Leveraging its experience in ERP implementations, Business Engineering Corporation is identifying industries' software needs and providing digital solutions.
Japanese manufacturing is at a critical juncture. Over the past three years, major supply chain disruptions—driven by COVID-19 and the US-China decoupling—have led corporate groups to diversify their suppliers for greater resilience. Renowned for their reliability and advanced technology, Japanese manufacturers are well positioned to capitalize on this shift. Additionally, with the yen’s depreciation, some analysts argue this moment presents a unique opportunity for Japan’s manufacturing sector. As an IT company specializing in manufacturing, what advantages do you believe Japanese manufacturers bring to the current macroeconomic landscape?
Japan is currently ranked 31st in the IMD digital competitiveness ranking, and it’s true that digitalization in the Japanese manufacturing industry lags behind. The prevailing view is that Japan has traditionally been a highly paper-based society. Japanese people are known for their precision and adherence to established systems, preferring to maintain the status quo. Tradition plays a significant role, and because it has worked well historically, there has been little impetus for change. Additionally, the government has not been aggressive in pushing digital transformation (DX) through incentives. However, I believe the core reason Japan has fallen behind in digitalization lies in its cultural and societal mindset.
As a largely monocultural and monoracial society, Japan has not required explicit or structured communication systems. Instead, there has long been a reliance on implicit, shared understanding—what could be called "atmospheric communication."
In the manufacturing sector, across diverse management styles the high skill level of on-site workers has historically compensated for inefficiencies in business operations. However, over the past two decades, Japanese manufacturing has gradually lost its competitiveness, and a key factor behind this decline is the lack of digitalization. This has been particularly evident when Japanese companies expand abroad. In countries without a monocultural background, tacit communication is not sufficient—clear systems and regulations are necessary.
Domestically, the COVID-19 pandemic served as a wake-up call, underscoring the importance of digitalization. Previously, in-person, on-site communication was sufficient to keep operations running smoothly. However, with face-to-face interactions severely limited during the pandemic, companies realized the need for digital tools and processes. As a result, digitalization in Japan is now advancing at an accelerated pace.
This chart illustrates the sales transition of our original mcframe product, which supports manufacturing company management. Since 2003, we have seen steady growth, with the exception of a dip following the Lehman Shock, when IT investment was among the first areas to be cut in Japan.
I assumed the role of president in April 2020, in the midst of the COVID-19 pandemic. As I mentioned earlier, COVID served as a major turning point. Although both top management and on-site workers were initially hesitant, the pandemic forced them to recognize the unavoidable need for digitalization. This realization triggered a significant digital transformation shift in the manufacturing industry, and the pace of change continues to accelerate. The scale of this rapid growth is difficult to fully grasp unless witnessed firsthand.
It’s interesting that you highlight this transition in Japanese manufacturing. The Kaizen philosophy and the Toyota Production System are now globally recognized benchmarks in manufacturing excellence. Japan is also renowned for its advancements in robotics. However, when it comes to software, Japan has yet to establish itself as a major global player.
As you mentioned, Japan has many robotics and machine tool companies that export globally, yet there are no highly competitive software products originating from Japan. Instead, most software is imported from overseas companies like Microsoft. Given our extensive experience working with Japanese companies, we aim to leverage that expertise to achieve strong market penetration internationally as well.
In today’s fast-paced and highly competitive landscape, digital transformation is crucial for driving innovation, streamlining operations, and enhancing decision-making. One of mcframe’s key strengths is its ability to integrate with complementary solutions to optimize the manufacturing process. mcframe IoT series enables data acquisition and analytics at the equipment level, while MES connects shop floor operations with enterprise systems. This synergy allows for real-time process optimization and seamless operational connectivity. How do mcframe ERP and its complementary solutions, such as IoT and MES, provide companies with a technological advantage?
It’s difficult to generalize, but when it comes to business operations like accounting and human resources management, there are commonalities across industries, making it easier to develop standardized software packages. Well-known solutions such as SAP, Oracle, and Microsoft dominate this space. However, manufacturing supply chain production and sales vary significantly depending on the industry and company. For example, while both the automotive and food industries fall under manufacturing, their process management requirements are vastly different. As a result, it is challenging to create a one-size-fits-all software solution.
