6 ms·

> Tange, 46, says his business model is an attempt to remove inefficiencies in Japan’s software industry, where layers of subcontractors take cuts on orders bef

by jussij 5y ago

> Tange, 46, says his business model is an attempt to remove inefficiencies in Japan’s software industry, where layers of subcontractors take cuts on orders before passing the work to another company below. This reminds me of a role I once had back in the late nighties. I was hired on contract by a multi-national consultancy firm to help out on one of their projects. The need someone to come in with good C programming skills. When I started I was amazed to find a 70 developers and testers workforce working on the project, most of whom were straight out of university. A nice earner for the consultancy firm; they were charging their development team out at $150.00 per hour, yet only paying graduate salaries. It must have been $100+ profit per hour per developer.

hardwaresofton 5y ago
Want to say that this model is still alive and well in Japan (like anywhere else obviously), and these days it looks like charging $10k/month (a lot to companies here for a single developer) for $2-5k/month developers in APAC or eastern Europe, with the guarantee that the project will be looked after based on the sensibilities of someone local/from the US (this person is usually the face of the business or extremely high up, etc). At it's worst this pattern is parasitic but at it's best it's mutually beneficial symbiosis -- if we look at the reality of whether the developers could clear the trust barrier (whether it should be there or not is another question) to getting the roles, it becomes a question of what that barrier skip is worth. BTW, Japan is rife with middlemen taking cuts. If you want to have a chuckle, look into property purchasing in japan/proptech. There are usually 3+ middlemen in the apartment purchase flow here, and fees that you do not see in most other places, ex. "reikin" (AKA "Key Money")[0]. [0]: https://en.wikipedia.org/wiki/Key_money https://en.wikipedia.org/wiki/Key_money
- franciscop 5y ago
  Parasitic implies one party (implied the employee?) is left worse off than otherwise. If these jobs are being accepted normally it's because the local offers are worse and the developer is not good/doesn't want to deal with the international business side (inc. finding clients, negotiating, etc). So it seems that in a free-ish market, this relationship would be strongly symbiotic, right? Interestingly in Japan they have "Key Money" and "Lock Change fee", which are two different non-refundable BS fees and they confused me initially. The key money also depends by region, with Kansai having it almost everywhere and in other areas "it depends".
  - hardwaresofton 5y ago
    > Parasitic implies one party (implied the employee?) is left worse off than otherwise. If these jobs are being accepted normally it's because the local offers are worse and the developer is not good/doesn't want to deal with the international business side (inc. finding clients, negotiating, etc). So it seems that in a free-ish market, this relationship would be strongly symbiotic, right? It's hard to guarantee that the labor side wouldn't have been able to land the contract without the labor re-seller, so it's up to your own personal bias to see this as a service or as predatory. Could go either way but on a case by case basis this is subjective in my opinion. There's not much magic here (well if there is, it can vary greatly), the contracting agencies are middlemen reselling labor that is in various states of compatibility to the company purchasing the labor. Perfectly compatible market actors could be using middlemen when they don't need to, and middlemen are incentivized to make this the case. The usual questions of whether middlemen are good or bad apply and it's not as simple as it being strongly parasitic or strongly symbiotic in any case, it's more like a spectrum which is why I described it as such. A bit of anecdata: I know someone who worked for a contracting firm in NYC that hired Japanese developers (and relocated them) to work in the American market and paid them Japanese wages to work at American companies. The Japanese developers were always happy at first because they were blissfully ignorant and didn't know what the company actually charged. Just because the host isn't aware of the parasite doesn't mean it's not being adversely affected -- some hosts just live severely degraded lives with no idea that they're being drained. It's possible to take the stance that labor is simply paying for imperfect knowledge/market conditions but by that logic