|The market is expected to grow to the level of 19 trillion yen
(US$140 billion) by fiscal 2000, Nikkei Computer said in its
outlook on Japan's computer market.
The market outlook during fiscal 1998 and
fiscal 2000 (See table 1 and table 2.) was analyzed by Nikkei Computer based on
interviews with computer makers, system integrators and research
companies, and takes into account statistical materials published
by the Ministry of International Trade and Industry (MITI), the
Japan Electronic Industry Development Association (JEIDA), the
Japan Personal Computer Software Association and other
Expanding PC Market Led by Businesses
In fiscal 1997 software sales declined 2 percent to 5.41 trillion
yen (US$40 billion) compared with a year earlier due mainly to
sluggish personal computer sales.
However, in fiscal 1998 the software market is likely to grow
about 3 percent. A 5 percent to 7 percent growth is expected in
fiscal 1999, and the computer hardware market is projected to
grow to a 6 trillion yen business by fiscal 2000. This is because
personal computers and PC servers are projected to be driving
forces in the market after fiscal 1998.
Many industry sources have said that the depressed economy has a
positive effect on the computer market. Indeed, demand for
personal computers among businesses still remains strong.
A survey conducted via email in December 1997 by "Nikkei Market Access," a
membership-based information service, provided such evidence.
There were two main types of responses to the question about
personal computers planned to be acquired in fiscal 1998. Those
responses were "the same level as in fiscal 1997" and "a higher
level than in fiscal 1997."
If small and midsize businesses and small office home office
(SOHO) markets are also included, the market is projected to
expand even more. However, the consumer market is expected to
remain sluggish. Surveys indicating consumers' dwindling desires
to purchase personal computers have been seen since the latter
half of 1997.
Personal computer makers have been placing great expectations on
Intel Corp.'s low-priced Celeron microprocessor and Microsoft
Corp.'s Windows 98. Yet, a rapid revival of the consumer market
in fiscal 1998 cannot be expected because individual users in
Japan are not motivated by low prices of PCs alone. In addition,
Windows 98 does not have as strong an impact as did the debut of
Sales of PC Servers to Expand at 20 Percent Level in FY98
The market for servers is growing at a 26 percent pace a year.
The PC server market is expected to secure the second position in
the server market following mainframes, by maintaining a high
growth rate of 20 percent after fiscal 1999. Strong demand for
servers used for such information-related systems as email and
the Internet is forecast.
The improved performance level of PC servers is expected to
contribute to expanded use of servers for business applications.
Such leading office computer makers as NEC Corp. and Fujitsu Ltd.
have been stepping up sales promotions of office-type PC servers.
Small and midsize businesses will likely soon move to replace
their office computers with PC servers. However, numerous
obstacles need to be overcome.
Vendors must provide better support for users. Secondly, is the
issue of the stability of Windows NT. JRI Systems Solution Ltd.
pointed out in Nikkei Computer that continuous operation of
Windows NT for a long period can result in unstable operations.
Meanwhile, the UNIX server sector, which will see its low-end
model area assaulted by PC servers, will shift its focus to
mainframes and high-end office computer markets. Nikkei Computer
forecast that the market in fiscal 1998 will increase 15 percent
to 450 billion yen (US$3.4 billion).
Continued Declines in Office Computer and Mainframe Sales
Nikkei Computer projects that in fiscal 1998 the market of office
computers will decline 3 percent to 300 billion yen (US$2.2
billion) reflecting the adverse effects of the increase in PC
servers and UNIX servers.
The office computer market is likely to maintain a level of 270
billion yen (US$2.0 billion) in fiscal 2000 due mainly to the
high reliability of the systems and efforts by computer makers to
build in such new functions as Java execution environments and
Web server tasks.
In fiscal 1998, the mainframe market, which holds the next
largest share after the PC market, is forecast to decline by 4
percent to 1.75 trillion yen (US$13 billion). A decline of 4
percent is expected after fiscal 1999 because the speed of the
improved performance-to-cost ratio far exceeds that of increased
demand for mainframes.
The PC workstation market is likely to see significant growth. In
fiscal 1997, the market registered only 30 billion yen (US$220
million), yet it has been forecast to grow to as much as 160
billion yen (US$1.2 billion) in fiscal 2000, taking full
advantage of low prices and strong applications for personal
computers. The PC workstation market is expected to grow in such
areas as Web content creation, financial businesses and
construction-related computer-aided design (CAD).
On the contrary, UNIX workstations will encounter a tough
environment. A gradual decline of 3 percent to 5 percent after
fiscal 1998 is forecast and the market will likely decline to the
level of 340 billion yen (US$2.5 billion) by 2000.
ERPs to See a Rapid Increase Among Software Products
Nikkei Computer has projected a 16 percent increase to 1.54
trillion yen (US$11 billion) for the software products market in
fiscal 1998. It also has projected a 17 percent-18 percent rate
of increase after fiscal 1999 and it said the market will reach a
level of 2 trillion yen by fiscal 2000.
Despite the effects of the sluggish economy, numerous issues need
to be dealt with in the development of information systems. For
example, measures against intensified competition among
businesses, Year 2000 issues and the establishment of global
standards are just a few of the major issues.
In fiscal 1998, among software products, significant increases
are expected to be seen in business application products
including Enterprise Resource Planning (ERP) packages and in such
communications products as email and groupware, which are
introduced by small and midsize businesses.
The ERP package market, in particular, has attracted attention.
Gartner Group Japan K.K.'s Dataquest estimated that the ERP
package market reached 36 billion yen (US$270 million) in fiscal
1997 (based on vendor shipments). It projects that the market
will see an average increase of 36 percent after fiscal 1998 and
that it will grow to a market size of 170 billion yen (US$1.3
billion) by fiscal 2002.
Expectations For Outsourcing in the Service Market
The service market can be classified into information service and
hardware maintenance service. The driving force of the
information service market is software development service
centered around the development of applications on a commissioned
A 9 percent increase to 7.61 trillion yen (US$57 billion) in
fiscal 1998 and a growth rate of 9-10 percent from fiscal 1999
are projected. Full-fledged outsourcing will have a favorable
effect on the information service market. Outsourcing has
significant potential as seen in the statistics prepared by MITI.
Specifically, labor costs account for almost 17 percent of
information systems budgets of Japanese businesses.
In addition to the existing commission-based mainframe operation
services, outsourcing services will spread to the inter-business
Table 1: Size of the Hardware Market, 1997-2000 (unit:
Nikkei Computer estimates. Items in parentheses indicate
comparisons with a year earlier (percent).
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Table 2: Sizes of the Software Product and Service Market,
1997-2000 (unit: billion yen)
Nikkei Computer estimates.
Items in parentheses indicate comparisons with a year earlier
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