AWS re:Invent 2024 - Unlocking Japan’s cloud potential: Strategic insights for success (CEN101)

0:00 - Hello, everyone. Today we will discuss the potential of cloud adoption in Japan, particularly focusing on market understanding and strategy analysis for selling and implementing such solutions. I'm Satoshi Yokota, founder and CEO of Classmethod, from Japan, and today I will present with my colleague, Takeda San. This is very special moment for me, and I'm honored to be here and part of the AWS re:Invent session series. First, I will briefly introduce our company.

0:47 Then Takeda San will present our market analysis and best practice for succeeding in the Japanese market. Let's begin. I started Classmethod in 2004 as a system integrator. In 2008, we started building everything in the cloud. We learned a lot about AWS, and then started helping other enterprise customer use AWS. Currently, we have 4,000 employee customers, enterprise customers, nearly 1,000 employees

1:33 and over 50 SaaS alliance partners. In our 15 years with AWS, we have achieved continuous growth with expanding cloud market. Our next target is $1 billion in revenue, as the market size exceed $60 billion in Japan, and continue to growth, continuously expand. Our growth is supported by our strong developer community. Our technical website has over 20,000 practical AWS article,

2:20 and has become one of the main resources for engineers in Japan. Our mission has three parts, finding great technology partners, bringing their solution to clients, and helping engineers use these technologies. Our goal is to help everyone with their cloud journey, and build a place where clients, developers, and partners can succeed together. Next, Takeda San will share more insight about SaaS companies entering the Japanese market. Thank you. (participants chattering)

3:07 - Thank you, Yokoto San. Yep, from now on, it's my time. Thank you for having time today. I study my part of this presentation. The first of all, the session objectives. In the beginning today, we have the two session objectives, first, understanding the initiatives of Japanese cloud integrator, and secondly, to learn what SaaS companies need to be aware of when entering the Japanese market. So Japan has a very long history and traditions.

3:57 It affect their business scene as well. So then to the Japanese culture, and yeah, I will introduce you to strange Japan. The first of all, we have to check where the Japanese position in the global, so you can see the first position of the GDP is the United States, surely, and second, China, then India, Germany. Japan is a fifth place right now. The share of global GDP is still 3.6. Compared with the other prospect, this is the population and not only the GDP, the urbanization rate

4:45 and the internet penetration. So the compared with the US, you can realize the urbanization rate is higher than United States, and also the internet penetrations. The Toyota, Sony, UNIQLO, Honda, Panasonic, CAPCOM, Canon, Nintendo, KONAMI, yeah, so we have very famous companies in Japan, and some of them are manufacturers, and some of them are from the game industries. So the such kind of gaming industry is really important for the cloud computing. The transaction is really high or heavy.

5:32 So then six benefits of single-marketing in Japan is the tips, can be the tips. First one is a consistent language. We use only Japanese, one country. As you have seen, the 125 population use just one language, and also the high urban concentration. So the Japan is very small island, however, the 125 population, it means that especially the Tokyo and Osaka cover most of part of the population, the infrastructure is a really concentrated.

6:17 Also the shared culture, one of the research shows that Japan is a really high context culture, so that without seeing anything, that we can realize something a lot. Also the consistency in customer behavior, so it's quite unique just from Hokkaido and also to the Okinawa in the knows that we are very similar customer behavior, and the concentrated media environment is also good for the marketing. This is quite unique as well. The finally, high brand loyalty, once we realize the service is good,

7:03 so then we tend to keep using the same services. Okay, so then I will have some quiz about the Japan. So how much do you know about the Japanese unique culture? So this thing is a circle. Do you know how to pronounce circle in Japanese? So it's en, but we have the same pronunciation is used to represent Japanese yen, yeah, Japanese yen from the circle, and also the word connection relationship is also we say en. So I know you don't understand what I mean. (chuckling)

7:49 Anyway, second question, do you know how Japanese people learn to drive? So the global standard is just before having the license, you try to drive on the road, but Japanese use a driving school. So there are many famous car manufacturers in Japan, however, it's really restrictive, so then the way of learning how to drive is strange compared to the global standard. The last question, do you know what time of year is entrance ceremony for schools? So the in the US is September, the other Asian countries,

8:35 the July and June, so the April is answer. This is a really important prospect of the marketing, the fiscal year of the government, and some public organizations use April as the start of the fiscal year. It means sometime US people come to Japan, so then you say the Q1, but it means from January to March. But there was some companies in the US start from February, but most of the, 70 or to 80% of Japanese company set April as start of the fiscal year.

