Narrowing the gap between Japan IS and U.S., European sites - information systems technology

In 1992, the Japan information technology (IT) market stands at the threshold of a new era of chastened expectations and changing dynamics.

The new pressures on the Japanese IT market have already begun to erase some of the historic differences between IT spending in Japan and in other mature economies. Consider the following:

* Last year, for the first time in years, the

market did not expand in double digits. IDC

preliminary estimates indicate that it grew

only 6% in 1991, better than the U.S. at 4% or

Western Europe at 3%, but considerably

below historic rates.

* Two outside measuring sticks suggest that

these overall lower rates will continue

through the next half decade at least. First,

the economy: in 1991, Japan's GNP grew

only 3.7%. Expansion in 1992 is expected to

dip below 3%, while through 1995 it should

hover in the 3-4% range. And second, common

sense: double-digit growth never continues

forever.

* Japanese users are proving less willing to

invest in new computer systems than in the

past, but the growth in their spending on

software and services has declined hardly at

all. After years of lagging behind the proportions

registered elsewhere, software and

services accounted for nearly 48% of the

Japanese IT market in 1991. One reason for

this shift has been the decision of many

system vendors to unbundle products and

services (e.g., maintenance) that had previously

been included in hardware pricing.

With hardware spending down, vendors

must recoup revenue where they can.

Indeed, the attitudes of Japanese users represent the most intriguing element in the new environment. For years, they have allowed the Japanese IT market to develop unique patterns setting it apart from the U.S. and European models.

No other major market, for example, has proven so loyal to mainframes, or so resistant to desktop systems; no other major market has shown less interest in Unix, in packaged software, or in PC LANs.

In addition, Japanese users are far more conservative in their general IT outlook. They are less likely to adopt new technologies than their counterparts in the United States and Europe.

Are these attitudes changing? Beyond simply determining short-term spending plans in 1992, the key issue for the Japan IT market is the overall strategic thrust of customer decisions.

To address both the short-term and long-term issues, IDC has extended its 1992 IT Customer Directions and Spending Strategies user survey project to Japan. Conforming with IDC's worldwide 1992 IT survey, the Japan survey posed a series of questions to almost 1,400 Japanese sites in February 1992. For a complete discussion of the methodology of IDC's 1992 IT surveys, see the Gray Sheet 27:9 February 28, 1992), page 7.

The survey focused on the sites' overall IS environment and on its strategy for implementing new technologies. Two key indicators of IT spending -- host environment and vertical market -- were examined for their effect on users' attitudes.

The IS Environment

The key areas of focus are the major challenges for 1992: attitudes towards IS change, acceptance of new technologies, and 1992 spending priorities.

Most important challenge for 1992: As in the United States, migration to more modern platforms was most often chosen as the primary IS challenge in 1992. This issue is especially important to mini and small business computer users. The Japan survey base differed by the low emphasis on cost control and the very high proportion citing staff issues (only 3% in the U.S. chose this option).

Attitudes towards IS change: The Japanese users portray themselves as significantly more conservative than their U.S. counterparts, a quarter of whom chose the "often adopt new technologies" option and only 11% of whom stated that they rarely make more than marginal improvements. In Japan the results were diametrically opposed. NEC 3100 sites proved especially unadventurous. Business services sites in Japan proved a typically adventurous.

Acceptance of new technologies: Workstations are by far the most popular new technology, followed by image processing and object-oriented databases or languages. EDI is far less attractive than in the United States.

There is a very wide swing from the high point (IBM and PCM S/370 and S/390 sites) to the low (NEC 3100), but most host environments clustered near the mean. Among the vertical markets, there is an equally wide swing from the high point (business services) to the low (finance).

Current spending priorities: Almost a third of the budget-weighted responses reported expectations of heavy investments in both hardware and software, while another quarter anticipated an emphasis on software and services. Only 7% expected to focus on hardware rather than software.

That left 37% expecting stasis or contraction. IBM/ PCM S/370 and S/390 sites and Hitachi mainframe environments are the most optimistic. In general, vertical market groupings did not stray too far from the survey mean.

Technology Implementation

This section attempts to gauge users' centralization of control and resources and their willingness to implement new IS paradigms such as client/server computing, an open systems or Unix-oriented strategy, outsourcing, and systems integration.

Current management control: In general, the bigger the host system, the higher the degree of central control becomes. However, overall control is much lower in Japan than in the United States. The "fully centralized" average in Japan was just over 30%, compared with 58% in the United States. The respective overall averages for no centralization were 37% and 15%.

The biggest differences between the two countries were in central management of LANs or departmental systems and of telecommunications. Users in the U.S. were much more likely to centralize control of the former, users in Japan to centralize management of the latter. In other words, users will centralize what is central to their overall activity.

Centralized vs. distributed resources: Despite the historic emphasis on mainframes in Japan, downsizing is making serious inroads. Over a third of the base is moving major applications onto smaller, distributed systems or focusing new applications development on distributed systems. Moreover, these proportions parallel the results in the U.S., the fountainhead of distributed computing.

Client/server computing: A far lower proportion of the survey base in Japan is moving or has moved to client/server computing than in the United States (6% compared to 22%). However, while users in Japan are in general somewhat more negative towards the subject than their U.S. counterparts, the discrepancy is manageable for vendors pushing the client/server approach.

To better examine the data, the three broadly positive responses to the client/server paradigm are grouped together and contrasted with the two broadly negative options. The average 40% positive reaction does not fall seriously short of the 49% positive vote by the U.S. surveybase. Once again, IBM/PCMS/370 and S/390 sites are the most enthusiastic, and NEC 3100 environments by far the least convinced. Finance is the most negative towards a new technology, followed by wholesale.

The education task confronting vendors is underscored by the quarter of the Japan base that would like to move to the client/server approach, but is unsure how. On the plus side, the extremely negative reaction dismissing client/server computing as a "buzzword" is no higher in Japan than in the United States.

Open systems: Only a quarter of the Japan base stated that they were pursuing an open systems strategy, in contrast to half of the U.S. base. However, the means of implementing such a strategy were broadly congruent.

Unix: The proportions actively pursuing a Unix option are much smaller in Japan than in the U.S. (12.5%, compared to 30%). However, the percentage considering a Unix-oriented strategy is much higher.

Added together, the potential markets are almost comparable as ratios of the two survey bases: 33% in Japan vs. 37% in the United States.

Outsourcing: Considering the significance of the outsourcing decision for IS managers, the 9% currently outsourcing in the Japan base is high, while the 23% pursuing or considering the option is strong testimony about the pressures on users in Japan. The ratios are particularly high at IBM and PCM S/370 and S/390 sites. And, for once, the positive ratio is particularly high in finance.

Systems integration: As with the responses on outsourcing, the reactions to systems integration in the Japan survey base suggested the difficulty and complexity of the issues confronting users today. The 23% of the Japan base pursuing or considering systems integration parallels the U.S. results.

However, at sites with no current interest in systems integration, users in Japan were much more likely to be satisfied with existing resources and services. It is significant that the current and potential demand for systems integration services is fairly evenly spread across all industry groups in the survey base.

COPYRIGHT 1992 International Data Corporation
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