Sweet On U.S. Software

With the Japanese stock market stuck in the doldrums, hard-pressed brokerages are looking for ways to trim costs. To streamline its trading, Osaka-based Ichiyoshi Securities Co. in early May joined a new computer network that will link it with 17 other small brokers. By yearend, 1,400 personal computers will be tied together in a system that will let traders write E-mail, read news, and trade shares on Japanese exchanges, all at the click of a mouse. To make it all work, Ichiyoshi bought American: Windows NT software from Microsoft Corp.

As leaders in such software, U.S. suppliers can expect many more such sales. In a curious twist, their major competition in Japan is not the Japanese--it's each other. But there's plenty for everyone. With the Japanese economy sputtering along, not just brokers but all sorts of companies are trying to improve white-collar efficiency by snapping up PCs and hooking them together online. Demand for network software and related applications is exploding, to an estimated $1.2 billion this year (chart). And "it's overwhelmingly U.S.-made," says Akihiko Narita, head of Japanese operations for Symantec Corp., a maker of business software in Cupertino, Calif.

COMING ON STRONG. Japan's software gap is most glaring in the core operating systems that run networks. In that niche, Novell Inc., based in Provo, Utah, now holds an eye-popping 60% market share, with the rest held largely by Microsoft, IBM, and Oracle.

Meantime, both Microsoft and IBM are rolling out powerful new systems in Japan. Microsoft, because of the popularity of Windows for stand-alone desktop machines, is coming on strong with its network version, Windows NT. "The Japanese market is very important for us, because it's young and growing," says Richard Tong, who heads up Microsoft's global marketing blitz for Windows NT. No kidding. PC sales in Japan are growing at a 35% annual clip, but so far only 21% of corporate PCs are on a network, compared with 64% in the U.S., says Dataquest.

Given the growth potential, Japanese software houses are scrambling to catch up. For example, Nomura Research Institute, the research arm of Nomura Securities Co., customized Windows NT for Ichiyoshi's new 18-broker trading scheme.

But the Japanese computer industry is still playing catch-up when it comes to software. Computer makers dug themselves into a deep hole in the 1980s by clinging to proprietary systems when customers were clamoring for more flexible "open" solutions. That meant each was busy duplicating basic software functions for its own machines.

Just ask Kazuya Watanabe. Before taking over as president of Novell Japan, Watanabe guided NEC Corp. to dominance in Japan's PC market and did a 10-year stint as head of the powerful Japan Electronics Industry Development Assn. He fought hard for an industry software standard but got nowhere. "At meetings, everyone would say: `Yes, yes, let's have open systems.' But then they would go back to their companies and get severely criticized for betraying the company architecture," says Watanabe. Tired of the bickering, Watanabe defected to Novell Japan Ltd. in 1990, where he has made NetWare almost a de facto standard in Japan. His goal is to post sales of $150 million in 1995, up 65% from last year.

BIGGER DEAL. Japanese companies are in a buying mood. Tokyo-based Asahi Kogyo, which installs about $1.2 billion a year in air-conditioning for office buildings, recently slashed costs by getting nationwide purchasing managers to share data on a network using NetWare. In an even bigger deal, IBM Japan Ltd. sold Dai-Ichi Mutual Life Insurance 9,000 PCs that talk to each other via IBM's LAN Server software. And Tomohiko Suetsugu, an IBM network software manager, says IBM has started supplying PCs to Japan's National Tax Administration under an agreement expected to result in the sale of 20,000 to 30,000 PCs, all connected by LAN Server.

Americans are poised to make a killing in network hardware, too. Cisco Systems Inc. already sells 26% of Japan's routers. And Japan's $200 million market for network "hubs" is dominated by Bay Systems in Santa Clara, Calif., and Yokogawa-Hewlett-Packard Ltd.

It will be difficult for the Japanese to overcome the U.S. lead. "Microsoft and Novell are clearly the guys to beat, and I don't see much chance for anyone else," says Fred Ebrahimi, chief executive of Denver-based Quark Inc., a software manufacturer. He thinks it could be a decade before the Japanese make serious inroads. Meantime, software is one of the few markets in Japan where Americans are in the driver's seat.

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