Japan's Intranet Business Gets Ready to Roll

Japan may now be up to a year behind the US in deploying intranets, but the conditions are ripe for Japanese corporations to quickly close the lead.

by John Boyd

When Jim Clark, chairman and founder of Internet-phenomenon Netscape Communications, visited Tokyo in February, he noted that 80% of Netscape's US revenues come from intranet business rather than the Internet. And today, according to Shinichi Sugihara, country manager for Netscape Communications Japan, that figure is closer to 85%. While the percentage in Japan is much lower, "that doesn't mean the intranet business here is not growing," Sugihara quickly adds. "It's growing fast."

There is still confusion over exactly what constitutes an intranet. Given that "intranet" is a relatively new buzzword that sounds similar to the Internet, some people trip over the term. "A common mistake is that some people say 'intranet' as opposed to the 'Internet,' because they think 'intranet' is synonymous with the World Wide Web portion of the Net," says Damon Doran, senior general manager of Tokyo-based Cyber Technologies International. "Yet, actually, an intranet is an internal business solution that is not based on a World Wide Web site, though that can also be part of the total solution."

Certain companies, hoping to appear leading edge, compound the confusion by calling any corporate network that supports an Internet protocol or technology an intranet, but not every LAN qualifies. Basically, an intranet is an internal company network that is based on standard Internet communications protocols, such as TCP/IP, and World Wide Web technologies, such as HTML (the language commonly used to construct homepages on the Web). These private corporate networks may or may not be connected to the public Internet, via a protective fire wall that allows companies to control access from outside callers.

Bringing a consistent interface

US network vendors and systems integrators have seized on the intranet concept as a short-term answer for commercially exploiting the global Internet craze while waiting for the business-inhibiting factors of the Net, such as lack of security and speed, to sort themselves out. The appeal of an intranet is that users can utilize Web technologies to easily access and exchange information among otherwise incompatible systems -- an attractive feature for corporations that maintain heterogeneous systems.

"The Web design is very simple and intuitive to use," says Steve Furney-Howe, director of planning and development at Nihon Sun Microsystems, a leading intranet vendor. "Look at Internet traffic and growth before the development of the Webtop paradigm, and then after. It doesn't compare. The basic reason is that a Webtop paradigm provides the user with the most consistent, platform-independent user interface there is."

By and large, installing intranets as a commercial business opportunity is just getting started in Japan. This is hardly surprising, given that the basic hardware components of the Internet/intranet -- PCs, servers, and networks -- have only recently begun to ship in Japan in the numbers required to create the necessary infrastructure.

Playing catch-up

According to market researcher IDC Japan, the estimated number of PCs installed in Japanese companies in 1995 was just over 9 million. This contrasts with 59 million in US corporations. And whereas 46% of the American labor force used a PC in 1995, the corresponding penetration rate for Japan was only 14%. Similar disparities exist in the use of LANs (local area networks).

"At the moment, the situation is quite different from the US market," says research director Junichi Saeki of IDC Japan. "It was only last year [that Japanese corporations] realized the effectiveness of the PC, and most PCs are still stand-alone. Even document sharing is still to come."

Saeki adds, however, that exceptions can be found, particularly in large engineering companies, automobile manufacturers like Toyota and Nissan, and steel companies such as Nippon Steel. "These companies are using networks to strengthen their relations with outside suppliers, so intranets will gradually migrate down to smaller companies."

Fujitsu among the leaders

It should come as no surprise that large computer vendors have taken the lead in implementing intranets for their own use. Fujitsu claims to be one of the first companies in the world to put one to work. In 1993, when the company was planning to upgrade a mainframe-based information-sharing network used by its engineers, it learned of World Wide Web experiments being conducted in Europe, and the Mosaic software created for browsing the Web at the University of Illinois.

After investigating the possibilities, Fujitsu liked what it saw and decided to adopt the technologies. Fujitsu adapted the technologies to work with Japan's double-byte kanji characters and its mainframes, and it became the first company outside the US to license Mosaic. As a result, Fujitsu engineers began browsing text files, databases, and multimedia information on a TCP/IP-enabled system, the company's first intranet.

The move soon proved its worth, according to Fujitsu, by slashing the need for laying down costly paper trails, and has resulted in savings of JPY300 million per year. Moreover, because engineers can now better access each other's work, ideas, and experience, they are able to make use of existing job proposals and system designs when dealing with new customers. This capability is bringing in additional estimated revenues of about JPY200 million.

