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Research Outline

Prepared for Jennifer G. | Delivered June 10, 2020

IT and Office 365 Spending in Japan

Goals

The objective of the research is to estimate the spending on IT solutions and the adoption situation of Office 365 products in Japan. The two goals are the estimation of the IT spending by companies in Japan and the number of Japanese subscribers and/or their spending on Microsoft Office 365 products.

Early Findings

  • According to Atradius, ICT spending in Japan was $220 billion in 2018, which was the third-largest market after the US and China. In 2019, the Japanese spending on ICT solutions was expected to grow by 4% and reach $229.1 billion. The ICT solutions consist primarily of computer hardware, software and services, in which IT services spending is expected to have the largest share and the growth of software spending is expected to the highest between 2019 and 2022.
  • Computer hardware spending is estimated to be JPY 2.62 trillion in 2019, which is expected to reach JPY2.7 trillion in 2022, representing a CAGR of 1.2%. Software spending is estimated to rise from JPY4.26 trillion to JPY5.18 trillion between 2019 and 2022, representing a CAGR of 6.7%. IT services spending is estimated to increase from JPY19.25 trillion to JPY22.13 trillion, representing a CAGR of 4.8% between 2019 and 2021.
  • According to IDC, the total IT spending in Japan was estimated to be $152 billion in 2018, which was expected to grow by 2.1%, down from 5.5% in 2017. The slow-down in growth was mainly attributed to the fact that the majority of organizations shifted their budgets to system maintenance rather than the new investment in technologies, such as big data and artificial intelligence. More data have been published by IDC, however, these reports are only accessible for a fee.
  • According to Statista, corporate IT budget accounted for between 1.5% and 6.1% of total revenue in 2016, across different industries.
  • In 2020, Microsoft announced that more than 25% of Office 365 licences have been purchased through Microsoft 365. According to Microsoft's 2019 fiscal year report, the revenue growth of Office Consumer products was driven by Office 365 Consumer products in Japan.
  • Driven by the growth in Japan, the revenue and seat of Microsoft's Office 365 Commercial products grew by 30% and 27% year-on-year respectively. The revenue of Office 365 Consumer products grew by 8% year-on-year, in which 4 percentage points originated from the Japanese market. The total number of subscribers or seats for Office 365 Consumer products reached 34.2 million in fiscal Q3 2019.
  • Globally, the number of Office 365 Commercial and Consumer subscribers reached 200 million and 35.6 million respectively in fiscal Q1 2020.