Japan Is A Different IBM i Market, But The Loyalty Is The Same
November 26, 2018 Timothy Prickett Morgan
Back in early November, we did an overview of the IBM i market in Japan, which accounts for about 10 percent of the IBM i installed base and is third to North America and Europe, which have always dominated the AS/400 and follow-on IBM midrange markets.
In this follow-up story, we wanted to dig a little deeper and talked to two downstream resellers, Bell Data (which is a publishing partner of The Four Hundred in Japan) and Star Computer, which is a downstream partner from iGuazu, the largest distributor of Power Systems with IBM i machinery in the country. (To learn more about the higher-level master resellers and what Big Blue told us about the Japanese market for IBM i systems, refer to that original story.) We also owe thanks to Simon O’Sullivan, senior vice president at high availability and system monitoring software maker Maxava, who has been spearheading the company’s move into the Japanese market and who provided us with the connections to resellers and his own insight about what is going on in the Land of the Rising Sun with regards to our favorite platform.
The culture in Japan is quite a bit different from what we are used to in North America and Europe, but interestingly, the AS/400 and its progeny very easily found a place in the business culture there.
“Japan is completely different, it is not like doing business in the United States, or Europe, or Southeast Asia. It is a completely different kettle of fish,” explains O’Sullivan. “We have sold into the market for a while. If you want to do business in Japan, you have two choices. You can operate there as a branch office, where you work totally through business partners and that means you can’t do any of the services work yourself and it has to be done by those partners. And that’s the way we have been operating in Japan until 18 months ago. At that time, we decided we needed to push into Japan, given that one out of every ten IBM i customers are located there and it is relatively close to New Zealand. It is a market we understand because we have been there for a long time operating as a branch.”
Maxava opened up an office in Tokyo and employed an office manager; the company already had a technical person in Japan and then hired another support person that can speak English as well as Japanese. The company also tapped Akinori Meguro, a very well-known IBM i expert in Japan, who is acting like an ambassador for the company, helping it make connections to the local IBM i community, and then added another a tech support specialist who speaks Japanese but works in New Zealand. So there are quite a few Japanese people on the Maxava staff to help drive this business.
Maxava is also getting some help from the reseller channel. Star Computer is a Maxava reseller, and iGuazu, the biggest master reseller and the upstream partner to Star Computer, has also inked a separate agreement to resell Maxava products in Japan, according to reports in the Japanese press.
O’Sullivan says that Maxava has 70 customers in Japan at this time, and is doing five times the number deals this year as it did last year – in part due to the uptake of Power9-based machines but also because it has opened up a direct office in Tokyo. The sales pipeline is a factor of 10X larger now than it was a year ago, and there is plenty of room for it to grow. Maxava has closed seven deals in the past six months, and three of them were done by Star Computer.
“We are seeing momentum across the board, and a lot more leads and opportunities coming in,” says O’Sullivan. “We are pretty confident that Japan is going to be big for us. The only other competition really is Syncsort with the Vision Solutions HA products. The opportunity for HA software in the country is quite large. HA penetration is not really been what you would expect in Japan. In other geographies, the penetration of HA products where some sort of replication is being done might be 10 percent of the base, in Japan it is around 5 percent of the base, which is surprising in a country that gets regular typhoons and earthquakes and sometimes tsunamis.”
If there are 15,000 IBM i customers in Japan, and the installed base of HA shops is about 5 percent, then that means there are about 750 IBM i customers who are doing HA, with Maxava getting about 10 percent and Syncsort/Vision Solutions having most of the remaining 90 percent. But assuming that HA software should eventually be used by maybe 10 percent to 15 percent of the base, there is another 750 to 1,500 potential customers to chase. Hence that big pipeline that O’Sullivan was mentioning above.
The competition in HA in Japan is mostly the Syncsort collective led by MIMIX (from the former Vision Solutions) and includes Quick-EDD (from the former Trader’s). The former Vision Solutions had strong partners in Japan and were reasonably successive. Another company called Bitas was selling Quick-EDD, but now that is also owned by Syncsort, and of course HelpSystems bought Bug Busters recently. “When you are talking about high volume transaction processing in Japan, there are really only two choices: Maxava HA and MIMIX,” says O’Sullivan. “We don’t really see HelpSystems Bug Busters in Japanese deals, and the same for IBM PowerHA, Rocket iCluster, or iSam Blue.”
