"Japan has long been a technology powerhouse, but is aware more can be done to firm its position and competitiveness in Asia-Pacific and in the world in face of digital transformation. Under the government’s guidance, through the Future Investment Strategy 2018, Japan is en route to do just that and accelerate innovation and business creation by capitalizing on its competitive advantages, such as R&D capability in robotics and in industries like manufacturing. The government’s initiative addresses key strategic areas for success, including automation and remote real-time services, smart systems, robotics, mobility, next-generation healthcare system or modernization of infrastructure. Tokyo 2020 is, for sure, a great opportunity and an anchor for companies and government to address many of these priorities. As the long-term partner of Japan in its technology journey, Cisco is helping Japan modernize its IT infrastructure for 2020 and beyond, in areas of mobility, cloud, IoT, artificial intelligence, automation, and security. Cisco is highly committed to contributing to Japan’s digital future." – Dave West
Dave West – Vice President, Cisco Japan
Japan has long been the global technology leader, and in many areas it still is. It is the largest manufacturer of robots, delivering more than half the world’s supply.1 But that doesn’t mean its managers are not anxious about the future, and whether their IT infrastructure won't support future digital trends. Nearly 60% of them said it wouldn't. No other country reflected a similar level of concern about the future. In fact, in seven countries – India, China, Vietnam, Indonesia, Singapore, Thailand and the Philippines - confidence was above 90%. (See Figure 1)
Figure 1
This concern was most deeply felt in the public sector, where more than three quarters of those who said their department had a digital transformation strategy thought it inadequate, but other sectors were hardly buoyant: manufacturing (61%), retail (60%) and financial services (55%), all thought preparations had fallen short. Only those in healthcare were optimistic.
The perception that Japan is slipping technologically is a familiar one. In part it’s because of the high standards the country set for itself. In some cases, the blame appears to be down to just missing opportunities. The Financial Times wrote last year2 about the country's massed ranks of vending machines. Nearly half of the country's 4.9 million vending machines sell drinks. If these were networked all sorts of user data could be gathered, according to the national trade association. Fuji Electric, which makes many of the machines, says only 100 are connected to the internet. "The IoT is still very much in the development stage with our customers," the FT quoted the company as saying. Cisco's survey of Japanese IT managers offered some insight into how these problems take root. For them, the overwhelming brake on upgrading their infrastructure is the budget: whereas managers elsewhere were as likely to cite complexity or a lack of understanding, 86% of Japan's IT executives blamed budget constraints. They indicated they were feeling the pinch in other ways: new technologies were as likely to help save costs as they were to improve productivity (61% vs 64%). Compare that to China, where productivity scored highest, but only slightly ahead of boosting innovation and improving customer experience (69%). Japanese managers, meanwhile, appeared indifferent to improving things for the customer: less than a quarter of Japanese IT managers hoped technologies would improve the customer experience.
1International Federation of Robotics, 2018 2Internet of things tops Shinzo Abe’s list of priorities, Oct 24 2017
While Japan has long been synonymous with robots (Sony's first AIBO robot pet appeared in prototype 20 years ago, and it remains the world’s largest producer of robots), Cisco's survey shows that on the whole IT managers do not seem to see automation shaping, or likely to shape, their company's future. It scores lowest as a technology (save for 5G). Only 30% of Japanese IT managers chose it as a shaping technology, half compared to China or Korea. (See figure 2)
Figure 2
In part, this is because automation has long been core to the Japanese industry – it has the fourth greatest robot density in manufacturing in the world, after South Korea, Singapore and Germany. But elsewhere automation has proved a challenge. This is most visible in Education and Retail, where less than 20% selected it. And most surprisingly, in the public sector and healthcare, no respondents said their companies or organizations had adopted any form of automation. Asked why, respondents in healthcare blamed either a lack of qualified staff or their current IT infrastructure. Given Japan's aging population and low unemployment, it appears that there is still some way to go for Japan to embrace the benefits of automation beyond the factory floor.
The government in August warned that both problems needed to be addressed. The report, submitted by Toshimitsu Motegi, minister of economic and fiscal policy to the cabinet, said the country was experiencing the worst labor shortage in a quarter century, and warned that some industries may already be seeing earnings suffer as a result. "It is crucial that we invest in human resource development and implement features of the fourth Industrial Revolution such as AI, IoT (Internet of Things), and robots," Kyodo quoted him as saying3. A report from McKinsey illustrated what this might look like in healthcare. The challenging demographic outlook, where 31% of the population is above 60 years old (age compared with 13 and 18% in China and the United States), would need technologies that connected such diverse things as "sensors, monitoring health conditions in real time, surgeries done in rural hospitals with remote-controlled robotics, or robots taking care of household chores and delivering food or medicine to the elderly." It may well be that healthcare IT managers know this vision is not new: While companies and universities have long experimented with robot carers, or 'carerobos', they inhabit a small market. The Economist late last year said the government expected it to be worth about $500M by 2020, but much of that will be coming from government subsidies to both producers and their nursing home customers.
