By Pujya Dass
Japan is a notoriously difficult market to crack. Even many successful, established businesses entering Japan from overseas do not bother to tailor their marketing and product or service appropriately to suit Japanese audiences. This applies to the Software as a Service (SaaS) industry just as much as any other. The SaaS market in Japan is bigger than the other SaaS markets in Asia. If you invest a proper amount of time and effort, you can find many amazing opportunities generated by underserved audiences.
Why the focus on SaaS?
The SaaS industry has the capability to grow worldwide over the next few years. Major SaaS companies like Salesforce and Adobe are estimated to grow to around $117 billion USD by the end of 2021. There is no doubt that SaaS products will provide a great deal of value and benefit to the companies that adopt them. With subscriptions or premium packages customers can get access to powerful software that is more affordable and accessible than ever.
What’s powering the development of SaaS in Japan?
As the SaaS industry in Japan is growing rapidly, soon it is likely to become world-leading. In 2020, the software market in Japan had a value of $11 billion USD, with SaaS accounting for a 31% share. By the end of 2021, the software market in Japan is projected to reach around $19 billion USD.
One component is the declining population. Between now and 2030, Japan is estimated to lose 2.3 million individuals between the ages of 15 and 64 from its labour force, as indicated by Mitsubishi UFJ Research and Consulting. In addition, the Ministry of Economy, Trade and Industry (METI) has said that 590,000 innovation related jobs will be unfilled by 2030. This absence of employment will drive organisations’ critical interest in the expansion of digital solutions and proficient arrangements that require less manual work. The SaaS model seems, therefore, to be a reasonable way of addressing this issue.
Which Japanese SaaS businesses are gaining most traction?
Besides, funding into new Japanese SaaS businesses has likewise been gaining traction. With more than $230 million USD of funding going into SaaS organisations in Japan last year, this is the most significant figure we’ve seen in recent years. What’s more, to offer somewhat more context, Japan’s investment spending for 2017 was about $2.5 billion USD. That implies generally 9.2% of all investment spending is going directly to SaaS organisations.
Earlier this year, a SaaS bookkeeping startup called freee raised $57 million USD in funding. This is a huge figure considering the relatively small size of the investment business in Japan. As of late, Japan has seen many SaaS organizations opening themselves up internationally by listing on the Tokyo Stock Exchange. These include Money Forward, a platform for personal and corporate money which is available globally and currently has a market value of more than $600 million USD.
Rakus is another example, a supplier of a few SaaS products for SMEs with a market worth of around $780 million USD, and at long last, Uzabase has reached a value of $730 million USD as an online financial services provider for B2B. We hope to see more Japanese SaaS organisations open up internationally over the next few years, and would not be shocked if a significant number of them end up becoming Unicorns with a valuation of more than $1 billion USD.
Where will the SaaS in Japan market go from here?
It seems inevitable that a transformation of SaaS in Japan will occur. For the nation to keep developing its economy as the population declines, the tech industry should focus on making the overall workforce more useful and effective. What’s more, the need will be particularly strong for labour-intensive industries like manufacturing, food and beverage, product development, co-ordination, as well as the healthcare and finance sectors.
There’s no doubt that Japan needs SaaS. The nation is uniquely situated to be a solid industry player, and we are still at the beginning of the SaaS disruption, which promises to deliver expansive impacts for both Japan and the rest of the world.
However, SaaS models aren’t getting much of a reputation — few people ask what SaaS is because of the strong progress already being made in the sector, and considering how specialists are convincing clients to make a purchase. SaaS solutions have acquired a significant part of the business applications market since they offer vital benefits to both trained professionals and clients without any specific training.
Avoiding non-active users in SaaS
While switching to a SaaS model may require an upgrade to normal business procedures, there is a high probability that this switch will increase your chances of long-term success. Perhaps the most serious issue new SaaS customers face is understanding precisely how a specific platform will function for them. According to Meta SaaS, as much as 31% of SaaS products are not being actively used by customers.
Presumably, this is not on the grounds that businesses don’t want to utilise the innovations they’ve embraced. It’s almost certain that their lack of use is due to not knowing precisely how to make arrangements work for their specific requirements—similar to business owners who don’t yet see how SaaS can benefit them. Showing customers arrangements that are tailor-made to fit their business’ particular necessities ought to be the focal point of business interactions, in addition to onboarding users.
In the SaaS world, where a considerable number of your customers may not comprehend why they need new arrangements, education is everything. Winning new customers often begins with showing crowds there’s a superior way, and this is no exception in the Japanese market.
What’s unique about the SaaS market in Japan?
It’s important to note that, compared with western markets, Japanese users will generally take a longer time to reach a final decision. This may involve several meetings in order to clearly understand the benefits of your SaaS product. Never underestimate the power of investing in thorough explanation and ensuring that the solution fits with your target organisation’s desired results. After all, they will need to convince their colleagues and managers that it’s the right SaaS to choose.
Let us know if you have an SaaS product and are looking to enter or expand in the Japanese market. We would love to hear from you!
If you’d like to be featured on the Tokyoesque blog, either in the form of an interview or by writing a guest article related to the Japanese market, please get in touch.