Japan remains the second-largest tech market worldwide after the US and accounts for a massive 40% of total IT spending in Asia Pacific. Japanese companies devote most of their annual IT budget and staff — 70% to 80% — to maintaining existing back-end infrastructure and applications. But we expect this budget to shift rapidly over the next two to three years as local organizations embrace disruptive technology innovations in their efforts to succeed in the Age of the Customer.
Forrester’s team of Asia Pacific analysts recently published our regional tech market predictions for 2014. Below are my predictions for Japan:
- Japan’s technology spending will show modest growth of 2% in 2014. Thanks to the positive economic impact of the government’s stimulus package and the depreciation of the yen, enterprise IT spending will likely grow by 3.7% in 2013. However, due to the consumption tax increase planned for April 2014 and the waning effects of the stimulus package, Forrester expects IT spending growth to slow to around 2% in 2014, driven by large application modernization projects in banking, manufacturing, and the public sector.
- Customer engagement will drive mobile, big data, and analytics investments. Consumers are pushing digital disruption by spending more time on mobile and social activities. Leading banks, retailers, and services firms are increasingly initiating mobile and omnichannel strategies and investing in analytics to improve the customer experience. Successful IT-led analytics projects will reflect and support the growing business reliance on simplified, timely access to customer-related information for improved, data-driven decision-making.
- Public cloud usage is growing sharply, but traditional practices will remain a barrier. Expanding local data center investments from Amazon Web Services, salesforce.com, and others is fueling increased demand. Cloud initiatives at local organizations typically target specific usage scenarios, such as CRM and sales force automation; application development and testing; short-term event and activity management; and data storage, backup, and archiving. But for most enterprise applications, Japanese organizations still prefer to custom-build on-premises solutions or purchase packaged applications and heavily customize them.
- Centralizing approaches to governance and security will take on greater urgency. Security has always been the top concern about cloud and mobile technologies. Organizations have been slow to implement cloud and mobile unless they have an internal IT security team to govern them. This leads to “shadow IT,” which increases risk — as a news story highlighting federal government agencies found out to its dismay. Instead of discouraging information workers from inventing ways to be productive, organizations must formalize their governance and security policies.
Today’s CIOs face pressure to make proprietary IT operations more cost-effective, embrace newer technologies, and use IT to drive better business outcomes. IT organizations in Japan that want to help improve business value must go beyond their traditional mindset of “controlling” technology to become smarter, more nimble, and increasingly customer-focused.