Japan excited about future of Ukraine’s tech industry

Japan future of Ukraine’s tech industry 2019

Almost every Ukrainian is using something Japanese — at least, almost every Ukrainian with a smartphone. That’s because 97 percent of smartphone owners here, or about 40 million people, use the messaging app Viber, which is owned by Japanese e-commerce giant Rakuten.

Viber might be the most well-known Japanese tech product in Ukraine, and it could help to break the ice for Japan and Ukraine to cooperate in the tech industry.


Viber everywhere

It is impossible to avoid Viber in Ukraine — even if one prefers WhatsApp, Facebook Messenger, or Telegram. Shipping companies, stores and small businesses like ateliers and translation agencies all use Viber to communicate with their clients.

In 2014, Ratuken purchased the messenger from its Israeli founder for $900 million. Since then, the app’s popularity in Ukraine has grown by leaps and bounds.

Now, Ratuken is taking notice: its CEO, Hiroshi Mikitani, has just hired a local country manager in Ukraine, the very first Viber employee here. More importantly, during a personal meeting with Ukrainian president Volodymyr Zelensky on June 26, Mikitani promised to open a Viber office in Kyiv.

Hiring a local manager is the first step toward ramping up the messenger’s business activities in Ukraine, according to Atanas Rayko, an executive responsible for Viber operations in Europe, Africa, and the Middle East.

The Ukrainian market is among top 10 biggest Viber markets by number of users in the world and the second in Eastern Europe, Rayko told the Kyiv Post.

“We have a special focus on this market’s development, trends and demands,” he said. “And we’re expecting to increase Rakuten Viber presence in Ukraine.”

Dmytro Ovcharenko, vice president at the IT Ukraine Association, says its good news when such a big tech company enters Ukraine.

“It is a company with a powerful brand, so its roll-out in Ukraine will become a positive signal to foreign investors,” Ovcharenko told the Kyiv Post. “This is especially important when taking into account the military conflict with Russia in eastern Ukraine and the turbulent political situation.”

While visiting Ukraine Mikitani also promised to join the State Investment Council, an advisory body to the country’s president. Then, two weeks later, Viber and Ukraine’s largest mobile carrier, Kyivstar, announced a cooperation agreement. Kyivstar will now allow its 26 million users to buy messaging stickers in Viber using mobile payments.

Although stickers are a minor feature of the app, “it is an important step for Kyivstar because Viber is installed on nine out of 10 Ukrainian smartphones,” says Olena Suvorova, head of the money transfer and payment department at Kyivstar.

Meanwhile, Ukraine’s largest private postal operator, Nova Poshta, has used Viber for its business since 2016. The company sends notifications about parcel arrivals through the app, which saves it money on text messages, and has a Viber chat bot designed to provide round-the-clock client support.

Nova Poshta director Oleksandr Bulba told the Kyiv Post that the firm chose Viber for its popularity with Ukrainians. Other messengers with smaller user bases were simply less influential, he said.
“Viber became that popular among Ukrainians and Ukrainian businesses because it appeared on the market of the digital solutions when smartphones boomed in our country,” Bulba said. “Later Viber secured a spot as a leader because of its simplicity… and word of mouth, of course.”

Rakuten already invested in Ukraine back in 2014 — but indirectly. That year, the Japanese e-commerce company acquired online shopping service Slice for an undisclosed price.

Slice was an American company that had its main development office in Odesa, a Ukrainian city on the Black Sea some 600 kilometers south of Kyiv. Four years later, Slice was renamed Rakuten Intelligence.

It still works out of Odesa, where it has 120 employees.


Start of IT cooperation

Around the same time the Rakuten delegation met with President Zelensky, tech associations in Japan and Ukraine signed a so-called “memorandum of understanding” to ramp up partnership between the countries’ tech sectors.

Japan’s JASIPA association and the IT Ukraine Association signed the memorandum on May 8. And although it has no legal effect, the two parties see it as the start of promising ties. Ukrainians are looking to find a new market in Japan, while the Japanese see Ukraine as a “window to Europe.”

The IT Ukraine Association’s Ovcharenko said the agreement has already improved lines of communication between the two countries, and a number of Ukrainian tech firms with membership in his association were invited to a trade show in Japan.

Ovcharenko hopes that, eventually, there will be more Japanese companies in Ukraine and vice-versa.


Japanese about Ukraine

Japanese entrepreneur Hiroshi Shibata was the de facto matchmaker in the memorandum of understanding.

Shibata lives in Ukraine and runs the Ago-ra consultancy, which helps Japanese companies to learn about doing business here. Splitting his time between Tokyo and Kyiv, he feels that Ukraine and Japan are still mentally distant and know very little about one another.

This manifests itself in their very limited business partnership: only 30 Japanese companies have branches in Ukraine while only 200 Japanese people live in the country.

But Shibata feels this is going to change, as Ukraine has just begun to view Japan as a potential business partner. Japan, in turn, has a serious shortage of labor in the tech sector, something Ukraine can help to overcome.

“Ukraine can offer high-skilled, experienced engineers with cutting-edge technologies. That is what Japan is desperate to have,” Shibata told the Kyiv Post.

But these relations aren’t just about Japan hiring a Ukrainian outsourcer. Ukrainian IT firms must also take the Japanese market more seriously and, consequently, launch operations there.

Although the IT business operates in roughly the same manner anywhere in the world, Shibata finds it easier to run a business in Ukraine than in Japan. Ukrainians have a global mindset and aim to run businesses internationally. They can also make decisions quickly — something the Japanese can learn from them, Shibata thinks.

Another Japanese person in Ukraine, Mishima Satoshi, is the founder of consultancy JoinJapan, which has been trying to bridge the gap between the two countries for 10 years. He thinks that, while the nations are “definitely close in our hearts,” there’s more work to do to link the countries through business.

All the same, Satoshi believes that a combination of “excellent” Ukrainian IT specialists and “excellent” Japanese manufacturers could be hugely successful.

“I think Ukrainians are very good at short distances. They concentrate on some outstanding idea and develop it into the (new) technology in a very short time,” Satoshi told the Kyiv Post.

“At the same time, the Japanese are good at long distances. They do business steadily according to a plan, which might help Ukrainian technologies to break into world markets.”

“Starting with Japan,” Satoshi added.


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