exploitation might as well not exist, and if that's the argument then we probably disagree on fundamental grounds about lots of things. > Interestingly in Japan they have "Key Money" and "Lock Change fee", which are two different non-refundable BS fees and they confused me initially. The key money also depends by region, with Kansai having it almost everywhere and in other areas "it depends". Sure, it's possible that the region a person wants to live in does not have Key Money in Japan, but I wouldn't count that a likely outcome. ~55% of apartments in Tokyo look to require Key Money[0], but I'd argue that even if it's not required, most first and maybe second time renters in Japan will pay it, thinking it's just a cost of doing business. All that changes in the second or third transaction ins knowledge on the renter's part. [0]: https://resources.realestate.co.jp/rent/what-percentage-of-apartments-in-japan-do-not-require-a-deposit-and-key-money/ https://resources.realestate.co.jp/rent/what-percentage-of-a...
- greggman3 5y ago
  I have never had a problem with "key money". I just see it as asking for 2/26ths of your rent up front (the average key money being 2 months rent and paid again every 2 years). I know it's labeled as "礼金" but functionally there is no different from them asking for 2/26ths of my rent up front and then asking for 1/26th each month for the next 24 months. That the system has evolved to have this strange system is curious but looking at it as just an upfront portion of the rent removes most negative feelings about it, at least for me. The thing that still bugs me a little though is the fact that move in costs to the average apartment is 6 months rent. first month + 2 months deposit + 2 months key money + 1 month to realtor. So, a $2.5k a month apartment costs $15k to get started. You can often get 100% of your deposit back when you leave but still, I know lots of people, especially younger people, that saving up 6 months rent to move is hard which suggests it's a barrier to mobility. Note: I'm comparing to Los Angeles where for large apartment complexes it was often just first months rent + $500 deposit to move in.
  - hardwaresofton 5y ago
    > The thing that still bugs me a little though is the fact that move in costs to the average apartment is 6 months rent. first month + 2 months deposit + 2 months key money + 1 month to realtor. So, a $2.5k a month apartment costs $15k to get started. Well that's simply the result of having so many middlepeople! :) The middlepeople figuring out that they should charge a multiple of rent rather than a static fee for the actual amount of work that may not keep up with inflation. A truly elegant solution. Another fun bit is the Guarantors that are sometimes required based on just how much the other side thinks they can trust you (or extract from you, since they often require guarantors they know). > You can often get 100% of your deposit back when you leave This I've not seen happen very often, most places will put it right in the contract that they're going to take 0 < x < 5 man out of what you paid just for "cleaning fees" and "AC maintenance" or what not, like an AirBnB would. > You can often get 100% of your deposit back when you leave but still, I know lots of people, especially younger people, that saving up 6 months rent to move is hard which suggests it's a barrier to mobility. I can see this, but a friend and I were discussing this the other day and he brought up an interesting point -- it could be that mobility was so common and bustling (maybe during the bubble?) that these middlepeople sprung up as a sort of natural reaction. I don't know the history but it's an interesting theory -- so maybe it's like a bad feedback loop -- middlemen appeared to facilitate lots and lots of real estate deals during a historic real estate boom, but they never geared back down so the friction persists.
- unscaled 5y ago
  While Japan is rife with middlemen taking the cut, 礼金 (key money) is not a good example. It goes directly to your landlord, just like your rent. Hiring in IT does have a lot of room for taking cuts. Most Japanese companies (even large ones - or rather, especially large ones) are very bad in doing their own recruiting, so they have to pay a lot of upfront fees to headhunters for every direct employee hired. This is another reason why hiring consulting staff can seem cheap on the short term.
max_hammer 5y ago
Its same in Indian IT. When I joined Infosys straight out of university, my salary was approx `$350` per month. They told client, I have 2 years of experience as Informatica developer and charged $50 per hour. Before joining the project, I had never seen the Informatica tool.
