Technoweb, an ASP, targets Japan's education providers.

Why rent out Edge24 over the Web instead of just selling it? "We didn't start with the ASP model," says founder and president Tetsushi Tokunaga, who has an MBA from Wharton. "We started by focusing on educational software and providing education packages. After thinking about how to sell our products to small corporate training centers, vocational schools, adult education centers, and juku cram schools, we discovered that most -- maybe 90 percent -- of our potential customers cannot afford to build their own in-house IT infrastructure." And if they can't afford that, the reasoning went, expensive server software would be a tough sell. Besides, the ASP model seems to fit Japan, where companies don't mind paying for service but do dislike paying for software. Deloitte Tohmatsu estimates the ASP business in Japan could be worth as much as ¥305.4 billion by 2004. So Technoweb is going with the ASP model, charging on either a time or usage basis, depending on the customer's preference. Larger clients who do have the infrastructure can buy custom versions of Edge24 that can be installed in-house under an annual licensing system.

In developing Edge24, which went live in March, Technoweb created its own database application, despite the costs and risks. Tokunaga says this makes Edge24 a faster application -- important on the Web -- than it would be if the company had gone with a bloated off-the-shelf database. It also lets Technoweb tune and customize the product for each client, a key selling feature considering the range of potential customers.

Because Edge24 was developed in-house, Tokunaga says, developers in the company "feel that it's their baby. As a result, they take a lot of pride in the product, and motivation isn't a big problem. This is the first system of its type in Japan, so the staff knows that they're not just following in someone else's footsteps. By bringing this system to market, they know that they are going to change the face of education in Japan, and that's a key motivator."

And to start that change, Technoweb is presently in discussions with a dozen potential customers, including management training and English conversation schools. The company also wants to target CPA training centers (see "Bean Counter U.," page 7, March 2000). As for large corporations -- possibly a key market for Edge24 -- the company says over half do training in-house. "They have their own original course manuals, notes, assignments, and exercises," says Tokunaga. With Edge24, he says, they can publish all their documents in HTML.

The question of partnerships is quite important for Technoweb, in terms of both content and backend engineering. IBM Japan is helping out with the latter -- and with management advice -- under its venture company support project, and Technoweb would like to team up with schools to offer large clients bundled education solutions. Tokunaga views schools as both customers and potential partners, and he estimates that "a complete training package provided by us together with a partner school would cost about half as much as obtaining the same services by traditional means."

It's going to be a busy year for the company. Tokunaga and his staff of six developers have set themselves the goal of achieving $4 million in sales and winning 430 Edge24 customers for the year starting with the March launch. Technoweb presently breaks even with its software development and consulting services, and the company is aiming to be fully in the black with Edge24 sales in the second year.

The company seeks funding. Tokunaga, being bilingual and familiar with US business methods, serves as the firms' one-man VC road show, and he's been talking to both Japanese and foreign potential investors. "I prefer working with foreign VCs," he says. "It's faster, and it's always very clear what they can do for you. Sometimes, when talking with Japanese VCs, there's a lot more talking and it takes a lot longer to get anywhere. Some of the Japanese VCs are still not genuine VCs. You may have heard that sometimes a Japanese VC doesn't offer pure investment -- you'll also be required to contract for life insurance, consulting, and other services. I have talked to a couple of Japanese VCs, but turned them down."

And in the future? "I want to bring US-style executive training to Japan," he says. "With Edge24, we can offer very sophisticated education services. I am very interested in programs offered by b-schools in the US, and this is the perfect platform for them to offer training to Japanese clients. I went to Wharton, and it wasn't cheap. I'd like to be able to offer executive-level training in Japan for a lot less." -- Daniel Scuka