Industry July 2011

Flavour of the Month

Cloud computing is catching on here more slowly than in the West, but Japan has much to offer—and learn from—this increasingly popular IT service.

Cloud computing is the industry du jour—and is particularly relevant for the Japanese market, given the impact of the 11 March disasters and the significant restructuring that Japan will have to undertake.

However, Japanese firms spend 25–50% less on IT than do comparable firms in the US. Moreover, the money is spent less efficiently and effectively, because firms here still have huge numbers of employees in their IT divisions. In addition, this multiple server-based computational resource that is accessed via digital networks is catching on more slowly here than in Europe and the US.

In the field of recruitment alone, cloud computing offers Japan the ability to undergo a sea change in the operation of its IT infrastructure. This would allow firms to drive more services with existing IT budgets.

Looking at the cloud market here, clearly there is great potential. Japan is the world’s third-largest economy and has a number of major strengths. One of these is attention to detail. Another, the high levels of service that are not found in non-Japanese firms, nevertheless may hinder the adoption of cloud computing, which is a mass-market offering with a standardised level of quality.

This is a tremendously advanced, technologically astute country. By putting its mind to the task, Japan could be a leader in the broader Asian market of cloud computing services.

The downside of cloud services is that, while time and money are required initially to operate a cloud, firms still have to restructure in order to accommodate those IT employees who become redundant. That is the immediate hurdle, as increased efficiency reduces the need for people.

I most definitely do not advocate wholesale reduction in the number of IT employees—the main point is to introduce and develop skills so that the same number of people are achieving a lot more.

Firms must recognise that their people must do different things as their skill sets are pushed in different directions. Firms have to create more development expertise and enhance the skills required to manage large amounts of high-technology infrastructure. Management must move from a manual to an automated environment, a transition that can be painful and is not helped by the strength of existing relationships and the desire to maintain the status quo, either in-house or with external IT service providers.

So the reality is that it can be difficult for some firms to develop, and it can be expensive. But, if we look at businesses that are successful in cloud computing services—such as Amazon, Google and—it is clear that their capabilities have evolved as a by-product of understanding how to manage large amounts of IT infrastructure.

Amazon emerged from the retail industry to manage its operations by developing core expertise in infrastructure management. There is just no equivalent to that in the Japanese market.

For systems integrators here, there is also a lack of competition and, therefore, less of an impetus to innovate. That leaves room for firms such as mine.

There is a huge market opportunity in Japan and a need for Japan to use IT infrastructure more efficiently, which will help to liberate business. Japan can offer so much in terms of attention to detail and high-class service—that is a great set of factors that are in Japan’s favour.