a disadvantage gartners iyengar addedfujitsu president masami yamamoto recently said that the company intends to increase its focus on it services through acquisitions of software firms particularly in the area of cloud computinga paper titled the competitiveness of japans software industry by tatsuo tanaka a faculty fellow at the research institute of economy trade and industry rieti in japan indicates that japan excels in producing custom and embedded software but lags when dealing with packaged business and online software custom software is said to be inefficient in terms of cost and quality because it cant derive economies of scale and compete globally against packged business and online software fidelitys dhanrajani added that japanese companies are involved in highend software development engineering and rd work they do not have the it services capabilities at the lower end of the value chain which constitutes the mass segment of it services demand to offer services across the value chain it becomes essential for them to make acquisitions in india moreover several small and mid cap it services companies are now coming at good valuations as they continue to struggle with lower margins and growth said dhanrajanisiddharth pai md of it consulting firm tpi india said that japanese companies have been looking at acquisitions for sometime now but the interest is greater today as the indian it sector has matured significantly pai also added that there may not be a dramatic increase in acquisitions as even today most japanese companies are conservative in outsourcing contractscurrently less than 10 of japanese outsourced it services are offshored of the offshored amount more than 50 goes to china and 13 to india all it development work is first contracted only to large system integrators like ntt and fujitsu who then breakup large projects and outsource to secondary and tertiary players indian and chinese vendors often serve as tertiary service providers