Masaru Tange says the strategy that turned his company into one of Japan’s best-performing stocks may be surprising: He buys smaller firms and boosts their workers’ pay.
Tange’s Shift Inc., a software tester, acquires other businesses near the bottom of the industry supply chain and raises their engineers’ salaries. He says he’s able to do this and still charge competitive prices by cutting out layers of companies that serve as middlemen in the outsourcing process. And having more workers leads to higher sales.
Shift’s shares have risen more than 5,300% since it went public in 2014, the second-best performance on Tokyo’s benchmark stock index. The company’s market capitalization has surged to about $2.3 billion, pushing the value of Tange’s 33% stake to about $745 million.
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. It’s also, he says, a break from the M&A strategy of buying a business and looking to reduce costs.
“I have a strong urge to rescue these young employees,” Tange, Shift’s founder, president and chief executive officer, said in an interview. “I want to create a fair working environment through M&A.”
Tange grew up in what he describes as an ordinary family in Hiroshima in southwestern Japan, where both his parents were civil servants. He established Shift in 2005 after majoring in mechanical engineering and spending more than five years working for a consulting firm.
Shift started out advising companies on how to improve profits. In 2009, it entered the software testing business.
Tange said he wanted to change engineers’ perception that software testing was a second-rate job, including by paying them more money.
For example, for a service where the market price was 2 million yen ($18,320), Shift would charge 1.5 million yen. This would enable it to win customers. At the same time, it would raise the amount paid to the engineer to about 800,000 yen from 500,000 yen. It could do so, Tange said, by getting rid of middlemen.
Shift acquired Yusuke Sato’s company in 2016. Since then, the software developer says his salary has jumped by more than 70%.
“Joining Shift was a huge turning point in my career,” Sato said.