| Summary: | This article discusses the recent development of offshoring in the
software industry in Japan. Following interviews with several Japanese
ICT companies, we reveal the present status and problems of offshoring
software development, which cannot be recognized from its macro
data. Japanese firms must expand offshoring because of increasing
competition within Japan, although offshoring creates an outflow of
technology and know-how to foreign firms. This outflow fosters
prospective foreign competitors, and improves their technology,
especially in China. Small and medium-sized Japanese software
companies that lack advanced technology will face competition for
survival against foreign firms in the near future. The income gap among
Japanese software engineers will also increase.
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