One of the major themes we’ve observed in enterprise migration to the cloud is that visibility or lack thereof becomes a major pain point because of all the ways that the cloud creates external, Internet-centric dependencies that are out of IT’s control. When you don’t have control, you really need visibility. If you don’t have visibility, you are definitely at a major operational disadvantage. This dynamic holds true no matter where you go. Earlier this year, ThousandEyes was proud to open its first office in Tokyo to serve the cloud and digital experience visibility needs of the Japanese IT market. And now, we’re extremely proud to announce our partnership with ITOCHU Techno-Solutions Corporation, one of the largest Systems Integrators in Japan. So, on this propitious occasion, I thought it’d be a good opportunity to survey the Japan IT market and what we’re seeing in regards to cloud adoption and the need for deeper Network Intelligence.
An Overview of the Japan Technology and IT Market
Japan is the world’s third largest ICT market by annual spending according to IDC, after the U.S. and China. The Japan IT landscape is heavily influenced by government and large telecom players, notably NTT—the fourth largest telecom carrier in the world by revenues. Though NTT is publicly listed on multiple stock exchanges, the Japanese government still owns about a third of NTT’s shares, making it a quasi-governmental organization. In addition, to NTT, the telecom market is dominated by large players like KDDI and Softbank. Japan is extremely connected. Mobile subscriber penetration effectively reached its ceiling in 2012, with 98% mobile broadband market penetration. According to GSMAIntellience, there are nearly 180M mobile connections for a population of 127M. As a point of comparison, the U.S. has 341M mobile connections for a population of 325M.
Large enterprises have traditionally dominated IT spending and investment in Japan, because the relative scarcity of skilled IT workers means that those skilled technicians tend to work for large Systems Integrators (SIers). In turn, most enterprises rely on Systems Integrators to a very large degree for IT service delivery.
Small to medium-sized business make up a larger share of the employment picture in Japan than in the U.S., but in the past, these SMBs have faced capital cost and IT expertise barriers in deploying IT in an aggressive fashion. That is likely due to the change due to the opportunity afforded by the growing availability of cloud and SaaS in particular, which makes cutting edge software much more accessible to smaller organizations.
The Japanese economy is very large but has been in a low growth mode, so for most Japanese CIOs, the top priorities for IT investment include both cost savings and supporting international business expansion where companies can find higher growth opportunities.
The Internet in Japan and Beyond
One really interesting thing about Japan is that compared to a lot of other countries, the Internet is highly concentrated. There are 175M IPv4 addresses advertised in Japan, but only 600 Autonomous Systems (Internet networks) with advertised prefixes. Compare this with Singapore, which has only 6M IPv4 addresses but 300 Autonomous Systems. Compare again with the U.S., which has roughly 7x Japan’s IP address space at 1.167B addresses but 28x the Autonomous Systems at roughly 17,000. The Japanese Internet effectively hubs into a few major carriers such as NTT, KDDI, Softbank, J-COM (the leading cable provider with 47% market share), and Internet Initiative Japan (IIJ)—the granddaddy of ISPs in Japan. With Japan possessing some of the highest average broadband speeds in the world, and the small size of the country making speed of light delivery extremely zippy, domestic Internet performance is generally a high-quality experience. That’s not to say that untoward things don’t occur in the Internet in Japan. In August of 2017, a BGP routing error on the part of Google caused an outage for much of the Internet in Japan.
That said, due to the fact that as noted above, large enterprises are aggressively expanding their footprint and investments overseas, their exposure to the Internet is globalizing, bringing greater unpredictability to their employees’ user experience with cloud and SaaS.
Cloud and SaaS Adoption is Growing
Traditionally, due to the difficulty in changing organizational structures and processes, most enterprise software was customized to each organization, creating a high total cost of ownership (TCO). In fact, legacy UNIX systems have hung on longer in Japanese IT environments on average than in the U.S. and Europe due to slow upgrades away from customized software. As a result, the move to cloud and SaaS not only saves on costs, but creates greater technical agility.
The cloud market in Japan is still relatively young, yet cloud and SaaS adoption is significant and growing healthily in Japan. According to Forrester, Japan represents over 40% of the Asia-Pac of the SaaS market, and will be over 50% of a $16B SaaS market in Asia-Pac by 2020. Japanese analyst firm ITR forecasts forward growth at IaaS/PaaS growth at 19.2% CAGR and SaaS growth at 12.5% CAGR.
Yes, Cloud and SaaS Migration Causes Visibility Pains in Japan
Japanese culture is famously precision-oriented, so IT services are expected to be delivered with high-quality, reliability and attention to detail. This need for precision extends to IT departments and SIers’ need to be able explain precisely why a service or capability is not delivered in the optimal fashion. Unfortunately, the cloud makes both delivering service and explaining service delivery much more challenging because of the loss of control over so many of the delivery mechanisms. Worse, traditional network monitoring doesn’t provide any help since it’s focused on internal network infrastructure rather than external ISPs, DNS, public cloud and SaaS providers. As I’ve mentioned, this phenomenon is universal and is being felt acutely in Japan, borne out by discussions with Global 2000 companies and top systems integrators. For example, one enterprise architect told us about the challenges of rolling out Office 365 licenses to a global workforce of 50,000 across dozens of countries and not having sufficient visibility to know how that suite of SaaS services is being delivered and what external factors are impacting it.
Excited to Partner with ITOCHU Techno-Solutions
Given the rapid growth in cloud and SaaS adoption, the need for deeper visibility has created a ripe opportunity for ThousandEyes. That’s why we’re excited to form a strategic partnership with ITOCHU Techno-Solutions, which is one of the most prominent Systems Integrators in Japan. iTOCHU brings more than just a very large customer base, extensive relationships in the market and strong technical expertise. ITOCHU is also a leader in innovation. For example, they operate the Dejima Future Factory to foster innovation through cross-industry collaboration working groups and meetups on topics like APIs and Big Data, IOT, network programmability and even corporate-specific digital initiatives.
Big things are happening with cloud and SaaS adoption in Japan, and with enterprises struggling with reduced IT visibility as a result, ThousandEyes and ITOCHU are ready to provide insights into digital experience from any user to any application over every network.