High-Tech Pioneers in Japan : Technology: Young U.S. companies setting up shop are departing from the expensive, often plodding way in which American businesses traditionally operate there.

TOKYO — With a fax machine in his home, a pocket beeper on his belt and borrowed space in a distributor’s office, Dennis Moran, 27, zips around Tokyo showing customers the advantages of his company’s computer networking equipment.

In America he might be regarded as just another salesman. Here in Japan, he is a high-tech pioneer, dauntlessly prying his way into this seemingly impenetrable market.

“I’m like a vampire,” Moran said. “I work a full Japanese workday and then come home at 11 p.m. to talk to the home office until 2 a.m. on the phone.”

The task of living and commuting in another culture takes its toll. “I’m a California boy. I’m used to going to the beach in an air-conditioned car,” Moran said. “Now I have to ride the Yamanote (train) line at rush hour. It’s really draining.”

His reward? A novel experience, a potential for rising more quickly up the ranks in the company and stock options that climb in value as the company builds share in the world’s second-largest market.

As the rising yen makes it increasingly expensive to set up shop in Japan, Moran is one of a small but growing number of young Americans who are finding low-cost ways to build a presence here for the fledgling U.S. companies they represent. Many of these start-up companies are in areas such as software, computer networking and medical equipment--areas in which the United States has a substantial edge.

Moran arrived in Japan a little more than a year ago to establish an office for Modtap, a Harvard, Mass.-based company with annual sales of $30 million. Today he has distributors in several market segments and an impressive 15% share of the Japanese market for the networking hardware Modtap sells.

Echelon, a young U.S. company that sells computer technology used to automate homes and factories, opened an office in Japan when it began shipping products in 1991. The company has since moved to bigger quarters and has a staff of 10. “We are already close to covering our (start-up) costs,” said Martin Bantle, who heads Echelon’s Japan office.

The quick entry of companies such as Echelon and Bodtap represents a radical departure from the expensive and often plodding manner in which U.S. companies have traditionally set up shop in Japan.

Conventional wisdom suggests that American companies should have an office at a good--and usually expensive--address in downtown Tokyo, staffed with at least one senior executive sent from headquarters.

But such an operation doesn’t come cheap. Companies find themselves putting up $400,000 to $1 million just for the 20-month deposit landlords typically require on commercial rents. An expatriate package for a senior executive that includes an American-sized apartment can easily cost $200,000 a year, not including salary.

Every time the yen rises, costs soar. The yen’s rapid rise during the last two years has raised the cost of a typical executive apartment to more than $10,000 a month, up from about $8,000 two years ago.

Such costs could scare away some American businesses. John Stern, head of the American Electronics Assn.’s Japan office, notes that the last time the dollar fell against the yen, the number of U.S. electronics companies that established offices in Japan shrunk by half, to just 23 a year.

To save costs, some companies will opt for an easier route, using Japanese trading companies to sell their products or offering exclusive deals to distributors. But some experts discourage such shortcuts.

“Don’t give exclusives,” Moran said. “You never know what they will do with your products.” And while big trading companies have name value, they are unlikely to provide your products with much support, experts say.

An alternative: Establish your own operation but keep costs down. For example, Moran’s apartment, though luxurious by Japanese standards, costs a third of what a typical American executive would pay for housing. Moran plans to move into an office soon. But he’s chosen a location in the lower-rent outskirts of Tokyo and plans to share the office with another businessman whose start-up company sells complementary networking technology.

Steven Gasser, representative director of Acuson Nippon, a Mountain View, Calif., manufacturer of ultrasound diagnostics equipment, said that when he established an office in Japan for Acuson 2 1/2 years ago, he managed to keep costs so low that the company took in a profit in its first year of operation in Japan. Gasser is already moving into bigger office space and training a Japanese manager to replace him. With land prices down sharply and rental prices plunging, he advises, “now is the time to make the move.”

Don’t worry about finding a fancy address. “There used to be a cachet about being at a good address,” said David Pollack, head of market development for the Japan office of the American Electronics Assn. Now, as the dollar’s value against the yen falls, he said, even big companies like Digital Equipment and Sun Microsystems are moving farther out.

One low-cost way of setting up in Japan is to work through a company such as Ivex International, a Tokyo consulting firm. Ivex represents seven U.S. companies, mostly software houses, in Japan. The company signs up distributors and provides technical support for clients’ products. When a company is ready to set up its own office, Ivex helps make the arrangements.

“Get into the market early and get your product localized,” said Danforth Thomas, vice president of Ivex. In the case of software, that means getting the software and documentation translated into Japanese and arranging for it to run on the major Japanese computer standards.

One of Ivex’s clients, a U.S. software company, was selling several packages a month of its pricey software when it decided to establish an operation in Japan in mid-1991. In January of 1992, the company invested roughly $300,000 to modify its software for the Japanese market. By last month, the company had a subsidiary staffed with seven people and a budget of $70,000 a month. It is already making a profit selling 100 software packages a month. Total setup cost? About $550,000.

Although there are many high-tech markets in Japan where companies can find room to grow, Japan’s software market is particularly wide-open. That’s because Japan has long focused on custom-built software and because its ready-made packaged software is of poor quality.

As the market takes off, U.S. companies have a distinct advantage. In 1991, 22 American software companies sold $161 million worth of software, a 38% increase over the year before. IDC Japan, a consulting company, predicts the Japanese software market will be worth $10.6 billion by 1996, double the $4.4 billion in sales recorded in 1990.

Most companies will eventually want to put their Japan operations in the hands of a capable Japanese manager. That used to be difficult because Japanese managers were reluctant to leave their sinecures to work in foreign companies. Now recession and the high yen have forced Japanese companies to squeeze out more of their middle managers. Many of them are insecure and looking for better, more challenging jobs.

“There are a lot of restless people at the major companies,” Pollack said.