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Why Japan matters: iPad mania, cloud computing and social intelligence

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By Marc Benioff

Editor's note: Marc Benioff, chairman and CEO of salesforce.com, really loves Japan. And if you are a startup founder or tech executive, he thinks you should too. He explains why in this guest post, culled from observations from his most recent visit.

Thousands of people lined up last week to buy iPads. And, if you didn’t notice them, it’s because they were in Tokyo.

I’ve been living in Japan for the past three weeks and couldn’t miss the madness around the introduction of the iPad here. I couldn’t believe the demand for this new “magical” computer. After all, this is the country that developed and built some of the world’s most popular PCs—and now the iPad, which was designed somewhere else, is revered. It’s bowed to. (Reportedly, about half of Japanese business and technology magazines are featuring the iPad on their covers.) I expect that out of the 10 million iPads sold this year, at least 500,000 to one million will be sold in Japan.

Something else amazing in Apple-mania happened last week. Apple’s market cap passed Microsoft. I suggested in a post last April, “The end of Microsoft. A door opens to a new cloud”, that this seminal event was about to happen. Steve Jobs described it as being “Surreal”. I agree. It is surreal—both unbelievable and fantastic. This is a milestone that signifies a dramatic change of computing: Windows is on the decline, and new technologies such as iPads and iPhones, Android and Google Search, and cloud computing are on the way up.

I have to admit, I love Japan. I love the people, the culture, the language, the architecture, the food—everything. I love walking through the temples and gardens in Kyoto. And, I love the philosophy of “zen.” I love working in Tokyo, which runs at a frenetic charge that’s even higher than New York City.

The reason I’ve been spending so much time in Japan is because it has become salesforce.com’s second largest market. We’ve found that the Japanese love cloud computing because it gives them great software that is eco-friendly, equal for all businesses, and upgrade-free. When I was at Oracle, Japanese customers were always waiting for our special “J” products (the port of our English versions), or the bug fix of a “J” port. It was often a long and painful wait. Cloud Computing solves all of these problems, and Japanese customers receive new software on day one, as well as bug fixes as they happen. Instant gratification.

One of the things that captivated my attention in Japan was how utterly swept the country is with social networking—there is a Japanese Facebook Imperative underway. Japan is already one of Twitter’s largest markets, and local social vendors like Mixi are pervasive. Japanese customers have easily and rapidly adopted social networking as it is highly compatible with their community-based culture. Japan, more than any other country, is ready to accelerate social networking with mobile. The wide penetration of 3G will be an engine for this movement. In fact, Japan has the highest percentage market penetration of 3G of any country, according to InfoCom. The combination of dominant social market share and broadband wireless is a powerful catalyst for Japan’s IT industry.

In my own personal experience here, I’ve seen this willingness to embrace social communications firsthand. Over the past few weeks of demonstrating Salesforce Chatter, salesforce.com’s new enterprise social networking service, I was amazed to find that Japanese customers made unusually quick decisions to pursue it. Customers in other parts of the world (including the U.S.) have required a great deal of testing and evaluation. But in Japan there was an innate understanding of our app to be a Twitter or Mixi for the enterprise, which translated seamlessly—and drove adoption. This experience inspired me to think about what I call “Social Intelligence,” an idea I believe will launch us past business intelligence as the next major theme in enterprise computing.

When you get an iPad, the new iPhone 4, or iPod you can’t miss seeing “designed by Apple in California”—the tagline that has generated heat from critics who get upset because the device is assembled in China. But what most people don’t recognize is that the parts are made all over the world, with some of the most important components being produced in Japan, Korea, and Taiwan. Take the iPod Nano. The flash memory is made by Toshiba, the Li-Ion battery is made by Sanyo and Sony, and the color LCD is made by Sharp, Toshiba, and Matsushita—making the total of the Japanese share in terms of cost 81%.

The reality is the iPod is made possible by some of the most important technology in the world—and a lot of it is from Japan. Even 10% of the iPad comes from Japan (the rest is made by Taiwanese and Korean manufacturers). Japan is one of the countries doing some of the most exciting research and development in the most complex components, which is what drives the most compelling products.

