rakuten, Works Applications, Mercari etc. will all pay up to 11m-13m for non-manager software engineers (even though they won't necessarily pay much higher for entry-level engineers). Many well-funded startups are also paying 7m-10m salaries to their engineers.
The pay gaps between different companies in the very same city (Tokyo) for the same position can be quite high. You can read more about it here: https://japan-dev.com/blog/software-developer-salaries-in-ja...
In short, if Shift Inc. is paying around 5m for their engineers, it might help them fight high turnover, but it won't be enough to bring the best engineers. There are companies which are both more well-known and stable and are still paying higher salaries.
[+] [-] unscaled|4 years ago|reply
These are higher, although probably not representative: Security Engineer (in their 40s): 13 million yen Automation Architect (in their 40s): 10 million yen Q.A. Engineer (in their 30s): 9 million yen.
These salaries are on par with the top paying local companies, but it's quite suspect none of them are registered on a third party site. They might be rather new.
[1] https://recruit.shiftinc.jp/entry/mid_career/job/
[+] [-] Forge36|4 years ago|reply
[+] [-] ZephyrBlu|4 years ago|reply
I don't think you can really convince most employers of this though.
[+] [-] DangitBobby|4 years ago|reply
[+] [-] rfrey|4 years ago|reply
[+] [-] Spooky23|4 years ago|reply