Japan’s Once-Dominant Carmakers Face Pay Hikes to Lure Data Center Geeks

(Bloomberg) -- Headhunter Casey Abel spent four months trying to hire a data center architect for a Japanese automaker, including five meetings with the client -- one with the top executive. In the end, the IT specialist joined an e-commerce company abroad for significantly more money.

“There’s just a massive mismatch in salaries,” said Abel, managing director at recruiter HCCR K.K., who has spent as long as a year trying to land some IT candidates. “You’ve got some engineers making 20 million yen ($170,000) a year. Then you try to fit them in the traditional manufacturer-based salary structure where it should be 7 to 9 million yen.”

Attracting the best information technologists is becoming increasingly important for Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. as they seek a bigger share of revenue from IT-driven services such as ride-sharing and cloud-based monitoring of vehicles. Nissan Chief Executive Officer Carlos Ghosn has said Japanese carmakers can’t afford to lose the “ global war for talent” to new rivals like Uber Technologies Inc. and Tesla Motors Inc.

See also: Ex-eBay Infrastructure Chief Takes Over Uber Data Center Strategy

Luring such talent requires big pay bumps in Japan because the companies are chasing the same experts that banks, tech companies and everyone else needs, said Abel. The automakers “operate within extremely strict budgets and the business is generally low margin.” Japanese companies suffer from a dearth of domestic talent and the perception their business is more “mature and slow moving” than the new wave of tech startups.

Honda said it will adopt a more flexible salary policy at its new Tokyo lab, while Nissan declined to comment specifically on pay at its new Tokyo data office. Toyota located its so-called connected-car business unit and AI research center in the U.S., which a spokesman said offer competitive compensation.

Hunt for Professionals

Japan has had the most severe talent shortages in the world since 2010, with IT professionals among the top three hardest positions to fill, according to Manpower Group’s annual market survey. The country is short of an estimated 171,000 IT staff in 2016 and the number may more than quadruple to 789,000 by 2030, according to a survey by the Ministry of Economy, Trade and Industry (METI).

That race for staff is accelerating. Nissan said in October it plans to hire about 150 engineers in Tokyo by 2018 for software, cloud computing, data analytics and machine learning. Honda starts operation next year of a Tokyo research center mainly for artificial intelligence and IT. Volkswagen AG said this week it will hire more than 1,000 IT experts, tapping high-technology sectors, gaming industry and top-level research centers, in the next three years.

Toyota last month announced its connected-car strategy, which includes building a big data center to create new business using drivers’ data such as tailoring insurance policies to drivers’ habits, and hired former U.S. defense scientist Gill Pratt to set up and lead an AI research institute in the U.S.

“You need really good talents to do those really complicated things,” said Jeremy Carlson, an analyst of autonomous driving at IHS Markit. “Japan has an educated and intelligent population, but many highly motivated and capable individuals in these fields flock to areas like Silicon Valley.”

Japan came last in METI’s survey in terms of the proportion of respondents who thought IT was an interesting area to work, while Indonesia, India and the U.S. ranked highest.

The Japanese corporations are following the lead of U.S. rivals Ford Motor Co. and General Motors Co. Ford established a science lab in Silicon Valley in 2012 to develop software, while GM has built two data centers since 2013 to streamline product development, manufacturing, marketing, sales as well as connectivity services.

Honda is trying to address the salary issue by adopting a more flexible work and pay system at its new Tokyo lab, rather than the rigid, seniority-based pay grades used elsewhere within the company, said Yoshiyuki Matsumoto, president of Honda’s research arm, which operates largely autonomously.

With the intense competition for staff in Japan, Toyota in April set up its Toyota Connected Inc. data unit in Plano, Texas. The division works with Microsoft Inc. to develop data management and services for its operations worldwide, including systems for connected cars that help make it easier for people to use automotive technology.

Then there’s the problem of attention span.

Design Cycle

The development cycle for a car usually last years, which can be frustrating for programmers used to building a system in weeks, said Mandali Khalesi, Asia-Pacific chief of Netherlands-based digital map-maker HERE, owned by German automakers Audi AG, BMW AG and Daimler AG. “These people are from complete IT backgrounds and they don’t expect these long-time cycles,” he said in an interview in Tokyo.

Nissan decided to try to turn that to its advantage. It’s building the 150-person connectivity division in Tokyo, partly in the belief that the long-serving work attitude is Japan’s edge over Silicon Valley, according to Ogi Redzic, head of the unit. About half the IT professionals in Japan have never changed jobs, compared with 14 percent in the U.S. and 21 percent in China, according to the METI survey.

“We cannot afford to have people that only come here for a year or two,” said Redzic, a former executive of HERE, who joined Nissan and alliance partner Renault SA this year to head the group’s IT service for connected cars.

“The way that people are going to get remunerated is going to be tied to the type of work that they do,” said Redzic, declining to give details. “We fully get it that if you want to build data-analytics themes there are certain market conditions around what those people expect.”