TT-567 -- Cloud Computing Heats Up, e-biz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, May 30, 2010 Issue No. 567

+++ INDEX

- What's New
- News
- Candidate Roundup/Vacancies
- Upcoming Events
- Corrections/Feedback
- News Credits

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+++ WHAT'S NEW

Over the last five years there has been a lot of
speculation about cloud computing, in its many guises, and
what sort of impact it will make in Japan. "Cloud
Computing" sounds sexy, but really just refers to any
application that runs on the Internet and where the
servers and user terminals are likely to be remote from
each other. We are in fact already deep in a Cloud
Computing boom here in Japan, thanks to Google, Mixi, and
DeNA, who all provide consumer applications such as email,
SNS, web office applications, and online games.

Rather, what the Japanese more specifically refer to as
Cloud Computing is commercial grade applications that
companies would want to use as replacements to
applications sitting on their mainframes, Unix open
systems, and Microsoft LANs/WANs. The main reason for
pursuing Cloud Computing is to allow companies to do away
with expensive hardware and the need to have to maintain
customized software.

According to market research firm IDC, the Japanese market
for Cloud Computing will jump from around JPY39.7bn in
2009 to around JPY143.2bn in 2014, an increase of around
360%. In our opinion, it could be a lot more than this if
the right conditions occur over the next two years.

There seems hardly a day that goes by without some major
firm announcing that it will start supplying and/or using
Cloud Computing as a strategic tool. At the forefront on
the supplier side are of course the leading IT firms such
as Fujitsu, NEC, and Hitachi, which are all trying to
emulate IBM's highly successful shift from hardware to
software and services. Ironically all three companies are
doing this by setting up large data centers (Fujitsu plans
to invest JPY20bn-JPY30bn in data centers) and appear to be
bringing in the software from outside parties...! In
contrast, about 80% of IBM's sales comes from software and
services, and increasingly more of it is coming from Cloud
Computing. True, IBM also is the dominant player worldwide
in servers, but this is a means to an end rather than the
main game.

Oh well, at least the Japanese IT majors are trying to
change their strategies. Perhaps in another ten years they
will have exchanged their hardware-centric engineering
workforce for a software centric one.

[Continued below...]

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[...Article continues]

The company which epitomizes what is possible with Cloud
Computing, as defined by commercial-grade applications, is
Salesforce.com. The company has been in Japan for more than
ten years, and had a hard time of it in the beginning. This was
largely because even though Japanese companies loved the
idea of reducing costs by using remote software, it turned
out that they couldn't get away from their unwillingness to
change their work flows, and thus needed customized
software.

Initially Salesforce.com couldn't figure out how to address
the apparent conflict between their one-size fits all model and
customer requests for special features. It partly resolved
this by turning the product from a purely Customer
Relationship Management (CRM) sales tool, into more of a
"glue" to provide a web front end for larger firms wanting
to give PC users access to their mainframe data.

At the same time, Salesforce.com came up with the idea of
making templates, to give users different views of the same
back end. This worked, and now the company has over 100
templates (our guess) that make the users think they are
getting something tailored for their industry -- but which
is really only partly the case. At the same time,
Salesforce.com has forged alliances with IT companies
wanting to help tune the templates and do even further
customization. This has gone well for them and has turned
the software into a development standard.

In FY2009, according to the Nikkei, Salesforce.com had
sales in Japan of just under JPY10bn, making it a serious
player in the local market. Indeed, Salesforce.com is now
doing well enough that it has announced that it will be
setting up a Japan-specific data center in Tokyo, to help
larger corporate and government users get over their fear
of their data going off-shore.

The templating approach certainly stood Salesforce.com in
good stead with one major new client recently. The
government needed software to manage the registration of
10-15m consumers reporting in for the eco-points program,
which allows them to get credits against purchases of
eco-friendly electronic products. Apparently local major
SI firms were approached first, but on hearing that there was
only one month to prepare the system basically they said
it couldn't be done. Not so, Salesforce.com, which agreed
to the timeframe and actually delivered a usable system in
just three weeks. This win has provided the company with a
huge endorsement and lets it better compete for the
business of local governments, medical organizations, and
other semi-governmental customers.

Along with Salesforce.com, the other winners in the Cloud
Computing sector so far all seem to be foreign firms. Much
has been made of the major contract won last year by Google
with Unicharm and various other major companies. True this
is just email and other simple apps, but it is a start to
an industry that otherwise has still been trying to get off
the ground for some time now. More recent wins include
Oracle supplying a manufacturing system to Panasonic
Factory Solutions last month (May), which both parties said
would cut Panasonic's IT spend by about 40% a year, and
auto parts maker Jatco, which will also introduce an
Oracle-produced system for intra-company suppliers' data
held at the firm.