We were the first SAP partner in Japan and introduced the country’s first SAP project. However, we also developed our own mcframe supply chain management system because, while SAP is an excellent and comprehensive system well-suited for large enterprises, we developed mcframe to provide flexible solutions that cater to the specific needs of mid-sized companies. Our goal was to create a more flexible solution, so we designed mcframe as an open-source platform that allows companies to customize it according to their specific needs.
One of our biggest strengths is supply chain management, and we have leveraged 25 years of accumulated experience to address diverse and specific manufacturing needs in the market. mcframe’s advantage lies in its seamless integration with manufacturing IoT for real-time on-site data collection and PLM (Product Lifecycle Management) for programming and planning, ensuring a holistic approach to manufacturing optimization.
Since 2015, mcframe sales have doubled, surpassing JPY 4 billion by fiscal year 2023. This impressive growth highlights the strong demand for mcframe, not only among Japanese companies but also from businesses worldwide. Looking at this significant expansion, how much of it is driven by international companies, and what specific demand are you seeing from them?
Overseas sales currently account for 20% of our total revenue, though the majority comes from Nikkei or Japanese-affiliated subsidiaries. However, in the U.S. market, our customer base primarily consists of local American companies. Moving forward, we aim to expand our presence by increasing the percentage of local companies using mcframe.
When looking at international markets, is there a particular sector within the manufacturing industry where you are seeing strong demand? Additionally, could you share which countries you are specifically targeting for expansion?
As you can see from the breakdown, demand for mcframe is fairly evenly distributed across various industries. There isn’t a single dominant sector, which highlights the versatility of our solutions in catering to different manufacturing needs.
Cloud-based international Accounting and ERP services for corporations anywhere in the world
Automotive parts companies were among the first to embrace digitalization, with other industries following suit. Today, the demand is fairly evenly distributed across sectors, as digitalization has become a necessity for all industries. However, there remains a significant disparity between companies that are actively pursuing digital transformation and those that are not.
We work with many business partners and distributors, and I’m often asked which industry they should focus on. My response is always the same—rather than targeting a specific industry, the key is to focus on companies that are proactive about digitalization, regardless of their sector.
One major trend shaping the manufacturing industry is globalization, which has revolutionized operations by opening new markets and integrating supply chains—bringing both opportunities and challenges.
One of your key offerings, GLASIAOUS, is a cloud-based international accounting and ERP service designed for global businesses. It supports multiple languages, currencies, and international accounting standards, enabling seamless cross-border operations. Key features include real-time financial visibility, multi-segment management, and robust security to help companies manage complex global structures efficiently. How is GLASIAOUS specifically tailored for globally operating companies, and could you elaborate on some of its key features?
The key differentiator of GLASIAOUS is its support for multiple languages and multiple currencies. In Japan, language conversion software typically only translates to English, but GLASIAOUS goes beyond that, making it a truly global solution.
Another major strength of GLASIAOUS is its comprehensive accounting system support. Since tax systems and accounting systems vary by country, staying up to date with the latest regulations is crucial. We ensure this by gathering data locally, allowing companies to remain compliant across different jurisdictions.
Currently, our GLASIAOUS users are primarily Japanese companies with overseas locations, particularly in manufacturing, trading, and logistics. The software is widely used in countries where Japanese firms have subsidiaries, including Thailand, China, Indonesia, Singapore, and Vietnam.
You mentioned that while mcframe and GLASIAOUS are closely affiliated with Nikkei companies, your goal is to expand adoption among local companies. What steps do you need to take to successfully make that transition?
In Europe and the U.S., well-established accounting software solutions already dominate the market, making it challenging for us to compete directly. However, in many Asian countries, there is no de facto standard software system. For example, in India, taxation varies by state, creating a complex regulatory landscape.
Our goal is to expand GLASIAOUS adoption in Southeast Asia and India, where there is a strong need for a solution that can adapt to local financial regulations and business environments.
