Adoption of Cloud B2B Services Continues to Grow in Japan

It has been 18 months since I first discussed how Japanese companies were taking a keen interest in moving to cloud based B2B services. In that particular blog entry I highlighted five reasons why Japanese companies were considering a move to cloud based B2B platforms. I wanted to take the opportunity to revisit each of these reasons and update according to some of the industry trends that I have been seeing over the past 18 months. I also wanted to provide some personal insights from my recent trips to Japan.  As you will see it certainly provides some validation in terms of my original findings relating to cloud B2B adoption across Japanese companies.

Reason 1. Introduce Flexibility: Japanese manufacturers need to scale production as seamlessly as possible to ensure they can meet varying consumer and market demand levels. By moving a B2B environment to the cloud, it allows companies to build flexibility into their supply chain as required by the needs of the business and the cloud also offers a secure, ‘neutral’ environment into which key suppliers or business partners can be connected.

Update – Over the past 18 months we have seen Japanese companies continue to rethink their production footprint around the world. There has been significant interest in setting up new plants in Brazil and Mexico to leverage low cost labour in these countries as well as use these locations as a springboard into the lucrative North American market. Mexico is one of the most important automotive manufacturing hubs in the world at the moment and that importance will grow further over the next few years. Nissan is certainly taking the lead in terms of trying to build a flexible production footprint, not just to service their production requirements but those of their partners Renault and Daimler as well. In fact over the last 18 months we have seen a number of new industry partnerships emerge, one of the most significant being Toyota and BMW who are working together to develop a new sports car.

In addition I believe we will see a new round of investment in the so called MINT (Mexico, Indonesia, Nigeria, Turkey) countries, a new set of emerging markets that I discussed at length in an earlier blog entry. Considering the investment placed by Japanese companies in the existing BRIC countries I would expect Japanese companies to take the lead in investing in the MINT countries as well.  It is interesting as I studied Flexible Manufacturing Systems when I was at University over twenty years ago but these systems were for use within the confines of a production plant.  Now, these FMS environments need to work across multiple plants and connecting to a single, cloud based environment is key to the success of these production environments. In fact the analyst IDC coined the phrase the ‘Global Plant Floor’, a great description of what many manufacturers would like to achieve, today. Building flexible, scalable production environments should now be on the agenda of every manufacturer that has truly global aspirations.

Reason 2. Implement Modernisation: Japanese manufacturers have relied on bespoke, behind the fire wall software solutions to manage their global production facilities. The cloud is going to drive a revolution in how IT environments are managed and maintained on an on-going basis and IT resources can be re-deployed on to other IT projects within the business.

Update – Over the past 18 months I have had two trips to Japan, one trip focussing on the high tech companies and the second trip looking at automotive companies. On each trip it was interesting to see which companies were taking the bull by the horns so to speak and were proactively looking to upgrade their B2B platforms.  Since I posted my last blog relating to Japan we have had many enquiries from Japanese companies wanting to move to a Managed Services environment.  Interestingly most of these companies are in the high tech sector but in each case they wanted to move away from their legacy communications network and on to a single platform that would give them the future proof communications infrastructure that they need to compete on the global stage. It may be due to the shorter life of high tech consumer electronics products that makes it easier for these companies to identify a window where they can move to a new platform.  In the automotive sector it is not so straight forward as cars will normally have a five year life cycle and it is not so easy to identify a suitable migration window to a new B2B platform without disrupting production in some shape or form.

From an automotive perspective one B2B application that is likely to see rapid adoption over the next few years, based on some of the discussions I have had in recent months, are Managed File Transfer applications.  The reason for this is that car manufacturers are de-centralising their design offices and hence they need the ability to exchange very large files between different locations.  The increased trend for partnering with other vehicle manufacturers, for example BMW and Toyota, has also led to a need to be able to share design information.  I would expect this trend to continue into the foreseeable future and cloud MFT based solutions will be perfect for this application.