3Japan economy needs AI, robots to offset aging population: white paper August 3, 2018 (Mainichi Japan)
"Chinese organizations are at the forefront of digital transformation and are prepared to invest in the relevant technologies to succeed, including big data and analytics. Big data plays a crucial role in not only driving businesses, but also pushing boundaries and propelling the future of China’s digital economy, which is fast becoming one of the biggest in the world. By harnessing the power of data and analytics, businesses can grow and deliver on the promise of China’s economic momentum. At the same time, in an economy heavily driven by data and analytics, we expect cloud adoption to grow in China, driven by regulation tailwind and the value proposition of cloud technology. At Cisco, we can help organizations use data for business and customer insights and to successfully adopt cloud, be it private or public, by providing the tools to manage and secure data seamlessly across the entire cloud environment. Cloud will, for sure, enhance the opportunity for organizations in China to further leverage its data, innovate and digitally transform." – Hera Siu
Hera Siu - Vice President and CEO, Cisco Greater China
China has long been pushing big data, and its giants (Tencent etc.) have vast data sets culled from their millions of users. The analyst firm IDC reported in April that China will be the biggest market in Asia/Pacific (excluding Japan) for big data and business analytics solutions, with spending forecast to reach $5.5 billion this year. While the big players – Alibaba, Tencent, Baidu – dominate the market, the data they collect is feeding a much broader growth in analytics. Zhouheiya, a specialized food chain, added crayfish to its duck-focused product line after discovering via Alibaba's data analytics service that the word crayfish is searched most during April to August – a time when braised duck less sought after. Manufacturing, healthcare and financial services managers also listed as the most important technology transforming their companies. This is not driven solely by the private sector; public sector managers put it only behind IoT as a technology shaping their organizations. While 56% of them listed big data and analytics, only a third listed cloud and only 11 percent automation. (See Figure 3)
Figure 3
Indeed, China's big data plan, launched in 2016, aims to quadruple the size of the industry by the end of the decade, cultivating 10 world-leading big data companies and up to 15 experimental zones. The pilot zone of Guizhou has already attracted the likes of Foxconn, Microsoft, Tencent and Alibaba, according to research by Gao Feng, a consultancy4. The interest from the public sector is not purely supportive of business: China is working with Tencent and Alibaba to build a social credit system based on data supplied by the companies. China isn't alone, however. IDC listed Australia as the second largest regional spender on big data and analytics. And it pointed to Southeast Asian players as ones likely to see the fastest growth in spending over the next five years: (19.7% CAGR), Philippines (19.0% CAGR) and Thailand (18.2% CAGR)5. While this spending is only modestly reflected in the Cisco survey, interest was: in all countries more than half of IT managers chose big data as a technology that is shaping, or will shape, their company's future.
4China’s Digital Landscape and Rising Disruptors: Module 2.9 Big Data, December 2017 5Big Data and Business Analytics Revenues in the Asia/Pacific (excluding Japan) Will Reach $14.7 Billion in 2018, Led by Banking and Telecommunication Investments: IDC April 11, 2018
Australian IT managers were for the most part positive: among the developed economies Cisco surveyed they were the most likely to say their organization was prepared to adopt the relevant technologies for digital transformation (89% vs 86% in Singapore, 81% in South Korea and 46% in Japan.) But there are concerns. More than 20% of Australian IT managers said they hadn't upgraded their infrastructure in the past three years. Only Japan came close. (See Figure 4) Australia's financial and public sectors were the most likely to be affected, with a third of IT managers in each saying they hadn't upgraded in the past three years. Most managers cited budget constraints. Regardless, Australian IT managers emerge in the survey as the ones who are less likely to put price over quality, with 33% indicating they had not made any tradeoffs to reduce the cost of their IT infrastructure. In Thailand, for example, not a single IT manager said he had not made any tradeoffs.