While in Japan, I learned that Japan’s political and technology leaders recognize that embracing new technology and developing fundamental infrastructure are at the core of this country. Anyone who has experienced the bullet train, driven on Japan’s highways, or made a cell phone call in Tokyo, knows Japan fully commits to these two tenets. Cloud computing is viewed as a critical next step for Japan, and it is the fastest growing part of Japan’s IT industry. Japan is always focused on getting the next big thing right. (And it usually does. I think the energy around the iPad last week demonstrates that they’re ready for Cloud 2—the next transformation in computing being defined by cloud + social + iPad.

One of the greatest surprises during my trip was that then-Prime Minister Hatoyama requested a meeting with me. I spent almost an hour with him demonstrating the power of cloud computing in Japan. Then he had a final meeting with the Chinese president. And, then he resigned. Why would he care so much about the cloud to spend some of his final moments in office with me? I think he realized that he needed to send a clear signal that this new technology is pivotal to the future of Japan.

Right before I left Tokyo for home, I met with John Roos, the United States ambassador to Japan. John is the former CEO of Wilson Sonsini, and is a Bay Area native. Interestingly, he had never been to Japan before being nominated to his position. He asked me why more entrepreneurs in the U.S. weren’t focused on the amazing markets in Japan. I told him that although the Japanese IT market is the second largest in the world, it’s notoriously difficult for many Americans to navigate. I am grateful to my Japan guru, Larry Ellison, with whom I was fortunate enough to experience many trips to this country while I worked at Oracle for 13 years. If it wasn’t for that direct education, I don’t think salesforce.com would be as successful as it is here.

Japan is accessible through several non-stop flights from San Francisco every day. And while the Japanese market and Japanese customers wait for the arrival of the next great thing, most entrepreneurs, and even VC firms, focus instead on China and India. I have never understood why, as China and India represent a market that is an order of magnitude smaller than Japan when it comes to key technologies, like software. Sure, India and China are fast-growing markets, but the current buyers are in Japan. The way I see it: If you are overlooking Japan, you might as well overlook the West Coast of the U.S. The Japanese city of Osaka has a bigger economy than the state of California.

As the second largest IT market outside of the U.S., the reality is Japan still matters. The world is changing profoundly (just look at my favorite Apple vs Microsoft market cap chart), but there are some traditional and established entities that retain a significant influence. Entrepreneurs should take note that 85% of all enterprise software is still essentially bought in three core markets: the U.S., Japan, and the UK. Ignoring Japan means ignoring one of the most important opportunities. And, if you need a hand in this market, come with me on my next trip. I can’t wait to get back.

© Japan Today

©2020 GPlusMedia Inc.

22 Comments
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You lost me at "I've been living in Japan for the past three weeks."

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The article certainly has a lot of positive things to say about Japan. I just have to sigh when I see all of the other copy wasted on name-dropping and iPad salivation.

I will just let the rest go, but "cloud computing is PIVOTAL to the future of Japan" really rather exaggerates the importance of an American fad, doesn't it? Really. The author wants to say that Japan's future would be lost if it were not for cloud computing. That is some pretty good hyperbole, especially because, Lord knows, Japan has had plenty of "thin client" revolutions before that have failed, just not this decade. People seem pretty satisfied with what they have.

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Japan though the eyes of a noobie :)

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3 weeks only? Must be a genious or something

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Cloud 2—the next transformation in computing being defined by cloud + social + iPad.

Apple does not understand the Internet at all. That is why you need a personal computer and iTunes to get the thing running instead of connecting it directly to the cloud. Hence the argument is bullsh..

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Take the iPod Nano. The flash memory is made by Toshiba, the Li-Ion battery is made by Sanyo and Sony, and the color LCD is made by Sharp, Toshiba, and Matsushita—making the total of the Japanese share in terms of cost 81%.

Take the new iPhone 4 and nearly all parts are made by Korean and Chinese competitors ... which was said to be "a sign for the decline of Japanese technology". So, who is right ??

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I am grateful to my Japan guru, Larry Ellison, with whom I was fortunate enough to experience many trips to this country while I worked at Oracle for 13 years.

Japan guru? Some people just don't know when to stop selling bullsh...

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As the second largest IT market outside of the U.S., the reality is Japan still matters.