- Aeolun 5y ago
  This explains a lot of my experience with our offshore engineers. Glad to see I’m not crazy.
  - apples_oranges 5y ago
    In my experience it's the same with western/American consultancies.
    - clappski 5y ago
      Yeah, similar story from Western Europe - graduate consultancy gave me 3 months of Java programming material to essentially self-teach myself straight out of university with 0 programming experience. 3 months later I was starting a C# role at a bulge bracket investment bank where the team was expecting someone with at least some exp. seeing as I was costing 75kpa to them (I received 20k as salary). Only reason I didn't get sent back the first week was my boss taking a liking to me, same story for the other 30/40 'consultants' starting at the same bank at the same time. Worse part was the precondition to accepting the graduate consultancy role was a 20k bond that I would have had to pay if I wanted to leave within 2 years of my first contract. While without them I wouldn't have ended up where I am today, at the same time they earned absolutely zero good will from me due to the terrible wage/cost ratio they gave me and the complete lack of any training while I had to take personal responsibility on the client site for my lack of experience.
      - cutemonster 5y ago
        > my boss taking a liking to me The boss in the client company (the investment bank)? (Not in the agency that employed you?) I wonder what your coworkers in the client company thought about you / your skills, in the beginning
Tade0 5y ago
This is still alive and well in eastern Europe - I worked for such companies. They would go a step further and lie that: -They can quickly expand that team of three mid-level developers to eleven, adding mostly seniors. -A team of junior to mid developers is comprised of seniors. -The team is working at FTE on this project and has no other responsibilities. Currently stakeholders often have to resort to requesting the CVs of all the people involved, but that doesn't shield them from that last trick. Of course the client is billed $100+/h, while developers can count on around 25-30% of that. A lot of people got rich like that around here.
- cutemonster 5y ago
  > requesting the CVs of all the people involved Can't the agency provide made up nice looking CV:s? > client is billed $100+/h That's interesting, then seems it's not much different from hiring a local person (in western Europe). > A team of junior to mid developers is comprised of seniors I suppose the clients usually won't notice? They're often non technical (or at least the managers there?) and don't know what to expect? (If the clients had enough technical in house people, they could do their own recruiting instead, didn't need agencies? Or how does it work)
  - rkangel 5y ago
    There's a line between 'misleading' and 'actual fraud' that these service providers like to stay on the right side of (but very close to). Producing made up CVs is the sort of thing that would make it a very short court case if they got caught.
    - Tade0 5y ago
      Actual conversation I had a few years ago: -Client requires <skill>. Can you add it to your CV? -I don't know, can I?
  - Tade0 5y ago
    > Can't the agency provide made up nice looking CV:s? Yes! But this is countered by a 30min call with the candidate. Regarding billing: this is how much SV companies are charged. At the same time they're the ones who fall victim to such practices the most often. For everyone else the average rate is around $45-55/h and you get what you pay for.
marvin 5y ago
This is basically the bread and butter of large parts of the consulting industry in Norway as well, although not quite as dysfunctional. Always be recruiting promising young engineers from university, pay them graduate salaries and bill them out at senior rates. Keep enough experienced engineers around to mentor them and ensure that the delivered product is good. Profit margin for each of these developers is excellent. When they get enough confidence and experience to realize they're underpaid, they'll jump ship to a company that pays senior-level salary (but still bills at very similar rates!), or to a consulting firm that mostly pays commission. Don't quite agree with myself whether this is an example of a gross inefficiency or just the logical way to train people.
fatnoah 5y ago
In 2003 or so, I was 4 years out of grad school and making a solid $85k or so doing software integrations. My company billed me out at $250/hour and my typical week was about 40-60 hours of billable time (yes, that's real, and that's why I quit!)

