Click, Cloud, Canon IT Solutions

It is often said that Japan is strong in analog, and I’ve also heard that this strength may have, in some ways, contributed to Japan falling behind in digitalization. Could you explain that a bit more?

Yes. When we say “strong in analog” here, I do not necessarily mean analog as the opposite of digital. Rather, I mean that Japan is strong in the physical world. For example, Japan still relies heavily on paper. I feel that this paper-based culture is one factor that has prevented business processes from becoming more efficient. Also, even though labor shortages are worsening due to the declining birthrate and aging population, especially in white-collar fields there tends to be a lack of thinking around process improvement and operational efficiency. There is a cultural tendency to try to solve problems through sheer effort and endurance, and that reliance on physical work may have been one reason Japan was left behind by the global wave of digitalization.

Japan is facing challenges such as population decline and labor shortages, making digitalization unavoidable. We often hear terms like DX, AI, and ICT. From your perspective, how do you view the current state of digitalization in Japan and its future direction?

One major turning point was the DX Report published by the Ministry of Economy, Trade and Industry in 2018. It clearly showed through data that Japan’s digitalization was significantly behind other countries, and because it was widely covered in the media, a strong sense of crisis spread rapidly among business leaders that “we must push digitalization forward.”

In manufacturing, IT adoption on factory floors had been advancing for some time, but in white-collar areas, even when digital tools were used, they often did not translate into real productivity gains. The DX Report changed awareness at the management level, but in practice many companies are still at the stage of “digitalization” rather than true “transformation,” or they consider having achieved that level as an achievement. We IT vendors have provided many tools, but I recognize, with some self-reflection, that in many cases we have only digitized existing work as-is, without driving process reform or creating new business models. As a result, Japan has not yet reached a level where national competitiveness is meaningfully lifted.

Japan has a culture of continuous improvement, often represented by the idea of kaizen. Do you think that affects progress in DX?

Yes, I do. But of course I am not saying improvement is a bad thing. Japanese companies, including in white-collar settings, have steadily carried out incremental improvements at the site level. That mindset of “refining our own workplace” fits Japanese temperament very well. However, it can also lead people to assume “our process is already optimal,” and even when introducing standard systems like ERP, they often resist changing their existing processes. For example, even when implementing mcframe, an ERP for manufacturers, there are always areas where customers say, “we cannot change this.” As a result, customization becomes necessary for each factory or department. We vendors understand why, but I believe that going forward, advancing standardization will be the key to greater efficiency.

Business models

You provide systems such as the accounting platform SuperStream to a wide range of companies from large to upper-mid-sized. How are you responding to challenges such as the shortage of engineers?

In Japan today, the number of system engineers is declining due to the aging society and low birthrate. Ideally, we would reduce one-off, bespoke work and shift to providing value through services, but many customers place great importance on their own unique business processes. We respect those preferences while still moving implementations in a direction that raises overall operational standards. At the same time, many mid-sized companies are more prepared to accept standard services, so we want to strengthen our business expansion in that space going forward.

AI is often described as a key driver of DX, but how do you see the role of AI?

DX and AI are often discussed together, but I see them as different. DX aims at reforming business processes and creating new business models. If you introduce AI without transforming processes, efficiency will rise, but that is simply replacing human labor with AI. It may help solve labor shortages, but it does not fundamentally increase corporate value.

Japanese people are good at incremental refinement, but less strong at bold transformation. With that in mind, it will be important to use AI to radically streamline processes. Many manufacturing customers already have high IT literacy and actively use AI themselves. On the other hand, small and mid-sized firms are not yet fully leveraging AI, and that is where we can provide support. Internally, we are also applying AI to system development, increasing our use cases, and sharing them with customers.

While AI reduces workloads, under the traditional person-month billing model there is a risk of declining revenue. How are you thinking about new business models?

That is exactly the challenge. Japan’s IT industry has long priced work based on labor, meaning how many people worked for how many months. But as AI reduces human work, that model no longer holds. We need to shift to value-based pricing, where fees are tied not to effort but to outcomes and value delivered. This is a challenge not only for Japan but globally.

