The Journal The Authority on Global Business in Japan

TECH | COMPUTING

NOVEMBER 2014

Better Business Weather

Japan enjoys perfect cloud-service conditions

By Richard Jolley

Most businesspeople today have heard of “the cloud.” It will probably have been on the agenda of at least one board meeting in the past 18 months—and why not? The cloud has been billed as a sure way to reduce costs and boost performance.

But this tech term has issues. It is being used to cover many things—some of which are not cloud computing at all. Mike Alfant, CEO of Fusion Systems and former president of the American Chamber of Commerce in Japan, explained that, “For every cloud solution out there, there are 10 that are not really cloud solutions. Caveat emptor.”

Like many IT experts, Alfant can put his finger on what actually sits under the hood of an official IT cloud—albeit in language that can seem arcane. “A real cloud environment typically has some implementation of MapReduce framework or Hadoop from Apache,” he said.

In effect, these technologies mean the environment can be expanded, or scaled, very quickly across hundreds or thousands of servers for computing on-demand.

Bright forecast
Despite the potential lexicological chicanery, the truth is that cloud services are growing fast—not least in Japan. The country ranked first for infrastructure to encourage cloud computing, according to the 2013 BSA Global Computing Scorecard. With its data privacy laws, low cybercrime, and widespread broadband connectivity, Japan has all the key ingredients.

“Japan enjoys fast and reliable Internet connectivity both domestically and internationally,” Alfant said, adding, “This is good news since it means the cloud can support everyone’s business needs.”

There was a time when Japanese companies were cautious about moving data to the cloud, but their fears seem to have been allayed. Thus, for example, Amazon Web Services (AWS), part of Internet retailer Amazon, has more than 20,000 Japanese customers, and that number continues to expand.

Yuko Nomiyama, PR manager for Amazon Data Services Japan K.K., placed this in context, saying, “For enterprises in Japan, the question isn’t ‘if’ we move to the cloud anymore; it’s really ‘how fast can we move?’ and ‘what are we going to move first?’

“Japanese customers are doing everything from running websites to developing new business applications and running critical business applications on AWS.”

Nomiyama’s words reflect the success that AWS is having globally. Indeed, according to Synergy Research Group, AWS revenue worldwide from cloud services is now well in excess of $1 billion a quarter. Nomiyama added, “Every day AWS adds enough new server capacity across the globe to support Amazon’s entire global infrastructure when it was a $7 billion enterprise.”

With the cloud-service market expanding more than 45 percent per annum, it is viewed as an important source of revenue for many companies besides Amazon. Google, Microsoft, and IBM are seeing phenomenal growth in their cloud-service offerings.

Microsoft, in particular, saw 164 percent growth in its Azure cloud platform, and IBM saw 86 percent growth in its SoftLayer services in the second quarter of 2014, according to the Synergy Research Group.

US communications giant Verizon, which created the Verizon Cloud, enhanced its own cloud offering in September—adding new pricing and service tiers—to drive growth.

According to Nilesh Pritam, external communications–Asia Pacific at Verizon Enterprise Solutions: “Companies are moving aggressively to cloud computing across the region. They see the benefit is not simply lowering cost, but being able to capitalize on new opportunities faster than competitors.”

On the ground
The veracity of that statement is evident in a recent survey of members of the American Chamber of Commerce in Japan’s Information, Communications and Technology (ICT) Committee. A questionnaire was sent to members asking for their views on the cloud and data security.

When asked about their business goals for the cloud, members came back with an answer that confirmed the Verizon view: some 43.7 percent of participants said the cloud yielded greater business flexibility and reduced time to deploy technology—both key attributes of an agile business. Just 25 percent said the reason for using the cloud was lowering costs.

Further, more than half the respondents said they were using a variety of cloud services. This was no surprise to Darren McKellin, ICT Committee co-chair, who knows all about what is available on the market.

“You have a public cloud, which is defined as a multi-tenant environment where you buy computing power on a pay-as-you-go model, shared with many other customers. A private cloud is defined as a single-tenant environment where the hardware, storage, and network are dedicated to a single entity. Private clouds cost a lot more, but in return customers get added security and customization. There are also hybrid clouds, which are a mix of public and private services,” McKellin clarified.

Positive outlook
When asked how they were using cloud services, the respondents indicated that the most popular areas were sales management/automation and marketing/media. “It confirms that flexibility and speed to market are best served by the cloud,” McKellin said.

“Imagine you work in a marketing department, and you have a marketing campaign you need to launch quickly. Do you want to ask your IT department to buy and deploy servers or contact a public cloud company that can provide computing power within less than an hour?”

Based on responses to the questionnaire, cloud services clearly appeal to businesses. A sizeable portion of respondents said they would be spending over ¥10 million on cloud services during the next financial year.

Alfant summed it up by saying, “Competition in Japan is fierce and getting stronger. Increasingly IT is becoming a source of competitive advantage that firms need to leverage for their survival. Managers should focus on how the cloud can deliver value to their customers and return value to shareholders.”

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Richard Jolley is an IT and business writer living and working in Tokyo.

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