Significant Business Opportunities as We Shift to Cloud

President and Group CEO, AVANT Corporation

Tetsuji Morikawa

Outside Director, AVANT Corporation

Jon Robertson~{*}

* In March 2021, Mr. Jon Robertson joined Snowflake Inc. as President, Asia Pacific &Japan

Needs for Cloud Shift Steadily Increasing

Morikawa: I would like to welcome Mr. Robertson, who has been appointed as an outside director since September 2020. He has been active at the forefront of IT companies such as SAP, EMC, and VMware, and based on his wealth of experience in being responsible for modernizing corporate information systems, I would like to receive comments on the potential of SaaS businesses that we are focusing on.

 

Robertson: I used to be in the application business world. At the time, the IT infrastructures were in the transition from mainframe to UNIX and Windows, and I assumed it as a legacy world in which if they were placed on Windows, SIers would add adjustment between OS, hardware, databases, and so on according to the application. However, when I joined VMware, as you know, this is a company that promotes modernization of IT infrastructure hardware and applications, such as data centers, I learned virtualization, that is, technological innovations in the cloud, and I noticed the opportunities in linking all types of data. In fact, as the number of SaaS businesses has increased, platforms such as data centers are undergoing a major shift, and I believe that I'm about to face very interesting time ahead.

 

Morikawa: It is often said that Japan's IT environment is two to three years, or even ten years behind the U.S. and Europe. Are such changes occurring in the Japanese market as well?

 

Robertson: Depending on the industry and size of the customers. Companies with many mission-critical systems, such as financial institutions, are still using mainframes, so rapid jump to the cloud is difficult, and the situation is that "Let's try a variety of things before planning." Conversely, start-up companies are quite different, and they have been competing in the cloud since the outset, and recently companies as large as 1,000 employees have begun to consider the cloud. I often hear them say, "We'll start with applications that don't weigh so heavily and accelerate it if that goes well."

Modernize Data Center Now

Morikawa: It is said that the spread of COVID-19 has led to a sudden increase in society's adoption of Digital Transformation (DX). Do you think the shift to cloud is progressing steadily, not only among startups, but also among large companies' backbone systems?

 

Robertson: Yes. Demand for cloud is growing faster than in the U.S. with work style reforms and the spread of remote work. Until now, however, Japanese companies have built private cloud environments, rather than public cloud environments, which are the trends of the world. As you know, companies in Europe and the U.S. are developing and operating approximately 70 to 80% of IT systems in-house, and less than 20% are outsourced. The opposite is true in Japan. Most Japanese companies' IT systems are virtualized at SIers' data centers. SIers' seems to be good for maintaining the status quo, but now customers' needs are ahead of them due in part to the Corona crisis, and customers who had told us that they had to do something at some point are saying, "Let's do data center modernization now and operate it in a multi-cloud!" Accordingly, we are responding to that voice and working with SIers to implement them in the cloud.

 

Morikawa: Cooperation with SIers is crucial in the Japanese marketplace, isn’t it?

 

Robertson: Yes. In Japan, an important background to the development of DX under the Corona crisis is the shortage of personnel in the IT industry, let alone in the information systems division of customers. As a result, both companies and SIers have begun to be considerably conscious of automation and AI utilization, and some SIers have been actively promoting the creation of such an environment in recent years in order to fit them into the cloud environment.

 

Morikawa: The so-called shift to MSP~{*}is advancing.

 

Robertson: That's what you mean. On the other hand, global companies that provide public cloud environments need to connect their platforms, as each platform is siloed. This is one of the business opportunities. We call it "journey to the cloud." There is no doubt that the momentum for "any cloud, any application, any device," which we have been advocating since about three years ago, or "Let's take applications to your favorite place no matter how old or new," is increasing. I think that the number of SaaS options will surely increase from next year.

 

* Managed Service Provider: A provider of services that maintain availability through the operation, monitoring, and maintenance of customers' IT systems

Cooperation with SIers and Consulting Companies Is Important

Morikawa: What about the movement of a consulting firm whose domain overlap with SIers?

