TT-602 -- Moving Office, Cloud Apps, and Saving Money, e-biz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, February 20, 2011, Issue No. 602


- What's New -- Saving money moving office and IT
- Short Takes -- Black Cherry -- for gout relief
- News -- Supreme Court: HK residency is not tax evasion
- Candidate Roundup/Vacancies
- Upcoming Events
- Corrections/Feedback
- News Credits

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Back in Terrie's Take 581 we discussed the fact that office
rents in Tokyo are dropping and now is probably the best
time to consider a move. In fact we decided to eat some of
our own dog food, and in January we moved our office to a
new location in Roppongi. This week's take is a discussion
of what happened, and what we learned about massively
reducing costs by moving both our office and our IT.

Back in 2007 a real estate fund bought the Minami-Aoyama
building we had been tenanted in for the previous 10 years.
We'd had a great relationship with the previous owners,
Odakyu, but obviously they knew nothing about the real
estate business and were eventually forced to sell off all
their real estate assets to the REIT. The new owners wasted
no time in jacking up the rent substantially. It wasn't a
pleasant experience, and it started with a very
heavy-looking fellow coming over and telling us flat out
that he was going to double our rent, or else.

Keeping in mind that this was 2007, we eventually agreed to
a gradual increase leading to a 50% rent rise over three
years. Of course the events of 2008 meant that we got stuck
in a "meat grinder" with the rent increasing each year,
even as our business suffered falls in revenue and
profits. Hoping that the long relationship meant something,
we went back to the landlord in March of last year, and asked
them to finally reduce the rent, especially given the fact
that other locations in the area were going for 30% less
and were in newer buildings. The response we got was that
it wouldn't be possible, and that as a fund it would be
preferable to have an empty building rather than suffer
reduced income on the P&L. This may seem counterintuitive,
but appears typical of how REITs think.

[Continued below...]

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[...Article continues]

So, we started looking for other buildings. What we learned
is that there are PLENTY of them available at competitive
prices. Whereas we were paying JPY19,000/tsubo (3.3 sq m.)
per month for a 30-year old building in a good address but
15 minutes walk from Omote Sando station in Tokyo, we
quickly found 10-year old and newer buildings just 5-8
minutes from the station could be had for
JPY13,000-JPY14,000/tsubo. Not only that but most landlords
are also willing to give at least 6 months free rent. Now
this doesn't mean completely free, because the monthly
payments for a leased space also include a management fee
of 20%-30%, called "kanri-hi". However, with some judicious
negotiation, even the kanri-hi can be dispensed with,
although typically at the expense of an increased rental

So on a 2-year lease with 25% of the period rent-free, our
effective rent dropped to about half of what we were
paying in the old building. That's a good start. But there
is more.

In moving, there are three major costs to consider before
looking at the cost savings at the other end:
1. Refurbishment of the building
2. Fit-out of the new premises and the actual move
3. IT costs

On the refurbishment side of things, we decided to
challenge the old landlord's practice of having the premises
refurbished by its own in-house construction company, and
we got outside quotes. Yes, the contract with the landlord
did indeed say that we would let them refurbish, but it
didn't say that we had to accept their pricing. Thus, armed
with two alternative quotes, the company had no option but
to drop their price.

On the fit-out of the new building, we were lucky enough to
find a company that not only does fit-outs but also
premises search. They were very proactive and found us the
office we wound up taking, even though we saw dozens from
other real estate agents. Because that company has both
business units involved, they were able to bring their
prices down substantially. If any readers are interested in
having the contact details for this company, please feel
free to contact us at Anyway, we
got two floors (130 tsubo) fitted with low-cost walls,
doors, and waiting areas for the equivalent of 3 months rent.
It's a good feeling to be in a nice clean space again and be
saving money, and it's great for staff morale.

On the IT costs side of things, the two big ticket items in
most office moves are the server room and maintaining
the servers. As many readers will surely know, servers are
not only very noisy, they also need to be kept cool, and
the best solution is to keep them in a sealed, air
conditioned room. This ties up real estate and necessitates
the use of an expensive add-on air conditioning system that
requires "special" ducts and cabling -- giving your
landlord's construction company an excuse to extract
another JPY3MM-JPY5MM out of you. Of course, this all has
to be removed at the end of the tenancy, which is another
million yen or so.