Given that Japan has had excellent Internet connectivity
for almost ten years now, and an ample supply of data
centers, why is it that Cloud Computing, and before it
"Software as a Service" (SaaS), has been slow to gain
acceptance? We know of a number of leading
commercial-grade applications companies, such as
accounting software firms, who have tried to make Cloud
Computing work but who have not been successful.

Our guess is that the following factors have been hobbling
the industry, and it will be companies like Google, with
their extremely low pricing, who will lead the way.
1. Requirement that the customer follows the work flow of
the product being offered, versus having to customize it
(make it cheap enough and they will change...!)
2. Requirement for the data to move outside the customer's
own servers -- many companies are concerned about this.
3. Coupled with data storage off-site, there is the
perceived security risk of transmitting data over the
Internet.
4. The still high cost of telecommunications and mission
critical grade remote data center facilities.
5. The high cost of Cloud Applications -- especially those
sold as SaaS. Often these products cost more than 5-10
times what a single traditionally licenced application
does, over the 5-year lifetime of the product.

We think that companies who start pricing fully functional
software at JPY300-JPY500/user/month, instead of the
current pricing of JPY5,000-JPY20,000/user/month, will gain
strong traction in the market. We are already seeing some
firms price at this level, with very basic applications in
the Human Resources (HR) and anti-spam fields, and there
will be more over the coming year.

The market is truly huge. According to a recent Nikkei
article, Japan's medical records software market is already
worth around JPY110bn -- but vendors are primarily
targeting larger hospitals with 400+ beds. As of February
2009, only 10% of hospitals with less than 100 beds and
just 18% of hospitals with 100-399 beds had such software
in place -- leaving a lot of sales for someone with the
stamina to visit Japan's 8,862 hospitals, 99,532 general
practitioner clinics, and 67,798 dental clinics...!

...The information janitors/

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+++ NEWS

- Unemployment numbers unexpectedly rise
- International traveler bookings jump
- More deflation for April
- Australia to take Japan to International Court on whaling
- "Junk" credit rating for Promise

-> Unemployment numbers unexpectedly rise

Unemployment numbers increased 0.1% in April over March, to
total 5.1%. While the rate fell to 5.5% for men, it rose to
4.7% for women, indicating that companies are still cutting
back on internal costs. There are now 3.56m people
unemployed in Japan, versus 62.69m people who are working.
As could be expected, construction industry jobs fell by
140,000 to 4.92m workers, while medical and welfare sector
jobs rose 310,000 to 6.45m workers. (Source: TT commentary
from nikkei.com, May 28, 2010)

http://e.nikkei.com/e/fr/tnks/Nni20100528D28EE666.htm

-> International traveler bookings jump

The number of Japanese planning to go overseas this year
appears to be headed for a big increase, with advance
bookings on international travel being up by 30% for the
month of July at the nation's number one travel agent JTB.
Advance bookings for August are up even further, with a 44%
increase at JTB. China is the major destination, mainly
because of the Shanghai Expo. Observers say the overall
travel increase is due to big discounts being offered on
family travel and a steady improvement in the economy.
(Source: TT commentary from nikkei.com, May 28, 2010)

http://e.nikkei.com/e/ac/tnks/Nni20100528D28HH660.htm

-> More deflation for April

The nation's Consumer Price Index (CPI) feel 1.5% over the
same month last year, making this the 14th month in a row
for deflation in the CPI. The April figure is largely
blamed on the government's waiver of public high school
tuition fees, which increased the drop by 0.54%. Outside
of this contributing factor, analysts are saying that
deflationary pressure is easing and may follow the Bank of
Japan's forecast for a CPI increase in FY2011 (ending March
2012). (Source: TT commentary from reuters.com, May 27,
2010)

http://www.reuters.com/article/idUSTOE64R00D20100528?type=marketsNews

-> Australia to take Japan to International Court on whaling

Australia is finally taking Japan to the International
Court of Justice in the Hague, to argue that Japan's
so-called "scientific whaling" practice is really just a
work-around on the limits on hunting whales. Japan has said
that it is prepared to defend itself in a court
confrontation. ***Ed: Australia has declared the southern
seas a whale sanctuary, which in itself doesn't have legal
power since the area is largely in international waters.
Rather, Australia's argument will focus on whether the
scientific whaling loophole Japan is using to hunt whales
is in fact being abused. The argument will be that Japan
kills far more whales than are needed for scientific
purposes and that furthermore there are now non-lethal
means to monitor the mammals. Good luck to them.** (Source:
TT commentary from google.com, May 28, 2010)

http://tinyurl.com/2unfd5x

-> "Junk" credit rating for Promise

Japan's second largest consumer finance company, Promise,
had its credit rating cut to junk grade (i.e., below
investment grade) by Moody's Investors Services. Moody's
said that Promise has a broken business model and may not
be able to regain profitability. The company's long-term
debt rating fell two levels from Ba1 to Baa2. Promise
shares fell another 1.6% on the news, making them 52% down
for the last 12 months. (Source: TT commentary from
bloomberg.com, May 28, 2010)

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a11EZfGt5pEI

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

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+++ CANDIDATE ROUND UP/VACANCIES

=> BiOS, a Division of the LINC Media group, is actively
marketing the following positions for customers setting up
or expanding in Japan, as well as other employers of
bilinguals.