 

Robertson: In Europe and the U.S., consulting companies are working with vendors to share the goal of "putting all applications on the cloud in around five years." So, I think we will see such a trend in Japan in the near future. In particular, customers in the transportation and retailing industries, which were damaged by the Corona disaster, will work together with consulting companies as in Europe and the U.S. to promote discussions on the adoption of cloud computing and SaaS. In fact, in the past, on-premises licensing businesses accounted for 70 to 80% of business negotiations, but currently 40 to 50% have shifted to as a service.

Develop Comprehensive Strengths through Creative Dialogue with Customers

Robertson: I have been talking about the progress of cloudization and SaaS. Could you tell me what kind of winning opportunities and growth the Avant Group is finding there?

 

Morikawa: The business we are pursuing is basically a field called information systems, not mission critical systems. Since the majority of the investment in information systems is made in this backbone systems, the information system has so far been viewed as a subterranean stream. However, the information system requires a high degree of creativity if we actually add value to various corporate data from the customer's point of view. On the other hand, mission critical systems are becoming standardized and commoditized while incorporating global best practices. In this sense, in the current world where new data is created successively, we believe it is crucial that the information systems we create shift to SaaS, and deal with various types of data with flexibility in response to demand.

 

Robertson: Certainly, SaaS environments can demonstrate creativity as an informational infrastructure that can meet the detailed requirements of Japanese companies.

 

Morikawa: In Japan, the manufacturing industry has traditionally focused on creating sophisticated production management systems, while the question of how to grow by utilizing management information is a universal issue for all industries. This is not just an asset allocation. Creativity is essential to pursue new business opportunities. If you handle only accounting information, you don’t need creativity, but managements today are asked how to create and enhance corporate value through dialogue with investors, as specified in the Corporate Governance Code.

 

Robertson: You made it clear the mission and processes that top management must fulfill.

 

Morikawa: To this end, we believe that it is necessary for each and every one of Avant Group to be aware of the management's point of view for our customers and to actively engage in creative dialogues.

 

Robertson: With a view to all types of management information, the entire Group should work together to build information infrastructure for customers and support their value creation.

 

Morikawa: Yes. Of course, the infrastructure can be standardized, but we believe that growth strategies to increase corporate value should reflect the originality of each company and management, and that this is the significance of SaaS base we provide. Ultimately, we want to create a platform where each employee of a customer company can communicate as a manager. That is what we are aiming in "spreading accountability," and I believe that the next decade will be a phase in which we will realize our mission through the collective strengths of the Group as a whole.

 

Robertson: Each company of Avant Group places great importance on relationships with its customers, creating strong relationships that last five years or ten years. Based on this ability to understand customers, I think that if we make use of the business climate in which the information that a company possesses plays a vital role in management, we will be able to shift to a SaaS model.

Based on Belief Useful for Customers' Management Innovation

Morikawa: Lastly, could you please share your frank opinions and impressions on the Avant Group as seen by Mr. Robertson, including your impressions of the issues that need to be addressed?

 

Robertson: In a word, I think it is a customer centric, customer focus company. A company that not only carries out what customers say, but also proposes solutions from a global perspective based on a proper outlook. In addition, when making proposals, there is a passion among everyone to express their opinions, regardless of whether they are executives or new employees, and I think they are in a good way different from traditional Japanese companies. I am also in a position to say, "Let's go digital transformation!" so that Japanese customers won't lose out to the world, so I can really empathize with that attitude. What's more, you place great importance on your employees, aren't you? It looks like a family. I hope you keep up this atmosphere. The number of people should continue to increase. Then, it is the mission that becomes important. The roles of each company and division will differ. However, there is always an overlap in their mission to ”spreading accountability.” Therefore, I hope that we place great importance on our mission and cooperate with each other as a team to create as many Japanese companies as possible that can compete in the global peers.

 

Morikawa: Thank you very much. As a self-reliant organization that makes the most of its diverse personalities, we are prepared to create synergies as all-Avant while sharing the belief that it will continue to be useful to customers, as well as our mission and vision with the members. We have received a great deal of advice that will be useful to the future of the Avant Group. I think it will be the biggest challenge for the next few years, so I hope you will continue to support us.