IT Solutions Market for Local Governments in Japan: Key Research Findings 2019

Yano Research Institute (the President, Takashi Mizukoshi) has conducted a survey on the domestic market of IT solutions for governments and has found out the market outline, transition of market size, the trends of cloud business at local governments, and the trends of leading vendors.

Transition and Forecast of Market Size regarding IT Solutions for Local Governments
Transition and Forecast of Market Size regarding IT Solutions for Local Governments

Market Overview

The domestic market size regarding IT solutions for governments for FY2018 (based on the sales at businesses) have decreased by 0.5% on a year-to-year basis to end up with 638,500 million yen. 

The main business for FY2018 has shifted to the scheduled updating of the current systems from the large IT solution demands including launching of My Number systems as well as public accounting systems, and strengthening of the networks and security cloud, which used to drive the entire market for the past few years. Therefore, the main profit making items for IT vendors have shifted to updating of the clients’ mission-critical or in-house communication systems that were suspended for a while, and to repairing of the systems according to the changes in laws and regulations. As some local governments have planned to adopt the cloud solutions for government promoted by Ministry of Public Management, Home Affairs Posts and Telecommunications, the actual implementation is likely to be during the period between FY2021 and FY2023.

When glanced at the market, the government systems have started using AI and RPA within the past one or two years, in addition to expanding use of the cloud solutions. Although almost all the cases of adoption are currently remained at PoC stages, some have at last progressed for considering implementation after the efficiency proven. According to the questionnaire to local governments that was conducted at the same time as the adoption, the rate of adopting RPA at the time accounted for only a few percent.

Noteworthy Topics

As a part of reconstructing the economy, the government has aimed at suppressing administrative costs as well as streamlining administrative systems of central ministries and agencies, local governments and extra governmental organizations. Adoption of the cloud solutions for local governments has also been planned as a part of the measures, which is expected to reduce the costs at the organizations. The IT systems for the government, including local governments, are to be chosen based on the “Cloud by Default” principle, meaning to prioritize the cloud services. This policy is the very reason of the expanding use of the cloud services at local governments.

Currently, the cloud services for local governments have been introduced mainly at small governments for less than 20,000 people. The cloud services adopted at middle-size governments for the districts with the population 200 thousand or more are limited. Increased use of the cloud services for local governments has increased acceptance of BPO services at such local governments. It has become general to use printing-peripheral task services in combination with the cloud services. Thus, BPO services have become remarkably demanded, as labor shortage becoming severer at administrative institutions and as the revised Labor Contracts Act being enforced.

Research Outline

1.Research Period: November 2018 to May 2019
2.Research Object: Providers and vendors of IT solutions, local governments, central government agencies, and independent administrative institutions
3.Research Methogology: Face-to-face interviews by the expert researchers, and surveys via telephone

IT Solutions Market for Local Governments

IT solutions for local governments in this research indicate those IT systems introduced in the local governments, central government agencies, and independent administrative institutions.  The market size includes the fees for purchasing or leasing hardware & software, maintenance & support fees, connection fees, and dispatching of personnel. The following expense items of the IT solutions for local governments such as the fees for equipment purchasing, for commissions, for safety measures, for various trainings, and for BPO services are also included, but no labor costs of government personnel are included.

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