We decided to dispose almost all our servers, keeping just two
units out of a dozen or so, and put everything else "up in
the cloud". A local Tokyo data center, Advantage24 got our
front-end applications and development servers. However, for
the back office, the biggest concern was email, and in
choosing a cloud provider of email -- we needed a service that
is reliable, fast, compatible, and of course cheap.

Originally, we were going to choose Google's Gmail service,
which several related companies are using without hassle.
However, we discovered that Microsoft has a service called
Exchange Online and decided that with the investment already
made in training and data, that we should stick with Exchange
and Outlook. We then migrated about 80 email accounts and
all our data to the servers in Redmond 3 weeks before our
move, and upon moving to the new office, email was available
complete with all data and settings just a few minutes after
the Internet was connected to the premises. BTW, we used
KVH's well-priced service to connect us to our fixed-line
telecommunications -- much cheaper than NTT.

Our subsequent experience with Exchange Online is that since
the front end software resides on the PC, even though web
connections maybe a little congested/slow at certain times
of the day, you don't really notice it. This is the one big
difference from Gmail. Google really needs a widely
supported offline-capable front-end to Gmail.

The outstanding thing with the Exchange Online service is
the pricing. You can get full email, 25GB of storage per
user, automatic backups, and spam filtering for just JPY522
per person per month. With prices like this, it's really
compelling for almost any small to medium-sized company,
even if you're not moving.

For our case, a cost comparison for the move implications
on IT and Exchange Online looks like this:

* Server room fit-out, including air conditioner -- JPY4MM
=> JPY1.3MM/year (3 years amortization)
* Server upgrades, firewall, and software every 3 years --
JPY1.5MM => JPY500K/year
* 2 tsubo of rented space -- JPY360K/year
* Server administration, backups, repair work, etc. --
JPY3.6MM/year (about 50% of the engineer's time)

Total => JPY5.76MM per year approx.

Microsoft solution for 80 people, with 3 days/month
engineer remote support => JPY1.4MM/year, which is a 75%
cost reduction as well as requiring no upfront investment
and little or no high-skilled people to support the

Our conclusion is that deflation is not just happening in
the rental market. With the changes in cloud computing and
thanks to Google's challenging Microsoft in the
price/performance category and now Microsoft's very viable
response, the winners are small companies like our's who
can get high-quality solutions at greatly reduced prices.

...The information janitors/



Some readers have asked why we are running these health
products messages. Just more ads? Well, no. Actually, we use
these products ourselves, to stay competitive working and
playing in Tokyo and know them to be effective. It's our
way of sharing insider tips with our readers. Of course if
you quote our reference number at, then we'd be
happy about that as well...

=> 1. Black Cherry -- for gout relief

Gout is an extremely painful inflammation of the bone
joints, particularly in the big toes, hands, wrists, and
other similar areas. It is caused by high levels of uric
acid in the blood which have crystallized and found their
way into the joints. Also known in days gone by as the
"rich man's" disease, it appears to be aggravated by diet,
as well as through genetic predisposition. Once you have
gout, it's hard to get rid of, and options to treat it are
not so great, led by NSAIDS and steroids. One natural
remedy that offers many sufferers relief is Black
Cherry Fruit concentrate, which acts as an anti
inflammatory. Good stuff if you suffer from gout.

=> 2. Romantic dinner for two at 148 Hiroo

This week's MMC prize is a romantic dinner for two at the
wonderful Asian-Australian Fusion restaurant 148 Hiroo,
courtesy of 148 Hiroo.

Our congratulations to Francesco Libassi for winning a one
night stay for two, including breakfast, at the Mercure
Hotel Ginza Tokyo, courtesy of the Mercure Hotel Ginza

Becoming a Metropolis Member is as simple as going to the
website and signing up for the weekly newsletter. No other

* Many more prizes scheduled in coming weeks.
* No charge to enter.
* Simply receive the MMC newsletter to stay in the draw.