Reason 3. Initiate Consolidation:  Japanese manufacturers have expanded their production facilities all over the world, building out extensive internal networks and deploying multiple B2B hubs. Cloud based B2B environments, such as GXS Trading Grid, are helping Japanese companies consolidate their global B2B hubs and networks and at the same time contribute some way towards future proofing their B2B platform.

Update – As highlighted above, the pace of consolidation to a single B2B platform appears to be quicker across high tech rather than automotive companies. This could be due to the fact that production operations are generally outsourced across the high tech industry as they tend to utilise more contract manufacturers. So it is the contract manufacturers such as Foxconn and Flextronics that need to develop cloud based platforms to connect with their own suppliers. In fact over the past 18 months we have seen many more consumer electronics companies such as Sony outsource their manufacturing to an external provider and I think this trend will continue.

In general we have seen more companies consolidate onto a Managed Services platform, either due to a lack of internal resource availability or a desire to route all transaction based traffic through a single provider. In addition to B2B networks, many Japanese manufacturers have built their business around home grown ERP platforms.  However these ERP platforms are becoming expensive to maintain and with an increasing desire to embrace mobile, social and Big Data technologies, these companies will need to upgrade their ERP environments as well. ERP upgrades and ERP instance consolidation provides an ideal opportunity for considering B2B Managed Services. I believe we will see Japanese companies focus on both upgrading/consolidating their ERP and B2B environments moving forwards and this will be a good thing for all concerned, especially for vendors such as OpenText.

Reason 4. Improve Collaboration: Japanese manufacturers are now embracing collaboration and co-opetition in order to respond to changing consumer and market demands. Therefore cloud environments utilising feature rich, web based applications that can be accessed anywhere across the business help to encourage collaboration between two or more partnering companies and their respective supply chains.  In addition they offer companies improved predictability and visibility of long term costs associated with running cloud based B2B platforms

Update – As highlighted earlier, we have seen more and more examples of Japanese companies needing to work with their competitors in order to exploit new market sectors. This need to embrace co-opetition has forced Japanese companies to change the way they work, especially with western partners. Using a cloud B2B platform is ideal for companies who wish to work jointly on a project as they can use a hosted platform for just the length of their joint project without much risk to their respective back end IT environments.

One thing I found during my trips to Japan was that more and more Japanese companies were becoming increasingly interested in how western companies were implementing and conducting B2B, for example what document standards were being used and how they connected to their trading partner communities.  This demonstrated to me that a significant cultural shift was underway in terms of proactively wanting to learn about how companies were using B2B in other markets and how they could deploy similar cloud B2B platforms across their own operations. The mere fact that more Japanese companies were willing to use a cloud platform meant that they were also willing to work more collaboratively with trading partners around the world. I still believe that the Japanese Earthquake in 2011 was the catalyst for this urge to adopt new collaborative ways of working.

Reason 5. Increase Resilience: Japanese manufacturers are having to build stronger resilience into their global operations in order to minimise future supply chain disruption. Cloud environments help to foster collaboration amongst trading partners around the world and more importantly helps to speed up communications out to a trading partner community during a time of crisis. 

Update – Increasing resilience to future supply chain disruptions has been one of the more important issues that Japanese supply chain directors have needed to address over the past 18 months.  Dual sourcing of suppliers, mapping out supplier networks and identifying potential points of weakness in a supply chain have all been addressed from an operational point of view. From a data centre point of view, moving to a cloud based environment hosted by a third party provider helps to ensure that business related transactions and information flow across a state of the art data centre infrastructure.

Even though Japanese companies have not had to test their back up and fail over processes in a major way since the 2011 earthquake, these companies are in a much better position today, from an increased resilience point of view, than they were before. The investment they have made in setting up new plants in different regions around the world will also help to protect against future supply chain disruption. Using a cloud B2B platform has provided the speed and flexibility to move production anywhere in the world.