by jussij 5y ago

hardwaresofton 5y ago

Want to say that this model is still alive and well in Japan (like anywhere else obviously), and these days it looks like charging $10k/month (a lot to companies here for a single developer) for $2-5k/month developers in APAC or eastern Europe, with the guarantee that the project will be looked after based on the sensibilities of someone local/from the US (this person is usually the face of the business or extremely high up, etc). At it's worst this pattern is parasitic but at it's best it's mutually beneficial symbiosis -- if we look at the reality of whether the developers could clear the trust barrier (whether it should be there or not is another question) to getting the roles, it becomes a question of what that barrier skip is worth. BTW, Japan is rife with middlemen taking cuts. If you want to have a chuckle, look into property purchasing in japan/proptech. There are usually 3+ middlemen in the apartment purchase flow here, and fees that you do not see in most other places, ex. "reikin" (AKA "Key Money")[0]. [0]: https://en.wikipedia.org/wiki/Key_money https://en.wikipedia.org/wiki/Key_money

franciscop 5y ago
Parasitic implies one party (implied the employee?) is left worse off than otherwise. If these jobs are being accepted normally it's because the local offers are worse and the developer is not good/doesn't want to deal with the international business side (inc. finding clients, negotiating, etc). So it seems that in a free-ish market, this relationship would be strongly symbiotic, right? Interestingly in Japan they have "Key Money" and "Lock Change fee", which are two different non-refundable BS fees and they confused me initially. The key money also depends by region, with Kansai having it almost everywhere and in other areas "it depends".
- hardwaresofton 5y ago
  > Parasitic implies one party (implied the employee?) is left worse off than otherwise. If these jobs are being accepted normally it's because the local offers are worse and the developer is not good/doesn't want to deal with the international business side (inc. finding clients, negotiating, etc). So it seems that in a free-ish market, this relationship would be strongly symbiotic, right? It's hard to guarantee that the labor side wouldn't have been able to land the contract without the labor re-seller, so it's up to your own personal bias to see this as a service or as predatory. Could go either way but on a case by case basis this is subjective in my opinion. There's not much magic here (well if there is, it can vary greatly), the contracting agencies are middlemen reselling labor that is in various states of compatibility to the company purchasing the labor. Perfectly compatible market actors could be using middlemen when they don't need to, and middlemen are incentivized to make this the case. The usual questions of whether middlemen are good or bad apply and it's not as simple as it being strongly parasitic or strongly symbiotic in any case, it's more like a spectrum which is why I described it as such. A bit of anecdata: I know someone who worked for a contracting firm in NYC that hired Japanese developers (and relocated them) to work in the American market and paid them Japanese wages to work at American companies. The Japanese developers were always happy at first because they were blissfully ignorant and didn't know what the company actually charged. Just because the host isn't aware of the parasite doesn't mean it's not being adversely affected -- some hosts just live severely degraded lives with no idea that they're being drained. It's possible to take the stance that labor is simply paying for imperfect knowledge/market conditions but by that logic exploitation might as well not exist, and if that's the argument then we probably disagree on fundamental grounds about lots of things. > Interestingly in Japan they have "Key Money" and "Lock Change fee", which are two different non-refundable BS fees and they confused me initially. The key money also depends by region, with Kansai having it almost everywhere and in other areas "it depends". Sure, it's possible that the region a person wants to live in does not have Key Money in Japan, but I wouldn't count that a likely outcome. ~55% of apartments in Tokyo look to require Key Money[0], but I'd argue that even if it's not required, most first and maybe second time renters in Japan will pay it, thinking it's just a cost of doing business. All that changes in the second or third transaction ins knowledge on the renter's part. [0]: https://resources.realestate.co.jp/rent/what-percentage-of-apartments-in-japan-do-not-require-a-deposit-and-key-money/ https://resources.realestate.co.jp/rent/what-percentage-of-a...
greggman3 5y ago
I have never had a problem with "key money". I just see it as asking for 2/26ths of your rent up front (the average key money being 2 months rent and paid again every 2 years). I know it's labeled as "礼金" but functionally there is no different from them asking for 2/26ths of my rent up front and then asking for 1/26th each month for the next 24 months. That the system has evolved to have this strange system is curious but looking at it as just an upfront portion of the rent removes most negative feelings about it, at least for me. The thing that still bugs me a little though is the fact that move in costs to the average apartment is 6 months rent. first month + 2 months deposit + 2 months key money + 1 month to realtor. So, a $2.5k a month apartment costs $15k to get started. You can often get 100% of your deposit back when you leave but still, I know lots of people, especially younger people, that saving up 6 months rent to move is hard which suggests it's a barrier to mobility. Note: I'm comparing to Los Angeles where for large apartment complexes it was often just first months rent + $500 deposit to move in.
- hardwaresofton 5y ago
  > The thing that still bugs me a little though is the fact that move in costs to the average apartment is 6 months rent. first month + 2 months deposit + 2 months key money + 1 month to realtor. So, a $2.5k a month apartment costs $15k to get started. Well that's simply the result of having so many middlepeople! :) The middlepeople figuring out that they should charge a multiple of rent rather than a static fee for the actual amount of work that may not keep up with inflation. A truly elegant solution. Another fun bit is the Guarantors that are sometimes required based on just how much the other side thinks they can trust you (or extract from you, since they often require guarantors they know). > You can often get 100% of your deposit back when you leave This I've not seen happen very often, most places will put it right in the contract that they're going to take 0 < x < 5 man out of what you paid just for "cleaning fees" and "AC maintenance" or what not, like an AirBnB would. > You can often get 100% of your deposit back when you leave but still, I know lots of people, especially younger people, that saving up 6 months rent to move is hard which suggests it's a barrier to mobility. I can see this, but a friend and I were discussing this the other day and he brought up an interesting point -- it could be that mobility was so common and bustling (maybe during the bubble?) that these middlepeople sprung up as a sort of natural reaction. I don't know the history but it's an interesting theory -- so maybe it's like a bad feedback loop -- middlemen appeared to facilitate lots and lots of real estate deals during a historic real estate boom, but they never geared back down so the friction persists.
unscaled 5y ago
While Japan is rife with middlemen taking the cut, 礼金 (key money) is not a good example. It goes directly to your landlord, just like your rent. Hiring in IT does have a lot of room for taking cuts. Most Japanese companies (even large ones - or rather, especially large ones) are very bad in doing their own recruiting, so they have to pay a lot of upfront fees to headhunters for every direct employee hired. This is another reason why hiring consulting staff can seem cheap on the short term.