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+++ NEWS

- Cold weather causes electricity output spike
- EV trucks a fresh ministry project
- Whaling hunt cut short, activists win?
- Surprising tax ruling by Supreme Court
- India-Japan trade deal big for generic drugs

-> Cold weather causes electricity output spike

Just how cold was in it January? Well frigid enough that
power usage for households was up 3% for the year, to
83.84bn kw/hrs. Just in case you were wondering, data from
the nation's 10 power utilities also shows a recovery in
industrial power usage -- a good indicator of how factories
are doing. Apparently the top 7 industries increased power
consumption by 5.7% over last year, to 22.81bn kw/hrs.
(Source: TT commentary from, Feb 18, 2011)

-> EV trucks a fresh ministry project

The Transport Ministry is financing to the tune of JPY1bn a
project to develop commercially viable small and mid-sized
electric trucks. The project is said to include Mitsubishi
Fuso, Isuzu, Hino and UD Trucks (formerly Nissan Diesel).
The Nikkei says that trucks and buses account for 7% of
Japan's CO2 emissions and is one reason for the project,
however, the more likely reason is that Japan wants to make
sure it stays ahead of the game as short-haul trucking
firms start to realize that mass produced EVs are much more
economical to run. (Source: TT commentary from, Feb 18, 2011)

-> Whaling hunt cut short, activists win?

After Fisheries Minister announced that Japan was cutting
short the season's whaling hunt because of harassment by
the Sea Shepherd organization, officials were careful to
announce the following day that they would continue the
hunt again next year. To reinforce that line, the Foreign
Ministry called in Australia's Ambassador to make its
displeasure of the fact that Sea Shepherd is still allowed
to use Australian ports, known. ***Ed: While the bluster
may save some face, it appears that the government has
decided that the ill-will and cost of the whale hunt is no
longer worth it. Greenpeace Japan (not to be confused with
Sea Shepherd) speculated that the whaling program may be
ended, as possibly indicated by government changes of
personnel in various related governing bodies. That would
be good.** (Source: TT commentary from, Feb 18, 2011)

-> Surprising tax ruling by Supreme Court

Although one may imagine that the Tax Office never loses a
case, the Supreme Court has just handed down a very
surprising ruling that will have big implications in
international tax collection by Japan. The court said that
the son of money lender Takefuji, Toshiki Takei, was
wrongly billed JPY133bn for gift and penalty taxes on a
JPY160bn gift of shares made by his parents while he was
living in Hong Kong and was resident there. The Japanese
Tax Office says that he lived in Hong Kong purely to evade
tax, but the Supreme Court said that nonetheless since the
shares were in an off-shore company and he did live most of
the time in Hong Kong, it was illegal to levy Japanese
taxes on Takei. ***Ed: Interestingly, after being hit by
the Supreme Court in the opposite direction several years
ago for refunds on exorbitant interest rates, which caused
Takefuji to seek bankruptcy protection, the company is now
claiming refunds on taxes paid on the amounts that are
having to be refunded.** (Source: TT commentary from, Feb 19, 2011)

-> India-Japan trade deal big for generic drugs

The Comprehensive Economic Partnership Agreement (CEPA)
signed between Japan and India this last week looks like it
could open the spigot for low-cost Indian generic drugs to
flood the Japanese pharmaceuticals market. The current
4%-10% duty will drop to zero, and import and standards
compliance procedures will be significantly eased as well.
Japan's generics market is said to be worth around JPY600bn
and is rising. ***Ed: Of course this could only happen
after Daiichi Sankyo, Japan's third largest drug company,
had fully digested Ranbaxy, India's largest pharma firm and
a leading producer of generics. Tough for the little guys,
though.** (Source: TT commentary from, Feb 16,

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.


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No announcements this week. This weekend's
Entrepreneur Seminar was very well attended,
though. Over 23 people looking to start or
grow their companies came to the session. The
next seminar will be scheduled some time in



In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

*** No corrections/comments this week


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