Japan's economic woes are spurring companies to seek greater efficiencies. ERP (enterprise resource planning) could be a winner for integrators.
In 1997, a dozen Japanese systems-integration firms working with Andersen Consulting and Baan closed one of the largest deals for Baan ERP software in company history. The sale, which encompassed 10,000 desktops, was made to Japanese heavy-equipment manufacturer Komatsu.
The success of this sale depended on three elements typical of international projects: the vendor, the local integrator, and the global consultant.
"Baan's value proposition in Japan was through the local systems integrators," says Doug Sallen, vice president of middle markets for Baan. Andersen Consulting's role was as a business process re-engineering consultant to the global Komatsu company. (Incidentally, Andersen Consulting has well-established offices in every major city throughout Asia-Pacific and receives close to 17 per cent of its $US6 billion annual revenue from the region.)Government-approved spendingGenerally ERP seems poised to make major headway in Japan. To position the country for growth and to stimulate the economy during the current economic downturn, the Japanese government is aggressively encouraging domestic IT spending through tax incentives and other programs.
ERP is a particular focus in this stimulus program, and the government has even established an ERP council in its Ministry of International Trade and Industry that has responsibilities for regulating manufacturing.
Historically the packaged-software industry has lagged in Japan. In the US and Western Europe, packaged software represents a $US14 billion market. By contrast, Japan, which is half the size of the US economically, supports a packaged-software market of less than $US500 million.
According to a Baan scenario, however, Japan's appetite for packaged software may grow in these tough times. In Baan's view the current economy is pushing customers away from expensive, customised mainframe applications and urging them toward less expensive and more flexible solutions.
And, finally, ERP may grow in Japan simply because of technology maturity. "Many Japanese executives feel that investments by US companies have been experiments to see if the technology would benefit business," Sallen observes.
These "late majority" buyers told Sallen that they'd have confidence in the technology only when they saw the level of investment stabilising in the US. Apparently it has, because this is one objection Sallen no longer hears.