No.3188
Local Government Solutions Market in Japan: Key Research Findings 2023
Local Government Solutions for FY2022 Forecasted to Drop by 3.5% on Year-on-Year Basis to 700,250 Million Yen as Repercussions of Pandemic Demand
Yano Research Institute (the President, Takashi Mizukoshi) has conducted a survey on the domestic local government solutions market, and found out the market overview, future perspectives, and the trends of service providers.
Market Overview
The size of local government solutions market in FY2021 is estimated to have grown by 7.2% from the previous fiscal year to 725,630 million yen. In addition to the considerable growth of BPO services for local governments associated with the spread of the novel coronavirus (including printing and fulfillment of vaccination vouchers, services regarding COVID-19 consultation center, call center for vaccine reservation, and backyard operation such as inputting vaccine recipient data onto a server, etc.), the expansion attributes to the increase of information-sharing systems on COVID-19. The demand increase started in FY2020, and it multiplied markedly in FY2021 to the level that can be described as special demand.
Meanwhile, IT vendors have been developing systems that comply with the standard specifications for mission-critical systems (that relates to Basic Resident Registration Network System) announced by the central government in August 2022, which is a significant event for the local government solutions market. However, as of January 2023, it has not been affecting the market size.
Noteworthy Topics
Attention Increases on Digital Transformation (DX) of Municipal Governments & “Vision for a Digital Garden City Nation”
For the purpose of reducing the total cost of system development, the central government has decided to complete standardization of mission critical systems for municipal governments by the end of FY2025, which will then be offered by the Digital Agency as government cloud. For this reason, solution providers are exploring business opportunities in the field that is poised to grow in FY2026 and beyond.
The target domain is the utilization of digital technology to solve region-specific issues and/or increase attractiveness of the region, which is the digital transformation of local governments in the broad sense. The “Vision for a Digital Garden City Nation” advocated by the Kishida administration is garnering attention in particular. Accelerating the online shift of administrative procedures, the concept of "Digital Garden City Nation" succeeds the conventional smart city initiatives, which promotes digitalization in a wide range of areas, including healthcare, mobility, tourism, and finance. The digital transformation of local governments is expected to be invigorated further in FY2023.
With the new attempts, the local government solutions market is projected to change drastically in the future.
Future Outlook
The demand related to COVID-19 anticipates notable decline in FY2022, shrinking the market almost to the pre-pandemic level. The local government solutions market is forecasted to drop by 3.5% from the previous fiscal year to 700,250 million yen.
The standardization of mission critical systems coupled with the migration to government cloud will have a significant impact on the market from FY 2023. It will be a booster factor for the market growth up to FY2025.
Nonetheless, the market is expected to shrink in FY2026 when the standardization and migration are fully implemented, as it will lead to a slowdown in sales of mission critical system and cloud businesses at IT vendors. The market for FY2026 is forecasted to decrease sharply by 34.3% from the preceding fiscal year to 653,100 million yen. The local government solutions market is about to reach a major turning point.
Research Outline
2.Research Object： Vendors providing IT solutions for municipal governments and municipal governments
3.Research Methogology： Face-to-face interviews by our expert researchers (including online interviews) and literature research
What is the Local Government Solutions Market?
Local government solutions in this research indicate IT systems deployed by municipal governments. The market size includes the fee for purchasing hardware and software, rental/lease fee, maintenance/service support fee, network access fee, engineer dispatch fee, and BPO service fee.
Defining by the breakdown of the expenditure and spending at local authorities, the market includes the cost of purchasing hardware, IT system consignment, various types of training, and BPO service. Personnel expenses of local government officials, government subsidies, and the cost of government cloud paid by the central government are not included in the market size.
＜Products and Services in the Market＞
Mission-critical solutions for local governments (that relates to Basic Resident Registration Network System), solution for data used internally, field solution, solutions related to Digital Transformation (DX) of local governments, etc.
Published Report
Contact Us
The copyright and all other rights pertaining to this report belong to Yano Research Institute.
Please contact our PR team when quoting the report contents for the purpose other than media coverage.
Depending on the purpose of using our report, we may ask you to present your sentences for confirmation beforehand.