9:22 It is really important because we need to provide information for the three, it means from October to January, because most of companies start budgeting in quarter four, I mean January to April. Without knowing such a fact, it's really difficult to struggle with the Japanese market, right? So some issues in the cloud market, we have six. Today, I will show the six issues. At first, shortage of human resources, and avoiding labor laws, and too much information,

10:12 lack of technical knowledge among decision-makers, and the conservative personality and right-or-wrong mentality, and the finally, business custom in the Japanese market. Let me take that water first. At first, shortage of human resources, this is, the data is from the one of the ministries from 2015 to 2030. The green line shows actual personnel supply,

10:59 the fact and the estimation, while the red mark is the index that stand as 2015 will be the 100, so then the finally 2030, it will be achieved 160. The yellow belt shows personnel shortage. So a lot of human resources, always, we ask that to the customer, "Do you have the enough human resources?" Always, the answer is yes, they lack the human resources. However, this is not only the problem, and surely the hiring problem always exists.

11:48 But this problem is not that should the hire more people, because we have the illustration of dismissal under the law. I don't read this text, just to show the Japanese labor protection laws. Due to those labor protection law, it's difficult to fire under the law. So as result, in Japan, the special business model exists. So SIer, it's a system integrator, but they can be the good work

12:36 because the project hires many people, but it's quite fragile. It may be the working on smoothly, however, suddenly it finish, yeah, yeah, it close the project. So then the Japanese labor protection law is a point, so then we need a human resources buffer. So the system integrator can be that subcontracting company. It means, yeah, so project closed, then layoff is forbidden, but company contract, termination of the contract is possible.

13:24 But in that case, the initiative will be held by the operating company, it's a subcontracting company. So to survive them, the hiding technical know-how will be their survival method. This is not good for the market expansion. Yeah, so that we want to proceed or expand more technologies in Japan, but this will be the one (indistinct). So the ambidexterity will be the key word in the world. So the recent world marketing management trend, the exploration is to find a new business chance.

14:16 So this is business development, and also we need to do the exploitation to proceed the business efficiency. So maximize square of the triangle, so the companies that can do both will survive. This is, yeah, so the exploitation will be replaced by the both in the future for the SaaS, and only the human can do this exploration, including indeed the failure. This is a research by the Tushman O'Reilly in the US.

15:03 So then, so compared with global standard and the Japanese situation, we need SaaS. So excuse me, sorry. This is to improve business efficiency. As I mentioned, business efficiency by the replace by the both, this can be the at the SaaS. So business development should be the human, and the business efficiency is by SaaS. So the increasing in the SaaS has led to more information. But this will be the next problem,

15:48 yeah, too much information. It means previously, the computer game existed by the Nintendo or something, so then we wanted to play all of the game, but after that, too many games, so then suddenly, we gave up the gathering the information. It is the same situation. If there are only a few SaaS, then we try to, yeah, gather the information about SaaS, but a lot of SaaS exists, too much SaaS, so then people gave up the gathering the information recently. So then we need some layer of technologies,

16:38 the optimization of technology selection or understanding of latest technology trend, simplification of complex technologies, security risk management technologies as well. Yeah, just a moment for the taking drink. It's quite dry with the. So the tech sommelier should be a cloud integrator. So we need to combine some AWS technologies or SaaS,

17:24 or such kind of the combination. To find either the wine and cheese or wine and some meat or fish, or such kind of combination is really important to yeah, do so. And then when we visit customers or clients, so then we try to ask them, "Do you have any problem?" So then the customer says always, "No, we don't have any problem. Yeah, no problem at all." So it means they are not aware of the problem. However, once we introduce some cases of other companies,

18:14 so then they realize the answer will be, "We have the same problem." So such kind of information, I mean before visiting, they didn't know that they have a problem, but once we introduced, they realize. Yeah, so sometimes, yeah, customers don't realize the problems themselves. So lack of technical knowledge among decision-makers can be the next problem. Non-technical decision-makers driving technology adoption, yeah, for example, the computer game industry can create a,

19:05 yeah, creators are really good at making games, however, their knowledge is focused to the game creation, so producer doesn't know the APIs, database, or serverless technologies or cache, or any other. So then the, yeah, learn the essentials in the executive session, it's okay so that you know, do you remember that driving school? So that is a kind of the culture how to learn. And also all the approval process is very long.

19:55 The engineers participate there some seminars, and also they take it back to the company and share the knowledge. So then in the US, the final decision-maker give the signature, that's all, so then it's quite quick, however, in Japan we use a stamp, but the stamp is a really difficult. They start the stamp rally. Engineer place some proposal to use the new technologies,

20:43 so then team leader acknowledge, then manager acknowledge, then senior manager acknowledge. Finally, the director proceed the go or no go, and then that process can take up to a month or more sometime. So we need to explain more detail about the technology to make it easier, so what level of explanation is needed? For example, normally, the cloud computing technology is compared

21:28 with traditional technology on-premise, right? So on-premise became as a modern technology as a cloud, but decision-maker cannot understand this explanation. So then we use, as other infrastructure, for example, the water, previously the water, water was a situation we use a well, needed to dig a well, or expansion, we need to find other water resources. However, recently, we can use water pay per use.