Main research areas

As cashless payments expand worldwide, Japan still uses a lot of cash, especially in regional areas. With financial infrastructure changing through initiatives like the shift to ISO 20022, how is your company developing its business?

The move to ISO 20022 is extremely important. One purpose is said to be anti–money laundering, but another aim is to structure data exchanges between financial institutions and improve transaction efficiency. In the past, data exchanges were mainly text-based. With the new format, the amount of information increases dramatically, enabling much more advanced data processing. The migration deadline is this November, and institutions are rushing to comply. Our EDI platform supports the new format. We are not only providing data conversion but also support that looks at the entire operational flow. We expect this to open up new business opportunities.

Canon IT Solutions operates on three pillars: system integration, service provision, and business co-creation. Could you explain how each pillar shapes your distinctive strengths?

Our company was formed through the integration of a systems subsidiary from the Sumitomo Metals group, Canon’s systems division, and an independent SI firm. Because of that, we have people with diverse backgrounds and expertise.

One major strength is the mathematical and analytical technology we inherited from our manufacturing roots, namely operations research. We use this knowledge to contribute in areas such as demand forecasting and inventory optimization within supply chain management. In our business co-creation model, we support data-driven management and differentiate ourselves through DX strategy formulation. Our R&D division conducts applied research in fields like natural language processing, generative AI, large language models, and image recognition, and delivers practical solutions to customers.

The phrase “Kyoso Kyoso,” roughly “co-thinking and co-creating,” symbolizes your identity. How do you build trust with customers?

Kyoso Kyoso is our core philosophy. It has a consulting aspect, but unlike typical consulting firms that apply standard methods, we work by thinking together with customers and executing together with them. Our consultants have extensive hands-on experience in industries such as manufacturing and distribution, so they understand on-site challenges deeply. That allows them to move quickly from identifying issues to proposing solutions, and to make highly practical recommendations. I believe that is the biggest reason customers trust us.

Canon IT Solutions Inc. Headquarters

You have proprietary technologies including EDI Master, Web Performer, and AvantStage. How do you position these, and which areas will you prioritize for future investment?

Our system integration business has two main pillars: financial services and manufacturing. Financial customers are large-scale, have their own planning departments, and are clear about what they want. So we provide support aligned closely with their direction. Manufacturers, by contrast, often have relatively small IT departments, which allows us to lead in a proposal-driven way. We offer "AvantStage" which we position as a best-of-breed ERP system that combines "mcframe" and our own demand forecasting system "FOREMAST"  . We see this as a key growth driver going forward.

Japanese companies are often said to be “slow in DX.” How can that image be changed globally?

The weak yen is part of this, but Japan has undeniably lost some growth momentum compared with overseas peers. Still, I do not believe Japan lacks innovation. Going forward, Japan’s software industry needs a global perspective, much like manufacturing once did.

While manufacturing competitiveness remains strong, it is also true that back-office productivity has barely improved for thirty years. Providing software that raises that area is our mission. Of course we cannot compete on the same field as massive vendors like AWS, but I believe it is meaningful to create Japan-origin software that fits Japanese sensibilities. Japanese companies also tend to prefer maintaining the status quo. That is why IT firms like ours must act like a “black ship,” in a positive sense, shaking up customers’ cultures and values and encouraging transformation. A customer once told us, “Please be our black ship.” That is exactly the role we want to play.

You have a long-term vision that runs through 2025. Could you share what comes after that?

Our current long-term vision runs through 2025, but the direction for the following five years is already set. Even if leadership changes, the idea of Kyoso Kyoso will remain central. Thinking together with customers and creating value together is who we are, and that stance will not change.

Finally, if you were to describe Canon IT Solutions in one phrase to business leaders and IT leaders around the world, what would you say?

In a domestic interview before, when asked what kind of company we are, I answered, “We are a Kyoso Kyoso company.” That has not changed. We are a company that co-thinks and co-creates the future with our customers, and I believe this philosophy is universal, anywhere in the world.

For more information, visit their website at: https://www.canon-its.co.jp/