Last November, you announced an equity investment in Cimtops to strengthen your longstanding partnership. Since 2016, you have been developing an OEM version of mcframe based on Cimtops’ paperless field report solution. This capital alliance is also intended to further expand mcframe into overseas markets while leveraging the strengths of both companies. What motivated this decision, and what role do you expect this collaboration to play in your company’s future?
Current enterprise software development is primarily focused on white-collar and business operations software, which is where most global companies have concentrated their efforts. However, onsite manufacturing software remains largely underdeveloped. Our next target, following the digitalization of business operations, is onsite digitalization, and Cimtops offers a straightforward solution for converting paper-based processes into digital formats.
For example, A research company has identified a growing opportunity for introducing new software solutions for onsite operations, as back-office and office operations digitalization is already well established. This is precisely why we invested in Cimtops—to leverage their expertise in onsite digitalization tools and drive the next phase of digital transformation in manufacturing.
You mentioned targeting mid-sized companies and the growing opportunity for onsite digitalization. How do you provide a solution that doesn’t require large-scale investment, particularly in the U.S., where the work culture differs significantly from Japan’s? Additionally, could you highlight some key features of your onsite digitalization solutions?
You're absolutely right, and I completely agree. We have developed mcframe to align with various market needs.
One of our key offerings in onsite digitalization is mcframe SIGNAL CHAIN, a solution that enables monitoring of factory equipment operational status through a system, allowing equipment operation supervision with minimal personnel.. When machinery malfunctions, the system triggers both physical and remote alerts via mobile devices and computers. Unlike Japanese factories, where early warning signs are easier to detect, American factories tend to be much larger, making real-time alerts especially valuable. This functionality has been well received in the U.S. market.
Our development philosophy is to prioritize simplicity and intuitiveness, ensuring ease of use across all markets rather than tailoring complexity based on region. This universal approach allows us to deliver straightforward, effective solutions globally.
In recent years, your net sales have shown consistent growth and are projected to exceed JPY 20 billion this fiscal year. Looking ahead, what do you see as the key driving factors behind this growth? Additionally, can you share any numerical targets and the strategies you plan to implement to achieve them?
We see significant business opportunities in the digitalization of Japan’s manufacturing supply chain, which remains behind global standards. Additionally, in Southeast Asia, the U.S., and other regions, we recognize strong potential not only among Nikkei companies but also with local businesses. Expanding our presence in these markets will be a key driver of our future growth.
Partnerships have been a key factor in your company's growth. In 1991, you became Japan’s first SAP partner, marking the beginning of your ERP business. More recently, in December, you partnered with First Accounting to promote the digitalization of purchasing operations, and you continue to expand your collaboration with Cimtops, as we discussed earlier. Are you currently seeking new partnerships? If so, what types of partnerships are you interested in, and in which countries?
Our business strategy focuses on identifying and integrating niche manufacturing software that other IT vendors do not target. We concentrate on specialized areas such as planning and quality assurance, focusing on manufacturing-specific solutions. Many unique global solutions exist, and our approach involves partnering with specialized software providers, localizing their products, and introducing them to the Japanese market. For example, PAS-X, a German pharmaceutical management software, targets a highly specialized area not covered by larger IT vendors.
We are also expanding our presence in international markets through strategic partnerships. We have five overseas subsidiaries and are investing in local partnerships in Vietnam and the Philippines, where direct subsidiaries are not feasible. Additionally, we are actively seeking an agent or distributor in India to strengthen our market presence.
Overall, we are pursuing two key strategic directions: licensing and importing overseas software for the Japanese market, and expanding our own software into global markets by working with strong local distributors.
Let’s imagine we return to interview you again in 2029 for your company’s 30th anniversary. What are your personal goals, and what do you hope your company will have achieved by that milestone?
There is currently no Japanese software or service that has achieved widespread adoption in the global market. Our mcframe and other products have been developed in collaboration with highly demanding Japanese companies, and our goal is to expand these solutions internationally.
While digitalization in the U.S. market appears advanced, visiting actual manufacturing sites reveals that this is not always the case. Similarly, many countries have made significant progress in accounting and business operations, yet supply chain and manufacturing site optimization are now emerging as the next promising areas for growth. We see a major opportunity in addressing these gaps and driving digital transformation in these areas.
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