IT shifting to BPO services from legacy SI
Enterprises’ demands are fast changing from IT products delivery to service offerings, says Masahiro Kitano, President and CEO, Hitachi Systems.
Hitachi Systems, an IT services company, is largely focusing on cloud, global solutions and BPO services to create new benchmarks and meet the new IT demands of organizations globally. In an exclusive interaction with IDG India, Masahiro Kitano, president and CEO, Hitachi Systems, spoke at length on his India visit and the company’s edge in today’s hyper-competitive technology landscape.
It’s been nearly three quarters (from April 2016) with you at the helm of Hitachi Systems. What initiatives have you implemented for the company's growth?
Historically, Hitachi Systems is a services company specializing in system operation, monitoring and maintenance of IT infrastructure. We execute system integration in Japan market. However in recent years, earlier CEO Naoya Takahashi changed the strategy from the legacy type of services by expanding the BPO business in Japan and globally. Many customers want to adapt this business model because of the lack of good IT skilled person especially in small and mid-size company. I, too, am changing the business mindset in Hitachi Systems from legacy SI to BPO--upside down.
Businesswise, by focusing on (recurring) services business, we achieved the target for H1 of 2016. And technology-wise, we launched innovative and advanced service such as drone operations management services. With this acquired security technology and capability of our SOC, we started the new security service. Also, we have inquires and POC request in new fields like AI and robotics, as well. Hence, I am very excited about these new projects.
How different is the new role at Hitachi Systems (from your earlier one at Hitachi for over three decades) in terms of portfolio focus and company vision?
The business environment is changing from product to development to services creation. I changed my role (as an engineer of mainframe, servers, routers, storage, PC at Hitachi) from development to changing everyone’s mindset from legacy oriented business to services oriented business. This is my career’s biggest change.
Customer demands are changing from a mere delivery of IT products to service offering. Also the keyword “IT” has changed has changed to “ICT” with communication becoming a predominant trend.
Recently, the “digitalization” has been rapidly accelerated and we are promoting the projects on this. Specifically we think the business opportunity lies in the digitalization of customer’s on-site business and in the fulfillment of the gap caused between real world and cyber world. And this is where we are focusing to provide services.
Without solely jumping straight into new technologies like IoT, AI, big data analytics, we first focus on solving the problems underlying the actual customers' business by using IT as a tool.
What is Hitachi Systems doing contrarily than other technology OEMs in the market?
Hitachi group has consolidated revenue of over 10 trillion yen and doing business worldwide in various fields including railway, energy, healthcare and more. And about 50 percent of the revenue comes from the overseas business doing out of Japan.
By collaborating with each other among these various business units, all of the group companies are working together to realize the social innovation. Hitachi Systems is doing ICT business as a part of the activities for the Social Innovation.
With the comprehensive power of Hitachi group, we can clarify the issues and solve the problems of the customers before providing them the solutions. For example Hitachi excels in monitoring plant systems, train control systems which is not pure IT. But aggregation of these industry trends with our IT expertise imparts the big competive edge from others.
Do you see CIOs globally seriously warming up to SMAC?
Many CIOs need to change their traditional mindsets on buying IT and evolve as business strategist. Many CIOs we have seen don’t talk much with CEOs because CEO is more focused on cost-cutting spree to run profitable company. CIOs want to change the company’s IT infra into modern models but some CEOs might disagree.
From IT investment point of view, depreciation and investment should be balanced. The cycle of systems integration hence becomes a barrier for the company’s growth. We hence make a clear proposal for both CIOs and CEOs to be on the same conversation level.
In Asia, especially in India, the business is growing rapidly and the cutting edge technologies are used quickly in short bursts. Smartphone is a good example. In the actual customers’ business, these technologies around SMAC are adopted rapidly hence we need to carefully watch the customers’ trend and we would like to lead the market to support them.
What technology trends are impacting end user companies with respect to adopting new-age enterprise technology?
Currently most of the big-scale systems use packaged software which pedals the cycle of “system integration”. The software updated every few years means the customers’ business becomes restricted. However, the customers’ business is changing day by day and IT needs to support that. An ICT service company that realizes and support the agile improvements along with the customer’ new demands will make a significant contribution in the market.
How is Hitachi Systems moving its customers from on-premise (capex) to cloud/SaaS (opex) business model? Is cloud happening for real?
Hitachi Systems migrates customers’ on-premise systems into private cloud in our datacenter and also provide the system operations services. Gaining the customers’ trust in providing the private cloud service, we also provide hybrid cloud incorporating the public cloud service if required. And in Japanese market, the needs for the cloud adoption including SaaS is increasing and growing further, that is, we can say it’s not mature yet and the situation is same in US and European market.
Releasing the restriction by the software license can be real force for SaaS market. It is about changing license model from legacy model and balance with the customer adopting cloud but utilizing on-premise legacy license software.
What are your definite short-term and long-term plans for Hitachi Systems Micro Clinic in India and Hitachi Systems?
So far in Indian market, the primary demand for IT system is basic field such as financial accounting, production management”, CRM. Hitachi System has abundant experiences and expertise in these fields in the long history. Firstly, here in Indian market, we deploy the IT services by leveraging our capability cultivated in Japan.
In the long term, we aim to become a ‘service company’ to solve the customers’ problems and support their business by levering IT as tool.
Your suggestions to CIOs and CTOs of companies to build robust IT strategy for 2017.
CIOs and CTOs should convey the digital transformation path to their CEOs clearly. Legacy staff at times are not ready for new technology and there is often paucity of budgets. CIOs should have dedicated budgets from the board to lead digital transformation path.
CIOs should adopt cloud as their IT infrastructure. For SI and operations, consider it as variant cost, not fixed cost. Acquire the environment where big data analytics can readily be conducted. Manufacturing industry which is traditionally strong in India with a close relationship with IT and now IoT. And lastly, reinforce the security posture at your company.