Aruna Basnayake, Japan Cloud
If partnering is a recurring theme in conversations about how to succeed in enterprise software in Japan, it’s for a good reason: systems integrators, or “SIers,” employ 70 percent of software engineers in Japan.
Catering to the development needs of Japanese companies for the past 30 years, SIers have built trusted relationships with their customers across all industries. They know their customers’ IT environments. They know their corporate cultures and protocol. It’s not hyperbole to say that SIers are the extended development organizations to Japan’s industrial giants.
So partnering with SIers is key for global cloud companies to build trust – as well as service capacity – in Japan. While cloud companies should sell directly to – and own – their customers, they need to make partnering with SIers an essential part of their go-to-market strategy for Japan.
Japan’s Absentee IT
The emergence of SIers is a story that is unique to Japan. Unlike American and European companies that have done most of their software development work in-house, Japanese companies have delegated the lion’s share of their systems development to SIers, a practice that dates back to the early 90s when companies slashed their IT budgets, or spun off their IT departments entirely, in reaction to the collapse of Japan’s economic bubble.
Although a handful of companies are moving toward developing more of their software in-house – the trade media are quick to highlight internal teams that leverage modern development tools to build innovative apps – the reality, again, is that SIers employ 70 percent of Japan’s enterprise software developers. A 2021 survey revealed that more than 60 percent of Japanese companies believe SIers are “absolutely essential” for implementing their digital transformation strategies.
It’s also noteworthy that only 40 percent of Japanese companies employ CIOs. The CIOs that do exist are often corporate managers. They may know their companies, but they are not necessarily IT specialists.
Filling the lack of deep IT expertise at Japanese companies are a plethora of SIers. They include affiliates of major hardware companies, independent SIers and cloud-native SIers as well as industry-specific SIers bearing the names of Japan’s largest banks, power companies, logistics companies and even advertising firms whose origins can be traced back to the IT departments that were spun off in the 90s. Traditional trading houses also localize, distribute and implement various software products, often through multi-tier subcontracting relationships with SIers and resellers.
As affiliates of the country’s iconic hardware manufacturers and telecommunications giant, Japan’s largest SIers have benefited from access to a massive installed base of on-premise systems – hence their potential as a channel for global companies looking to augment their more strategic, direct sales engagements.
Partnering for Trust
Although the advent of the cloud has impacted their top line, SIers are still trusted advisors to their customers. They are, after all, cut from the same cloth. So it’s definitely in the interest of global cloud companies to turn to them for post-sales services and support.
Japan Cloud’s partners work closely with SIers. Business consultancies, both local and global, are also valued partners. Together, they engage deeply with IT departments and end-users. SIers are also a source of referrals, though deals are always signed on our partners’ paper.
Companies should reach out to partners early upon their arrival in Japan. A show of partner support, in specific deals as well as at public events, goes a long way in gaining the confidence and trust of customers. Training and certifying partners also requires time as product content needs to be translated.
Cloud companies should also invite partners to global events and meetings with executives. They should be kept up to date on the latest product innovations and global customer stories. Exposure to a company’s global momentum and brand power are key.
It’s important that companies treat their partners with great care and respect. Despite its size, Japan’s IT market is extremely dense and centralized. News of bad deals or unsupportive vendors spreads quickly. Everyone talks to everyone. Japan’s IT landscape is littered with global companies that alienated their partners.
Enabling Partner Success
Japanese customers have embraced the cloud. They view digital transformation as critical to their success in a hybrid world. They must succeed, and they are depending on the cloud to enable their success. Global cloud companies need to hire and develop the best local leadership. They need to demonstrate operational excellence and build a local customer success culture.
But cloud companies cannot enable customer success on their own. They need the support of local SIers. Cloud companies need their scale. They need the credibility that local SIers have with customers.
To quote from my previous interview with Naoki Togawa of Nikkei BP, customers do not want to work with “fly-by-night foreign software firms.”
And neither do SIers. Global cloud companies need to earn SIers’ trust and respect as well. They need to select a few valued partners whom they can commit to and utilize fully. They need to invest in partner training and certification.
They need to enable their partners’ success long term – just as they do their customers’.