"The mainframe is now open to ordinary users via Internet technology," says Tsuneo Kawatsuma, a manager in Fujitsu's open systems software engineering department. He adds that Fujitsu is releasing several commercial software packages that will allow companies with mainframes to build their own intranet front-ends.

But while Kawatsuma estimates there are now hundreds of Web servers operating in Fujitsu, he emphasizes, "The Internet is not almighty yet. It's good for database inquiries and browsing information, but the order-entry side is not there yet. This is why we continue to use a combination of mainframes, client/server, and intranets."

NEC implements intranets

NEC is also implementing intranets for a wide range of users. Hiroshi Funamo, a senior manager in NEC's Internet engineering department, estimates there were over 350 general intranet servers in use within NEC in August. Major examples include an intranet database accessed by some 20,000 systems engineers and sales people to track the NEC products used by customers.

With some 188,000 employees in NEC worldwide, a number of disparate electronic mail systems have sprung up. NEC therefore has established GMS Mailer, an intranet gateway that allows the systems to communicate with each other, both internally and externally over the Net. Then there is UNIPAT, a patent database for the convenience of engineers who need to draw up new patents as well as find out what technologies have already been patented.

Funamo's Internet department is a part of the C&C Systems group covering computers and communications. He notes that C&C executives and senior managers like himself now use the corporate intranet for keeping each other up-to-date. "We used to meet regularly every other month," observes Funamo. "Now this information is put on the intranet, and we meet maybe once a year."

Profiting from experience

Just how well the computer vendors are currently able to parlay their internal experience into outside business is not clear. Requests for hard figures and customer names are rarely met, which suggests the intranet business is still in its early days.

"Systems integrators don't necessarily have the capability to create sophisticated intranets yet," says IDC Japan's Saeki. "They not only need networking and TCP/IP systems experience, but also knowledge of the individual businesses and industries their customers are in." And though the major computer vendors are familiar with their customers' businesses, "their experience is mainly based on the mainframe, which may not suit everyone's needs," points out Saeki.

Taisei's enterprise-wide intranets

One non-computer company that is ahead in exploiting intranet technology is Taisei Corporation, a JPY2 trillion construction giant based in Tokyo. According to Kazumi Ogawa, section manager of the company's information systems department, Taisei operates three enterprise-wide intranets, with another under construction and plans for more.

Taisei's New Dreams intranet is an image database for storing graphical renditions of buildings, constructions, and designs. Previously, these were stored on a stand-alone computer located in the company's Shinjuku headquarters. "We added a Web interface to the Oracle database, and now employees from Hokkaido to Kyushu can, with a password, access it through the company's own network," says Ogawa.

The client machines are Windows 95 PCs and Apple Macintoshes using Netscape browsers. "Now it's easy for staff to cut and paste the images into customer presentations," explains Ogawa, whereas before, "only people in headquarters could access the images.

Taisei is also planning to add Internet interfaces to such "housekeeping" systems as accounting and human resources. "The processing will remain on mainframes, but we want to change the character-based interfaces to Internet interfaces," says Ogawa. Some pilot projects got underway in mid-September.

Ogawa's colleague in information systems, assistant manager Koichi Suwa, explains how Taisei became an early adapter of intranets. "The head of information systems formed a small New Technologies group in the summer of 1993. When I asked him what we should study, he said, 'Just play with what interests you.' So I played with the Internet." Later, when Suwa and others made suggestions about using the Internet and intranets, the management was receptive.

The long road ahead

While exceptions like Taisei exist, most companies appear to still be in the experimental stage. According to an estimate by Microsoft Japan, there were approximately 3,000 intranet servers in operation in Japan at the end of August, but most were for evaluation purposes. "In contrast, we estimate there are over 30,000 Internet servers in Japan," says James LaLonde, industry marketing manager at Microsoft Japan. "In the US, the intranet server count has already surpassed the Internet server count. We expect the same thing to happen in Japan over the next 24 months."

Netscape's Jim Clark has estimated that Japan is 6 to 12 months behind the US in the deployment of intranets. "But," he adds, "there's a high level of interest in Japan, so the rate at which [intranets] will be adopted will be as fast as the US."

Or maybe even faster. As Steve Furney-Howe at Nihon Sun notes, "Relative to the US, there is less legacy installed -- a smaller base of diverse network systems -- in Japan." This may be to Japan's advantage, he suggests, since "many companies are considering getting networked the 'right way' the first time, by implementing an intranet approach."