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  • Japan’s IT Service Industry to Pick Up Toward March; Nikkei Watcher Survey
  • January 27, 1999 (TOKYO) — Japan’s information technology service industry will turn brisk toward March in the face of growing service businesses, a Nikkei Watcher survey shows.
    However, computer marketers, which depend heavily on hardware sales, continue to suffer bleak conditions, though there is some sign of improving business.

    A survey on business conditions of the IT service industry conducted by Nikkei Watcher on IT Business indicates that more and more leading solution providers have a feeling the economy is picking up.

    This survey asked the respondents to judge the business conditions of their companies intuitively. The business judgment index is the number representing the results in the range between minus 100 and plus 100.

    The questionnaire was sent to a total of 125 companies, either listed companies, over-the-counter companies or influential channel companies of similar size on Dec. 1, 1998. It asked them their business conditions between October and December 1998 as well as their business prospects between January and March 1999, and got an effective response from 99 companies with a response rate of 79.2 percent.

    The business index given by 99 leading service providers for the period between October and December 1998 was zero, but it jumps to plus six for the period of January and March 1999.

    The Bank of Japan harshly judges leading companies in non-production categories in its corporate short-term economic prospects. It a gave minus 34 for December 1998 and minus 27 for March 1999.

    These results seem to indicate that the IT service industry will see business improve before other industries. According to Japan Information Processing Service Co., Ltd., the IT industry is doing best in Japan, and will be in a good business condition until 2005.

    In particular, the sales index will increase by 14 points from the period between October and December 1998 toward the period between January and March 1999. The gross profit index will also make a slight increase from three to five. This contains the judgment that sales will increase with modest profits toward the period between January and March 1999.

    There are several factors for the improving business indexes of the IT service industry. The first is the expansion of investment brought about by a hold back in mid-1998. The second is the expectation to the government’s economic measures, including a tax cut for enterprises in purchasing PCs. The third is demand for renewal of personal computers. In 1999, more than five million personal computers will be in demand, according to Dataquest Japan KK.

    There are factors to deter the improvement. They include: (1) discouraging the business mind for investments in information systems, (2) concern over the delay in shipments of products, which are expected to be a driving force for the expansion of investment, such as Windows 2000, and (3) the delay in investments in strategic systems because of the late response to the year 2000 issue.

    Since the judgment of business is promising, expectations of economic recovery are slightly stronger than the fear for economic stagnation.

    Related story:
    EIAJ Expects 1999 Electronics Output to Rise 2 Percent
    JEIDA Chairman Welcomes Temporary PC Tax Cut in Japan

    (Nikkei Watcher on IT Business)



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