IT Salaries in Tokyo

Are You Being Paid What You're Worth?

Tokyo has long been a paradise (at least in salary and perks) for expatriate IT professionals. Did the bursting of Japanese bubble economy change the salary gradient? And how has the recent surge of downsizing affected the demand for IT staff? The general answer seems to be: not as much as you might have thought.

by Virginia Kouyoumdjian

Foreigners remain the uncrowned royalty of Tokyo's information technology (IT) kingdom, especially within multinationals and financial institutions. Although companies are more and more often hiring native Japanese as technicians, project managers still tend to be foreign. The reason, as one computer service company executive put it, is that "foreigners' skills in terms of inventiveness and creativity are much greater. They also take more responsibility, whereas Japanese often require a great deal of hand-holding."

Is this off the record?

Trying to get a clear picture of the real demand for foreign IT professionals in Japan, and the salaries that they are earning, proved to be a quite a challenge. Unlike for many other industries, there is no easy recourse to independently produced compensation surveys. This is due in part to the enormous discrepancies within the IT industry in terms of the size of the employers, the scale of their needs, and their level of willingness to pay for services and skills that are often in short supply. This article is therefore based on conversations with a number of people on various sides of the IT world in Tokyo : employers, workers, contractors, and executive search specialists. No names are named, though, because most of those I interviewed would speak only "off the record." In a nutshell, the findings of Computing Japan's informal survey of the Tokyo IT world are:
* There is still enormous demand for the right kinds of IT skills.
* Remuneration levels are falling off at the top end, but they remain high overall.
* Japanese language ability is desirable, but by no means a necessity.
One interesting and perhaps surprising caution was voiced by those in a position to know. While experience with a Japanese company might appear to be a foot in the door for some young entrants in the IT field, this approach may actually be detrimental to one's long-term career.

"Japanese companies use antiquated processes to get from A to Z, which make them very slow. The way they work can be as much as 15 years out of date compared to an American company. It's like a sailboat compared to light speed," warned an executive at a contract agency. If no other door is open, taking a job at a Japanese company may pay the rent and put food on the table, but the work is unlikely to teach the cutting-edge skills that will lead be to a better job in the future. Financial services' salaries top the scale

The financial services industry rests firmly at the top of the market pyramid in terms of IT staff demand and compensation. Although there have been major moves to cut costs and trim staff at most of the foreign brokerage houses in Tokyo, the IT staff has been largely immune. Top management realizes that much of the success operation rests on the skills of their IT team in developing the programs and networks that will support the traders.

As a result, financial services remains the sector with the most demand for IT professionals and the highest salary levels. One executive at a mid-level Tokyo executive search firm pegs the range for a beginner in the IT field (someone with less than 2 years of experience), at about ·5 to ·7 million per year. This rises quickly to an annual salary of ·8 to ·10 million ó possibly as high as ·15 million ó for someone with 3 to 5 years of experience.

Beyond that, compensation varies greatly, depending on each person's particular skills or combination of skills. An employee with a good knowledge of systems programming plus a thorough understanding of derivative products, for example, can command an annual basic salary of ·20 million as a local hire, plus bonuses, confirmed the IT manager at one foreign securities firm. But even this pales in comparison with the very top end of the range. One of Tokyo's top-level executive search firms reports that some IT managers at financial institutions are earning packages of ·50 million to ·60 million per year.

This is the exception rather than the rule, however. While there are still some lucrative expatriate packages, most of the compensation packages currently available at financial institutions are for local hire. And the few expat packages that remain generally require fairly hefty qualifications, such as a PhD in mathematics or a proven record in a particular field. Generally, however, foreign firms are trying to eliminate expatriate packages as much as possible.

There is even a trend in some companies to move their IT services out of Japan altogether. Compensation levels in Singapore, for example, are much lower than those in Japan, and with the modern telecommunications infrastructure and corporate WANs, physical location is becoming less and less important. Entry level salaries that would be ·5 to ·6 million in Tokyo are only about ·2 million in Singapore ó a significant saving for any corporation.

The trend toward outsourcing

One trend that is becoming evident as a result of cutbacks at securities firms and other companies is greater demand for contract employees who will take on particular projects. For employers, outsourcing has a downside: once the project is over, the employees will be gone and their sets of skills with them. This is counterbalanced, however, by the fact that employees in the IT field have a high degree of mobility overall. The likelihood that a full-time employee may leave a job for greener pastures after the end of a particular project is also quite high.