max_hammer 5y ago

Its same in Indian IT. When I joined Infosys straight out of university, my salary was approx `$350` per month. They told client, I have 2 years of experience as Informatica developer and charged $50 per hour. Before joining the project, I had never seen the Informatica tool.

Aeolun 5y ago
This explains a lot of my experience with our offshore engineers. Glad to see I’m not crazy.
- apples_oranges 5y ago
  In my experience it's the same with western/American consultancies.
  - clappski 5y ago
    Yeah, similar story from Western Europe - graduate consultancy gave me 3 months of Java programming material to essentially self-teach myself straight out of university with 0 programming experience. 3 months later I was starting a C# role at a bulge bracket investment bank where the team was expecting someone with at least some exp. seeing as I was costing 75kpa to them (I received 20k as salary). Only reason I didn't get sent back the first week was my boss taking a liking to me, same story for the other 30/40 'consultants' starting at the same bank at the same time. Worse part was the precondition to accepting the graduate consultancy role was a 20k bond that I would have had to pay if I wanted to leave within 2 years of my first contract. While without them I wouldn't have ended up where I am today, at the same time they earned absolutely zero good will from me due to the terrible wage/cost ratio they gave me and the complete lack of any training while I had to take personal responsibility on the client site for my lack of experience.
    - cutemonster 5y ago
      > my boss taking a liking to me The boss in the client company (the investment bank)? (Not in the agency that employed you?) I wonder what your coworkers in the client company thought about you / your skills, in the beginning

Tade0 5y ago

This is still alive and well in eastern Europe - I worked for such companies. They would go a step further and lie that: -They can quickly expand that team of three mid-level developers to eleven, adding mostly seniors. -A team of junior to mid developers is comprised of seniors. -The team is working at FTE on this project and has no other responsibilities. Currently stakeholders often have to resort to requesting the CVs of all the people involved, but that doesn't shield them from that last trick. Of course the client is billed $100+/h, while developers can count on around 25-30% of that. A lot of people got rich like that around here.

cutemonster 5y ago
> requesting the CVs of all the people involved Can't the agency provide made up nice looking CV:s? > client is billed $100+/h That's interesting, then seems it's not much different from hiring a local person (in western Europe). > A team of junior to mid developers is comprised of seniors I suppose the clients usually won't notice? They're often non technical (or at least the managers there?) and don't know what to expect? (If the clients had enough technical in house people, they could do their own recruiting instead, didn't need agencies? Or how does it work)
- rkangel 5y ago
  There's a line between 'misleading' and 'actual fraud' that these service providers like to stay on the right side of (but very close to). Producing made up CVs is the sort of thing that would make it a very short court case if they got caught.
  - Tade0 5y ago
    Actual conversation I had a few years ago: -Client requires <skill>. Can you add it to your CV? -I don't know, can I?
- Tade0 5y ago
  > Can't the agency provide made up nice looking CV:s? Yes! But this is countered by a 30min call with the candidate. Regarding billing: this is how much SV companies are charged. At the same time they're the ones who fall victim to such practices the most often. For everyone else the average rate is around $45-55/h and you get what you pay for.

marvin 5y ago

This is basically the bread and butter of large parts of the consulting industry in Norway as well, although not quite as dysfunctional. Always be recruiting promising young engineers from university, pay them graduate salaries and bill them out at senior rates. Keep enough experienced engineers around to mentor them and ensure that the delivered product is good. Profit margin for each of these developers is excellent. When they get enough confidence and experience to realize they're underpaid, they'll jump ship to a company that pays senior-level salary (but still bills at very similar rates!), or to a consulting firm that mostly pays commission. Don't quite agree with myself whether this is an example of a gross inefficiency or just the logical way to train people.

fatnoah 5y ago

In 2003 or so, I was 4 years out of grad school and making a solid $85k or so doing software integrations. My company billed me out at $250/hour and my typical week was about 40-60 hours of billable time (yes, that's real, and that's why I quit!)