Japanese companies are leaving home and setting up shop in the industrial West in unprecedented numbers. No, not Japanese computer companies but banks and financial institutions, motor manufacturers, consumer electronics companies and a host of other businesses that are finding it increasingly difficult to sell their products from their home base in the face of […]
Japanese companies are leaving home and setting up shop in the industrial West in unprecedented numbers. No, not Japanese computer companies but banks and financial institutions, motor manufacturers, consumer electronics companies and a host of other businesses that are finding it increasingly difficult to sell their products from their home base in the face of growing tariff barriers and protectionist quotas. And, just as the British empire builders of a century and more ago, who took everything they could with them, right down to their place-names, to make themselves feel a little less isolated and cut off from everything they held dear in an alien environment, so do Japanese companies seek to cocoon their foreign operations in as much that is familiar as they possibly can. In Japan, computers are extremely expensive by US and European standards, as a glance at the converted prices in our Tokyograms column makes clear. Mainframes there are still generally rented, at prices that work out at anything up to double what users pay in the West, when the monthly rental is multiplied by the three to five years over which a machine is typically written off – and it’s much nearer three than five years in Japan. Heartrending That high price pays for a level of handholding quite unknown in the US and Europe, even from IBM, which probably offers users the most comprehensive and lavish service of any manufacturer. And expatriate Japanese running outposts in a hostile and alien environment, find that the support they get from local computer suppliers is distressingly perfunctory, and, as expatriates are wont to do, they have been making heart-rending distress calls back home to enquire whether something can’t be done about it. It is therefore a big mistake to see all the machinations in the IBM-compatible market of the past 12 months solely as an earnest of Japan’s determination to conquer the entire computer world. Fujitsu Ltd, Hitachi Ltd and NEC Corp are far more diffident about their ability to sell mainframes outside Japan than they are usually painted – witness the caution with which Fujitsu Ltd has established its base in Spain: it has been there for 15 years, yet only now is starting to use the operation as a springboard into other European markets. If anyone doubts the strength of the pressure on Japanese companies to look after those stranded in the foreign outposts of their major customers, the case was made beyond peradventure in January 1987, when IBM Japan agreed to take over support of the major foreign operations of Nomura Securities and other majors (CI No 601). Loss of face The pressure on an ethnic Japanese company is even stronger than it is on a quasi-Japanese company like IBM Japan. Corporate Japan is dominated by extended families of companies whose corporate culture has always been to look after one’s own. So Hitachi, Fujitsu and NEC – the big three Japanese mainframers are seen to be letting the family down when they do not do all in their power to solve the overseas computer problems of other family members that use their computers back home in Japan. It is a matter of loss of face. But setting up a support network for a handful of customers in an alien land is a hideously expensive, and those customers have got to keep their local costs under strict control to remain competitive in their foreign operations, so they can’t be made to pay the full cost of the support that they are demanding. What are the Big Three to do to solve the problem? A large part of the answer lies in their overseas marketing partners – but it is extraordinarily difficult for Hitachi to twist the arm of National Semiconductor Corp sufficiently that the company persuades National Advanced Systems to reserve a corner of each major support office for a team of Japanese technicians, and accord them every facility. How much easier if Hitachi has a direct stake in that marketing operation. But that is not all that is needed: a high level of local expertise to solve the in-between problems that are special to the local market is required, s
o local as well as Japanese experts are necessary if a truly comprehensive service is to be provided. That is the reason that Hitachi and Fujitsu have been establishing software development centres in New York, London and Los Angeles, why Hitachi was ascloseasthis to Electronic Data Systems Corp even before the agreement to acquire National Advanced Systems was reached, why, too, NEC was more than happy to take a 15% stake in Bull HN Information Systems Inc. Fujitsu’s position with regard to Amdahl Corp is much more problematic, because despite its 46% shareholding, it is faced with a publicly-quoted company that defends its autonomy with prickly determination. Only once has Fujitsu shown its teeth, when it vetoed the agreed merger between Amdahl and Storage Technology Corp, and the experience was not a happy one for either. Derisory So Fujitsu is having to go it alone – and it has hinted at plans to market its mainframes in France and Germany – no coincidence that there are large numbers of Japanese companies in both countries. But the only way to cover the extraordinarily high costs of supporting those expatriate customers is to spread the costs over as many other customers as possible, which means that Hitachi and Fujitsu have to find as much national business in each country where they operate as they can. Which is great news for IBM users but depressing for IBM’s shareholders, because the only way that either can win business abroad is by undercutting IBM on price – and by selling as much of their own software as they can, an even bigger threat to IBM’s bottom line and control of the market than are the hardware sales. Japanese companies can compete on price not only because in key areas their costs are even lower than IBM’s, but also because their shareholders are prepared to accept what look by Wall Street or London standards to be derisory profits and dividends, so long as the company keeps on growing. It is inevitable therefore that the battle between IBM and its two Japanese tormentors is going to get increasingly bitter, and that it is one that has to cost IBM dear, not only at the bottom line but also in volume. But for once, users stand to be the big winners.