** HIGHLIGHTED POSITION(S)

BiOS is currently looking for experienced IT call center
staff to work onsite at our client's Hachioji office,
providing effective and efficient delivery of Level 1
Support and Data Center Contact Services to our client’s
customer base. Predominantly a customer facing role, you
will be the first line of service delivery across a wide
range of areas, from hardware support, through info
input and gathering, to data centre monitoring, as well
as translation work. This is a fantastic role to broaden
your skill set from an early point and increase your
career options later on.

This is a challenging and rewarding role, requiring
experience in dealing with end users and taking their
queries, ideally as part of a service desk or help desk
operation. Needless to say, polished communication skills
are vital for this role, and although daily conversation
level of English is potentially enough, the higher your
ability level is the better. Training will be provided for
the specific systems and process used by our client, but
a good base level of technical ability will stand you in
excellent stead for a successful application

Remuneration is JPY3m – JPY4.5m depending on your
experience and level

** POSITIONS VACANT

- Jnr Sales Rep, Plastics Manuf, Ebina, JPY4m – JPY6m
- Contact Center Onsite Coordinator, Global Vendor,
JPY4.5m – JPY5.5m
- Program Manager, Euro Insurer Tech Division JPY8 – JPY12m
- FileNet Architect, European Insurance co., JPY6 – JPY7.5m
- Unix Engineer, Okinawa I-Bank, JPY4m – JPY5m

Interested individuals may e-mail resumes to:
stuart.gibson@biosjp.com

** BiOS Job Mail

Every 2 weeks BiOS sends out a regular communication to its
job seeking candidates, called BiOS Job Mail. Every edition
carries a list of BiOS's current and most up-to-date
vacancies, with each entry featuring a short job
description and a direct link to the main entry on the BiOS
home page. Regardless of whether you are unemployed and
searching, thinking about a career change, or just curious
to know if there is something out there that might suit you
better, the BiOS Job Mail newsletter is an easy and
convenient way for you to stay informed. If you would like
to register for the BiOS Job Mail, or to find out more,
please email stuart.gibson@biosjp.com.

Interested individuals may e-mail resumes to:
stuart.gibson@biosjp.com

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+++ UPCOMING EVENTS/ANNOUNCEMENTS

------------------ ICA Event - June 17th ------------------

Speaker: Dr. Gerhard Fasol, CEO-Eurotechnology Japan K.K.
Topic: Current Mobile Market Trends - Opportunities For Japan

Details: Complete event details at: http://www.icajapan.jp/
(RSVP Required)

Date: Thursday, June 17, 2010
Time: 6:30 Doors open, Pizza and Drinks included.
Cost: 4,000 yen (members), 6,000 yen (non-members)

Open to all - Venue is Beacon Communications.
Address: 11F JR Tokyu Meguro Building (Tokyu-line
Meguro Station) 3-1-1 Kami-Osaki, Shinagawa-ku.
http://www.beaconcom.jp/en/#/map
-----------------------------------------------------------

------ CCH 'Japan Labor & Employment Law Seminar 2010'-----

Seminar covers following key topics:

1. Review of amendments to the 2010 Labor & Employment Law

2. Topical Issues: Bullying (workplace intimidation) &
Sexual Harassment
- Risks: Workers Accident Compensation Insurance & Lawsuit
- How to try to collect and gather evidence
- Factors to help decide who is telling the truth
- Disciplinary actions to be imposed as penalties
- Key points companies should execute/plan for in advance
to prevent employees from engaging in bullying and sexual
harassment and more...

Date: Friday, June 25th, 1:30pm-5:00pm
Venue: Happo-en 5F, Linden Room
Number of Seats: 50 seats
Language: English
Speaker: Hideki Kano Attorney, Anderson, Mori & Tomotsune
Fees: 20,000 yen + tax

Register: https://www.cch-japan.jp/contents/register/form
For more details, please Contact us at: support@cch.co.jp,
or 03-3265-1161.

www.cch-japan.jp
-----------------------------------------------------------
***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors@terrie.com.

*** No feedback this week.

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+++ ABOUT US

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Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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