Technical Talent Under the Rising Sun

Globally, companies in the IT sector continue to struggle to recruit, train, and retain the specialized talent required to remain competitive. The 2024 State of Tech Talent Survey, fielded early this year by the Linux Foundation and LF Training & Certification, has gathered valuable insights into global talent management trends and strategies, including a specific focus on the critical challenges faced by Japan’s IT industry.

Japan’s looming digital cliff

In 2018, the Japanese Ministry of Economy, Trade and Industry (METI) warned that without urgent modernization of its legacy technology-based systems by 2025, Japan’s IT industry will face a digital cliff with potential losses of JPY 12 trillion per year (more than 2% of Japan’s 2022 GDP).

As the clock ticks ever louder toward this nearing deadline, the 2024 State of Tech Talent Japan Report provides new data-based insights into the lifelines that Japan’s tech sector can use to avoid METI’s predictions: talent management strategies and modernization initiatives.

Key Findings

The survey report uncovers significant challenges arising from skilled talent shortages and the urgent need for digital transformation. But despite these challenges, a strong commitment to training and upskilling staff will help Japanese organizations navigate the path to modernization and stay competitive globally. Opportunities abound, as 60% of Japanese organizations plan to increase investment over the next 18 months. Let’s dive in.

What does the data reveal about the technical talent market in Japan?

Japan’s technical talent market is very narrow.

• As of 2018, METI reported a deficit of around 220,000 IT workers, which is expected to worsen.
• Traditional wage structures result in lower salaries, causing IT professionals to seek jobs elsewhere.
• Japan’s IT workforce lags behind other Asian countries in certifications and expertise.

Addressing the skill gap

Japan’s IT organizations are adapting their talent management strategies in response to this skilled workforce shortage. A key strategy to address the skill gap involves increased focus on in-house training and development (upskilling). Japan has become a global leader providing extensive training for inexperienced new hires, often through well-structured onboarding programs for fresh graduates.

• Upskilling is considered an important strategy by 97% of organizations with an astounding 41% rating it extremely important.
• 55% of Japanese organizations currently have programs to upskill inexperienced staff.
• 51% cross-skill existing staff.

Opportunity for improvement exists, as 44% of respondents noted that a big challenge with upskilling programs is that they take time and can be ineffective when training for complex roles.

Hiring Challenges and Strategies

Compounding the difficulties created by the narrow technical talent market, Japan’s IT sector also experiences a high turnover rate among new hires (47%) within 6 months of onboarding. Many organizations are tackling this problem by improving existing training infrastructures and creating flexible, targeted curriculums.

The most cited challenge in hiring technical staff in Japan is certifying claimed technical skills. Collaborating with external training programs to obtain certifications can help validate technical skills and make the hiring process easier.

More hiring barriers are coming down. Japan's traditional employment practices, including lifelong employment and rigid wage structures, are evolving. Government initiatives, such as the establishment of the Digital Agency in 2021 and a shift towards mid-career hiring, indicate a move away from these traditional practices.

Modernization Initiatives

To avoid the digital cliff, Japan’s IT sector must move quickly to reduce entrenched legacy systems – on average, 45% of the IT workload is still running on mainframe technologies. Integrating new technologies into these systems is complex but crucial for future growth.  

• Japanese organizations surveyed on average use a mix of mainframe (45%) and cloud (51%) technologies.
• Despite skilled talent shortages, 97% of Japanese organizations plan to modernize their current technology stack.
• 59% of organizations plan to significantly incorporate cloud technologies in their modernization efforts.

GenAI integration

Another key focus area is the adoption of generative AI (GenAI) as workforce enhancement. Japan’s IT sector is taking a strategic approach to complement its existing workforce with GenAI capabilities.

• The top three uses for GenAI in Japan are infrastructure monitoring, software development and system maintenance.
• Differing from the norm for other locations, a higher percentage of Japanese organizations are expecting to increase their staffing level after implementing GenAI into the business (36% vs. 26% in North America/Europe)

GenAI and Training

GenAI can improve training programs by allowing for easy customization of the training experience and creating scenario-based learning through simulated training environments. These strategies can increase engagement and be leveraged to address specific skill gaps.

Parting Thoughts

The 2024 State of Tech Talent Japan Report shows the Japanese IT industry at a critical point. There are big challenges, especially with skilled worker shortages and modernizing legacy systems, but there's also a strong commitment to training and upskilling. By continuing to invest in these areas and adopting new technologies, Japanese IT organizations can navigate the path to modernization and avoid the looming digital cliff.