22:15 So on-premise server or well will be on the balance sheet, however, the pay per use based, the water will be the profit and loss, so this kind of the explanation is required. Also different types of the explanation that we use the metaphor. For the client side, we use a PC or mobile, so this is having the service, so then the software or app. AWS is a kind of the dishes, the size materials,

23:05 so the wooden dishes or paper dishes or just a stainless or metal dishes as well, and also size small one or large one or something, so then this is IaaS or PaaS. But a backend API, each business company need to focus to the, yeah, or concentrate the certain area, so then they need to cook the background APIs. The SaaS is a pre-made product, so just use a microwave, so then it's possible to use,

23:52 so the business company focus to their business. That's why they need to make the APIs, their own APIs, but other part, so the identification or security or any other professional area should be applied for the SaaS, and the data analytics, the data analysis is required as well. Yeah, such kind of explanation with metaphor is required. And also the without a quite easy metaphor or the such kind the explanation, they misunderstand about the cost,

24:39 so they say this is a reasonable cost. So the recent trend as a business, we use machines or something, but do you think, is it expensive? But this may happen, we proceed the business, so then we need to invest certain machines to expand or to under some crops or something in this case. But there, some decision-maker who didn't know that about the technology tend to think about a reasonable cost this is. In order to avoid this,

25:25 it's better to gather the people involved, so the business company decision-maker and the subcontracting company and AWS or ISP partners and the cloud integrator on the table at once. And this is also this kind of meeting shouldn't be the Zoom or something. Meeting should be held face to face-to-face. I ask to you as well, have you ever been to the concert or music live? And also have you ever been to watch the music video? You can realize a lot of information is lost.

26:15 So then the face-to-face communication is really important. We try to gather everything related with some decision making. And also the conservative personality and right-or-wrong mentality can be the problem. No one want to be the first penguin in Japan, so they always ask us, "Are we the first?" So people are waiting for someone to jump in the water. So the bigger company,

27:02 the more they fear failure. Without explanation of the past case, it's okay for in the case of the US. Without the case, consideration will stop. And also, once someone start introducing, nobody want to be the last one as well. They want to be on trend. Yeah, and the finally, I will introduce business customs in Japanese market as well. Invoicing will be the problem.

27:51 Yeah, so the AWS use, we use a credit card for payment, but a credit card are not widely used in business situation in Japan yet. So then invoicing is really important. Yeah, invoices are preferred for the payment. And also the credit card should be deducted certainly, on the certain date, but invoicing, that can have a certain time. Also the foreign exchange can be the problem. The pricing in the US is fixed, however,

28:40 the Japanese currency is the varied, dynamically moved. So the data shows from 2019 to 2024, from November to November, however, yeah, due to the exchange rate fluctuations, that we had 1.6 times compared with four years ago. Hesitating making to purchase the, even if it was the same price. So then I want to ask some SaaS providers,

29:26 don't chase the dots, chase the surface. It means the big deal can be to make a profit enough, and it is good for you, however, market reputation will be the company's product is really expensive. On the other hand, that we try to expand, so then the market suitable price is required. Yeah, it means appropriate pricing is expected. So the community is quite similar as in the US that we teach each other,

30:12 and also the try to have a exchange information, organize some the user group activities. In Japan, the Japan AWS user group shows JAWS as well is really active. Not only that the serverless technologies or certain SaaS technologies, they gather the communication, they gather the community occasionally. So then, yeah, Yokoto San has already introduced the DevelopersIO. This is our tech blog site. Its monthly page view is at 3.2 million,

31:00 the 1 million unique users, and the over 40,000 blog posts already posted, and this time, re:Invent, so then this is a kind of the festival, so then there are lot of my colleagues keep posting a lot of blogs as well, and this is really good for the technology users. This can be the recipe for the try out of the new technologies, or how to cook, or a good combination of the AWS or SaaS. Okay, so then conclusion, I showed there are some issues in the cloud market, the shortage of human resources, avoiding labor law,

31:47 too much information, lack of technical knowledge among decision-makers, and the conservative personality and the right-or-wrong mentality, and finally, the business customs in the Japanese market. And also our session objectives was understanding the initiatives of a Japanese cloud integrator and learn what SaaS companies need to be aware of when entering the Japanese market. So please come to Japan to integrate your cloud, join our circle or community, along with En, connection. Yeah, thank you for having time. (participants applauding)