Contract employees may be paid either by the project/month or by the hour, depending on the company, and compensation levels vary dramatically. One service company that employs foreigners responded somewhat cynically that, "The base pay is about ·3,500 an hour, simply because any foreigner can make that much just teaching English. Someone with C++ programming ability can make over ·10,000 an hour". In general, monthly fees average in the ·500,000 to ·600,000 range for what some describe as "not even full-time work."

Job-hopping is a fact of life in the Tokyo IT market. The work is often project-oriented, and the lack of an attractive follow-up project immediately after a task starts to wind down is often enough to send an IT manager looking elsewhere for new opportunities. Higher compensation is also attractive to this overwhelmingly young crowd. According to one executive search firm, a ·1 million differential in annual salary is sufficient to convince most IT professionals to change jobs.

Moving down the pyramid

Because salary levels are so high in comparison to other industries, looking at the financial services industry gives a rather skewed view of what is going on in the IT field. On the other hand, it should be remembered that the financial services sector accounts for at least 30% of the IT jobs available to foreigners in Tokyo.

The financial sector is attractive to some because, in many cases, little or no Japanese-language ability is needed in order to get or keep the job. (Although some Japanese ability, even at basic spoken levels, is becoming more and more essential.) Moving away from financial services companies, though, Japanese-language ability becomes increasingly important. Many Japanese branches of foreign multinationals are so heavily localized that, in terms of employee make-up, they differ little from their

Japanese counterparts

At the other end of the spectrum from the financial services industry are IT positions in the manufacturing industry. The salary differential between the financial and manufacturing sectors can be more than 100%. "If ·30 million is the maximum you can make in finance," said the head of a Tokyo-based computer service company, "then it's no more than ·10 million in manufacturing and maybe ·15 million in the service sector." The president at one search firm suggested a smaller gap, but noted that the financial sector is more likely to offer additional, non-salary benefits.

On the other hand, the work pressures are different, and there is often much greater job stability in manufacturing. The nature of the work is often different as well, requiring more team effort than individual fireworks.

Another alternative for foreigners is working for one of the myriad smaller companies, both Japanese and foreign, in the computer service industry. These positions generally offer more challenge in terms of the variety of work. As one foreign employee of a small Japanese company put it, " I work as a programmer, network specialist, database administrator ó you name it. That's an inevitable aspect of working for a small company." And, of course, working for a Japanese company requires a relatively high level of Japanese-language skills.

The hot skill: C++

In terms of the types of skills most in demand in the IT sector, there is general agreement that programmers who have excellent knowledge of C++ are the most highly prized ó and also in the shortest supply. Demand in this area is such that other programming skills become almost irrelevant. Experienced C++ programmers can command a premium salary.

At the other end of the spectrum are COBOL programmers. Many companies are busily trying to turn their COBOL staff into sales and administration specialists.

In the middle is probably UNIX, which remains an area of strong and steady demand, from front-office development at financial institutions to relational database programming and network management. This is also an area where there is still a dearth of qualified Japanese personnel, so opportunities for foreigners with UNIX experience are numerous. Salary levels for persons with strictly PC skills are generally lower, although some change may occur depending on how Windows NT affects UNIX. At the moment, skills in MS-DOS, Windows, and NetWare are seen as nickel and dime, and command salaries of from ·4 million to maybe ·8 million. Specialized skills in networking (LANs, WANs, client/server) are much in demand. So, too, is ability in downsizing ó or rightsizing, as it is more often called nowadays.

Overall, most companies are looking for as much versatility as possible. The ideal IT professional was described by one contract agency executive as "someone with a good working knowledge of C++ and the underlying architecture of UNIX-based machines, several years' experience with relational databases, and the ability to sit in front of any box and work with it efficiently in fairly short order." Similar sentiments were voiced by executive search firms, who commented on the need to have people able to keep up with the rapid and dramatic changes in technology.

Demand remains high

IT employers at the moment face something of a dilemma. High-level skills are becoming more and more vital, especially in the financial services industry. Most firms aim for a combination of re-engineering and rightsizing ó but, ironically, achieving this generally requires some boosting of resources in IT.

As companies desperately try to cut costs, expatriate packages are no longer what they used to be, and there is much more local hiring and outsourcing. Despite this trend, however, the levels of compensation in financial services firms remain so far above the average in other industries that it is an extremely attractive area to work in. In other industries, the market is somewhat less well-paid, and supplemental skills such as Japanese-language ability become more important; this is offset, however, by greater stability in the work environment. Overall, the picture remains bright for foreigners working in IT in Tokyo.