Figure 4
On another positive note, 71% of executives from Australia who hadn't upgraded said they planned to in the near future – even though that figure was still low compared to Southeast Asian countries and South Korea. And despite ongoing concerns about the country’s national broadband and 5G network plans, Cisco survey shows 5G is taking shape in Australia. Thirty-six percent of IT managers consider 5G a technology that will shape their digital future – slightly above regional average (34%). Indeed, Open Signal, a company that collects and analyses data on mobile connection speeds, said it had in recent months seen big jumps in 4G download speeds in Australia, which it put down to big network investments from the main carriers.
About 20% of Indian IT managers say their infrastructure is a decade old – or older, according to the survey. Only counterparts in Indonesia say the same. Some, such as those in China, Vietnam, Australia, Thailand and Malaysia say none of their infrastructure is that old. Of those IT managers in India who said they hadn't upgraded their infrastructure in the past three years, 70% added they were overwhelmed by the influx of new technologies. This figure was much higher than elsewhere (Japan was 30%, for example). A lot of the concern seems to be in larger organizations – those above 10,000 employees. While only 2% of IT managers of small Indian companies – those employing less than 1,000 people – said they did not believe their current IT infrastructure would support future digital needs, that number rose to a quarter in organizations with more than 10,000 employees.
South Korean manufacturers are constrained from adopting key technologies because of budgets, according to the survey. More than 50% of Korean manufacturers cited limited budgets as the reason why they had not adopted cloud technologies, higher than the regional average of 40%. This was after Korean IT managers in the manufacturing industry listed the technology as second (74%) only after big data as the most important technology shaping their company’s future.
Except for the public sector, 60% IT managers in Korea have their eyes set on 5G – that’s the highest percentage regionally and only China comes close with 46%. While the survey didn’t show the requirements and implications of deploying such technology, Korean IT leaders are for the most part the most concerned about talent. For example, 52% of them indicated unfit talent is the reason their companies are unable to deploy artificial intelligence.
Singapore's push into big data analytics – the cornerstone of its smart nation strategy – is being driven by larger organizations, according to the Cisco survey. Not only did Singaporean IT executives cite big data as the most important technology shaping their organization, but the proportion rose depending on the organization’s size, placing Singapore ahead of other countries in terms of taking the technology seriously. (See Figure 5)
Figure 5
Put this down to two primary factors: government initiatives and the emergence of regional ride-sharing and e-commerce giants based in Singapore. A study by KPMG commissioned by the Competition Commission of Singapore6 found that the efforts of government agencies had helped to ease the high costs associated with implementing and setting up analytics infrastructure, as well as facilitate data sharing. It also pointed to the growth of private ride booking companies such as Grab and Uber (which merged in this year) and the pure e-commerce companies such as Lazada as stimulating the development of analytics capabilities in those sectors in Singapore.
There are other government initiatives too, where government-run agencies and think tanks have collaborated with the private sector to explore the use of analytics in new areas. Fujitsu Limited, Singapore Management University and A*STAR's Institute of High Performance Computing, for example, are leveraging artificial intelligence and big data analytics to help the Maritime and Port Authority of Singapore improve vessel traffic management in one of the busiest ports in the world.
6Understanding the Data and Analytics Landscape in Singapore, August 2017
"Digital transformation is no longer just a vision in Vietnam, it is a reality. Businesses across the country are adopting technology and harnessing its power to overcome challenges and unlock new growth opportunities. From improving operational efficiency to empowering a mobile workforce and enhancing customer experience, technology is helping companies on multiple fronts.
