Japanese and Foreign Companies Find Opportunities in Cloud Computing

Jul 27, 2010


The cloud computing market in Japan has been given another recent boost, which is exciting news for Japanese and non-Japanese cloud computing providers alike. Ministerial talks were recently held between Japan and Australia to discuss collaborative strategies for technology exchange, cyber security, broadband and smart grid development.

Stephen Conroy, Minister for Broadband, Communications and the Digital Economy and Kazuhiro Haraguchi, Minister of Internal Affairs and Communication met in July to increase cooperation between the two countries in the field of communications. The new Kan administration in Japan plans to double the IT investment from 2 trillion JPY by 2020 and expects growth in the IT industry to boost the Japanese economy by 7 trillion JPY. The so-called “Smart Cloud Strategy” policy will support computerisation in governments and the medical and education sectors.

Although the ICT industry in Japan has been paying more attention to cloud computing systems recently, American IT vendors, such as Google and Amazon.com, still dominate the industry. According to the Yano Research Institute and Fujitsu Research Institute, barriers to cloud computing in Japan include expensive property prices which prevent companies from expanding their data storage centres, difficulties associated with standardising applications, operation systems and hardware and privacy concerns held by Japanese customers.

In spite of these difficulties the cloud computing market is growing steadily in Japan. In 2009, the size of the market was estimated at over 140 billion JPY, and was predicted to grow to up to 740 billion JPY by 2015 (Yano Research Institute). Currently the percentage of companies using cloud computing is 9.4% and the number of companies looking to introduce the system in the near future is estimated at approximately 31%. The types of services which companies are mainly interested in are sales and corporate communications (Cross Marketing). Japanese IT vendors have started to compete with American vendors by developing their original services such as tailor-made cloud systematisation for internal office use, integration between on-premise and cloud computing services, and Business Process Outsourcing (BPO) services. Sumitomo Forestry and NEC plan to provide cloud computing systems to 30,000 construction companies which support logistic, Computer Aided Design (CAD) and ordering by 2014. They are also targeting high level security and increased quality of services to address the concerns of their customers in Japan. Mitsubishi Electric attempts to differentiate their cloud computing systems by enhancing security with protective coding and electronic signature. Fujitsu also recently announced that they would invest up to 100 billion JPY in cloud computing development.

The cloud computing market in Japan constitutes good opportunities for multinational IT companies. Because the cloud computing market in Japan is not yet fully developed, multinational IT vendors with high quality services and experiences have a distinct competitive advantage. IT infrastructure has been more broadly developed in Japan recently, and the R&D environment ranked No. 1 in the world by the Economist Intelligence Unit (2007).