Software Powerhouses Remain Elusive Goal for Japanese
By this point in the Information Age, Japan believed that it would have its very own Microsoft Corp. and Lotus Development Corp. High-speed “software factories” at Hitachi and Toshiba would be rewriting the global economics of software development.
Instead, the nation’s two most profitable software companies are video game giants: Nintendo Co. and Sega Enterprises Ltd.
That is not exactly what Japan’s powerful Ministry of International Trade and Industry had in mind when it declared computer software a strategic industry over a decade ago. “The software industry as a whole is not so good,” concedes a senior official at MITI’s information services industry division.
Why not? Some here insist that it is because giant mainframe computer companies such as Fujitsu and NEC essentially gave away their software and thus ruined the market for independent software developers. Others maintain that the Japanese are culturally more comfortable with hardware and lack the essential creativity and design sensibilities necessary to succeed in software. A few software savants swear it is because Bill Gates was born in Seattle instead of Sapporo.
To a limited extent, each of these explanations is valid. But the single most important reason why Nintendo and Sega are global software giants--while NEC and Hitachi are not--is simply that the former have better customers.
Typical Japanese teen-agers are more representative of the global marketplace than the typical Japanese company. It’s not that the Japanese are incapable of creating excellent software. It’s that Japan’s corporate customers have the sort of eccentric preferences that makes growing a profitable local software industry extraordinarily difficult.
For example, large Japanese companies such as Mitsubishi and Toyota just don’t like the idea of buying off-the-shelf software systems. They want their vendors to tailor the software to their special needs. “Japanese companies prefer custom solutions to packaged ones,” asserts Tohru Saino, deputy editor of Nikkei Information Strategies, one of Japan’s top information technology magazines. “They want a system that’s unique to them, not a commodity.”
Custom software development is time-consuming and expensive. Moreover, it doesn’t lend itself to the sort of business model that has characterized such successful corporate software vendors as Oracle or Andersen Consulting. You end up with software job shops, not Symantecs or Borlands that can sell thousands of packages at a whack.
More important, Japanese companies simply haven’t adopted personal computing or client-server architectures with the enthusiasm (some would say recklessness) of their American counterparts. “In many areas, the customer base is less advanced or smaller than the U.S.,” observes the MITI official. “You have 20 million or 30 million PCs; we have only 2 or 3 million . . . so local area networking is not so advanced. The market here is not big enough for independent development of networking software.”
That’s why American software and networking companies now dominate low-end business computing in Japan. Recent price cuts by the U.S. companies will only make it harder for the Japanese to gear up in this business.
But there are even subtler reasons why Japanese companies make such lousy software customers. In America, most companies did a miserable job of automating the factory floor and a terrific job of computerizing the white-collar worker. By contrast, Japanese companies have done a world-class job automating their factories while leaving their white-collar class computerless. “I think this is a very big reason,” the MITI official says. “Japanese companies are less concerned with the productivity of white collar workers as compared to blue collar workers, although that is changing now that companies are thinking about layoffs for the first time.”
Companies such as Apple Computer and Microsoft succeeded in America precisely because they preached the promise of white-collar productivity. Until last year, this wasn’t even a top concern in the computer purchasing decisions of major Japanese companies. What kind of business software do you develop if your corporate customers say they don’t care to pay a premium for productivity?
Improving corporate communication? No sale! “The other barrier to software is cultural,” the MITI official adds. “We communicate just by talking with each other. We don’t have any culture of memo writing like Americans do. We don’t have phone machines. We either communicate in person or over the phone. E-mail is not attractive enough to make a big investment . . . although that may soon change.”
To be sure, everything in Japanese industry is changing. Japanese companies are just now beginning to seek in software what American companies have had for years. American companies here enjoy riding the slowly rising tide of demand. While MITI is furiously trying to figure out ways to restructure the indigenous software industry, the simple truth is that Japan isn’t going to get a smarter business software industry until it gets smarter business customers.
Or until Bill Gates decides to emigrate.