As businesses progress on their transformation journey they are starting to understand that for them to be able to exploit the full potential of digital adoption, they need to make cybersecurity a fundamental part of their digital strategy. While companies are starting to adopt technologies that can help them, there is a need for Vietnam to develop local capabilities, especially on the talent front and for closer collaboration among all stakeholders on sharing intelligence to ensure they stay a step ahead of malicious actors." – Thuy Le Luong
Thuy Le Luong - Managing Director, Cisco Vietnam
Vietnam, too, has a plan – this one about cybersecurity. A recent AT Kearney survey commissioned by Cisco on cybersecurity in the ASEAN region showed Malaysia, Indonesia and Vietnam are already blocking 3.5 times more threats than the global average. Another cybersecurity survey by Cisco7 in the region found that a third of cybersecurity incidents in Vietnam cost the victims more than $10 million – compared to a regional 4% and a worldwide 3%, and way ahead of the next biggest victim, Australia (10%).8
That said, Vietnam is not standing still. In January it set up a Cyberspace Operations Command to oversee government control of the Internet and military IT-related issues. In June, its national assembly passed a law designed to tighten cybersecurity, to come into effect on Jan 1, 2019.9 Cisco’s survey shows IT leaders are also taking the issue seriously: 81% of them said they were upgrading their IT infrastructure to improve their cybersecurity posture, the highest number both among other technologies for Vietnamese managers and for cybersecurity in the region. Vietnamese executives in financial services and managers in the public sector were the ones taking it more seriously: All those surveyed in government said it was important, and 94% of those in financial services. That this message was already being reflected in deployment decisions was clear: 88% said they had already started to adopt cybersecurity - the largest proportion both of technologies adopted, and of all technologies adopted by any country. (See Figure 6)
Figure 6
At the same time, Cisco’s survey reveals supreme confidence on the part of the country’s IT managers. It scored highest (99%) when they were asked whether their organization had a digital transformation strategy, and was the only country where all managers said they believed their institution’s digital transformation strategy was adequate to achieve their goals. (They recorded the same unique score when asked whether their strategy was adequate to adopt the relevant technologies for digital transformation.) Not only that: more Vietnamese IT executives than any other country surveyed included cloud, cybersecurity and automation among technologies that were shaping, or would shape, their company’s future, suggesting that Vietnamese managers are laser-focused on the key technologies for this stage of their country’s development. Drilling down further, the survey data suggested that all sectors and organizations, large and small, are thinking the same way.
7 Cisco 2018 Asia Pacific Security Capabilities Benchmark Study, Sept 2018 8 Cisco 2018 Asia Pacific Security Capabilities Benchmark Study, Sept 2018 9 ‘Vietnam: Withdraw Problematic Cyber Security Law,’ Human Rights Watch, June 7, 2018
Indonesian retailers do not seem to be reacting fast enough to the technology-driven shifts in their industry. Despite the rapid growth of Go-Jek into areas once associated with the ubiquitous mall – food delivery, payments, banking, grocery, stylists, even massage – Indonesian retailers are still behind in adopting the technologies necessary to challenge the platform giant. Nine percent of IT managers in Indonesian retail said their companies were not adequately prepared to adopt the relevant technologies. (Most other sectors had no one suggesting they were not prepared.). This number rose to 14% when they were asked whether their company’s strategy was enough in itself to achieve their goals. Link Retailers had listed the cloud as by far (86%) the most important technology shaping their company’s future, suggesting that cloud adoption – the foundation of any digital strategy – among retailers was lower than IT managers would like.
Thai civil servants see a big future for big data and analytics in their organizations – 79% of respondents in the public sector said it was shaping, or would shape, their organizations’ future – rating even higher than cybersecurity. This illustrates how governments in emerging Asia see analyzing the data they are collecting, or could collect, on their citizens could help make providing public services more efficient. In March General Prayuth Chan o-cha, Thailand’s prime minister, announced his Digital Government Plan 2017-2021, aiming to incorporate an integrated information network to develop digital capabilities within all sectors, including agriculture, tourism, education, the medical profession, investment, disaster prevention, and public administration.
Malaysia’s civil servants are much more likely than their counterparts in other countries to say that their organization has started adopting big data and analytics (BDA) – 79% against 52% for all countries surveyed. That said, there was still some concern among some public sector IT managers that their current IT structure wasn’t enough – 17% said no, and 14% said they weren’t sure, while 22% of those who said their department had a digital transformation strategy said it wasn’t enough to adopt the relevant technologies.
This nuance – high adoption of analytics, but concern that what was being done wouldn’t be enough – might be explained by the country’s aggressive embrace of big data. Several years ago the government introduced its own big data roadmap, hoping to make the country ASEAN’s leading big data analytics hub. A white paper by Frost & Sullivan10 in 2015 saw gaps in the initiatives, recommending the country “adopt a more focused approach towards R&D and infrastructure initiatives.” It concluded that “significant efforts are needed to help Malaysia unlock the potential economic impact of BDA.”
10 National Big Data Analytics Initiative: Assessing the Opportunity and Impact of Big Data Analytics in Malaysia, F&S, 2015
More than 20% of civil servants in the Philippines said that their government department did not have a digital transformation strategy, higher than the average. And while 58% of those surveyed said they had started to adopt cloud services, only a quarter (26%) of public sector IT managers said they had begun to adopt cybersecurity (compared to 82% of those in the Philippines’ financial services industry and 62% across public sectors in all countries surveyed.) The Philippines government in January said it would invest about $40 million in upgrade its cybersecurity capabilities, after the elections commission’s database was hacked last year, and 68 other government agencies targeted by hackers in 2016 alone.