As you might expect, the IBM base in Japan centers on the banking or manufacturing sectors, not coincidentally where HA is critical and why there being a lower tendency to use HA software in the country is a bit perplexing. The deals that Maxava is doing are typically companies that are new to HA and have mostly relied on tape backup to save their cookies in the event of a disaster. “Those are really good ones to win because we are bringing them into the HA fold,” O’Sullivan says. “We are doing a lot of replacements in other regions, and we do the odd replacement in Japan as well.”
Given the reserved and hierarchical nature of the Japanese business culture, it can be difficult to get anyone in a company to speak freely about their opinions in the market. But Yoji Jinno, sales manager at Star Computer, which is located in Osaka, a large port city in the center of the island nation (and the second largest city in the country after the capital city, Tokyo), was kind enough to provide us with his own thoughts and insight.
Star Computer Service Company was founded in 1977 and is a wholly owned subsidiary of Shiraishi Kogyo Company, a calcium carbonate manufacturer that was created forty years earlier. Star Computer was formed to buy computers for its parent company, and in 2010, the company decided to start using its expertise to sell IT systems to companies outside of its parent as well as providing system integration and technical support for these systems. The company has 23 employees and has recently decided to push HA software as a differentiator.
“I think there are still many installations at manufacturers and distributors as well as in the financial and insurance sectors,” explains Jinno-san in an email interview, speaking in reference to the broader IBM i market in Japan. “But in our company, the majority of customers and prospects are in the manufacturing industries. These customers are requiring zero downtime, which is another reason we have partnered with the Maxava.”
There is yet one more reason to use replication software besides for high availability and disaster recovery, according to Jinno-san, and that is for migrating from older IBM i machines to new Power9 iron. The old and new machines get set up with HA replication, and the customer can test the applications on the new Power9 box with live data and then failover to the new machine when they are sure that everything is working properly. This is a lot better than having downtime, which is a fact of life when you are doing a tape-based migration.
Bell Data has been in the IBM midrange market for quite a bit longer than Star Computer, and it is considerably larger. The company was founded in 1991 and has 238 employees and has about 2,600 customers – a sizeable chunk of the Japanese IBM i market. Bell Data’s headquarters is located in Tokyo, and it has branches in Nagoya, Osaka, and Kyushu; the company is able to support clients across all of Japan by using other IT partners where it does not have (or need) direct reach, Hiroshi Onodera, chairman of Bell Data, tells The Four Hundred in an email interview.
When the AS/400 was launched 30 years ago, it was positioned as an “office computer” and sold mostly to small and medium businesses in the manufacturing and distribution sectors, says Onodera-san, but over time, as Power-based models came to the market and machines had more processing capabilities, the machine became popular in the banking, finance, healthcare, and academic sectors.
Japan is unique in one important way from the North America and Europe with respect to the IBM i base, according to Onodera-san. “In Japan, most customers write their own applications,” he says. “Because business customs are so different, customers have to develop large add-on programs to suites if they decide to use package solutions. However, the issue is that RPG programmers are decreasing and customers are shifting to open systems. Thus, IBM Japan announced in this March an effort to develop 1,000 RPG engineers with company resources. Also, we try to hire skilled software engineers from Vietnam who have IBM i experience.”
Incidentally, Bell Data also sells Maxava HA to customers looking for disaster recovery and high availability.
Among the people that we talked to, there is consensus that Japanese IBM base is dominated by machines in the P05 tier, followed by a healthy number of P10 machines, some P20 machines, and a few P30 machines. This is consistent with what we see in the installed base in the United States, and that distribution is driven by the Moore’s Law improvements in the Power architecture in the past two decades. The compute capacity of the systems has grown much faster than the transaction processing workloads have, and therefore customers can often get by with one or two cores of computing today when they needed a much bigger NUMA system with multiple sockets and many more cores in years gone by.