Toward the Increased Competitiveness of Knowledge-Based Industries: Using the Information Services Industry as a Model

ABSTRACT

The competitiveness of Japan's manufacturing industry has weakened, and its growth potential is limited.On the other hand, the IT service industry, with its high growth potential, is one of the knowledge based industries and, as such, is expected to become a sunrise industry.In fact, many companies have begun entering the IT service industry.

To accelerate the growth of the IT service industry in Japan, users and suppliers must carry out the following. Users must nominate full-time chief information officers to analyze and verify investment performance so that stable demand can be created.As for suppliers, it can be pointed out that Japanese software Manufacturers have demonstrated their competitive edge in designing products for specific users, products that interface with business operation or equipment, and products that have entertainment value.Such products include custom-made software, built-in software, computer/video games, etc.However, Japan's software industry needs to shift its main product from custom-made software to packaged software or IT-consulting, areas in which the industry is comparatively weak.

To obtain a competitive edge in the area of packaged software, English-language ability and R&D are prerequisites.Although Japanese companies conduct R&D, development is preferred to research.The Japanese government and universities are reluctant to conduct basic research activities.Japanese software manufacturers are less active in R&D than their foreign counterparts.Leading companies around the world have far outperformed their Japanese competitors in terms of technology and market share.Therefore, it is quite essential for the Japanese government and universities to support software manufacturers in basic research activities and, at the same time, Japanese major software manufactures should be more active in the development of technology.On the other hand, many small software companies with twenty or fewer employees are strongly committed to R&D and have developed their own products, thereby increasing productivity.Major software manufacturers should not limit themselves to only the products that they themselves develop but should take advantage of the development capabilities of these small companies and their products.

To successfully shift to IT-related services, such as IT-consulting, it is more important for software manufacturers to let employees share and utilize knowledge through in-house education than to activate R&D activities.However, the ratio of education cost to sales in Japanese companies is far lower than that in leading companies around the world.Therefore, it is necessary to increase the amount of investment in education, establish target levels in education, clarify compensation for targets achieved, improve the capabilities of individuals, and increase productivity.As a result, Japan's IT service industry will be able to increase wages to a level that better suits the economic situation in the country.