Who said it didn't? Is that what people in salesforce.com think? Really!?

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And, if you need a hand in this market, come with me on my next trip.

OK, how can I contact you?

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Doesn't he know that companies here pay people to line up for products so that they look popular?

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The ipad sold out in Tokyo because apple wanted it to look that way, in Osaka you can freely buy it because apple didn't pay people to stand in line, a common practice in Japan.

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Does anyone else see the US actually "lagging" Japan in a lot of ways? I used to go back and look at these big goofy-looking phones they use and laugh. G-whatever, it did not make a difference. It was like Americans used to make fun of Soviets for making big clumsy things.

The last time I went back and saw the latest gizmos, it stunned me that the average Tokyo high school girl had better kit. They can use them, too.

So when I read articles like this telling people how Japan is going be like this and that, I know I am reading some noob-speak.

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Interesting perspective, at stark odds to an ongoing discussion on the Business in Japan group on Linked-In regarding the so-called Galapagos effect. The Linked In group are mostly old Japan hands with business experience and have been here longer than three weeks. There is a sense of exasperation amongst a lot of the comments there.

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America can't make smartphones much smaller because Americans like to watch videos, surf the internet, run whatever apps or games they fancy, etc. with it. They want large enough screens with HD. There's no point in getting that high quality if the screen is too small.

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Ha ha ha, have to laugh at this guy, 3 weeks? Yeah, wonderland is all sparkling & shiny. Once the wonderland phase ends this kid is off the block and back in the US in no time flat.

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Klien2 I couldn't disagree more with your comment. When I bought my first MP3 player in 1999, no one at my gym in tokyo had ever seen one before.

Nearly all the IT innovations start in the U.S., from wifi, to e-commerce, to smartphones, to MP3 players, to the frickin Internet itself.

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Come on Marc, are you getting old? Where are your visions? Still ranting about Microsoft? The outdated ipod nano as an example for Japanese technological innovation?

When I was at Oracle, Japanese customers were always waiting for our special “J” products (the port of our English versions), or the bug fix of a “J” port. It was often a long and painful wait. Cloud Computing solves all of these problems, and Japanese customers receive new software on day one, as well as bug fixes as they happen.

Anyone else who gets lost on this reasoning?

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America can't make smartphones much smaller because Americans like to watch videos, surf the internet, run whatever apps or games they fancy, etc. with it. They want large enough screens with HD. There's no point in getting that high quality if the screen is too small.

Without those features, you no longer have a 'smartphone' you have what is colloquially known as a 'dumbphone'. So you're right in that America can't make a 'smartphone' with a 2 inch screen. The Japanese can't do it either; just because a phone can access the internet does not make it a 'smartphone'.

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Yo Marc, Apple fanboi much?

Imo, Microsoft has a better infrastructure in place to go cloud. Google would place second cause it's only got phones and soon maybe a tablet, while MS on the other hand has the Zune, Xbox, phones by a hundred companies, Hotmail(if you still living in the 90's), MSN, Live.com. If only MS figures a way to tie it all in. Or even Sony which has a whole bunch of devices they need to tie into a Sonynet of some kind. But then their UI sucks. Apple is a closed environment, a blessing for some and a curse onto others, then again there's jailbreaking. But as for Apple ushering in the era of cloud computing, yeah, sure, get rid of the "Connect to iTunes" for all the iStuff, make mobileme free or cheap, it won't get far. Apple would have to play catch up to Google and MS in this department. However, they are building some huge server complex in NC or somewhere, so maybe they do have something up their sleeve. Plus they the Steve Jobs and he's been known to do sh!t like raise the dead ie Apple Inc. since '99 or so. We're a Mac household, but I'm putting off getting an iPad till g2, possibly with a front facing camera(don't really need it), Retina technology, longer battery life and double the memory for the same price. Oh and maybe true multitasking.

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The Japanese city of Osaka has a bigger economy than the state of California.

That would be interesting if it were true. However, the GDP of the Osaka-Kobe area is reported as being equivalent to $341 billion, compared with the GDP of California which is reported as being $1.8 trillion.

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3 weeks? In one year he will be here with us in JT, spitting venom over J-things. Wait and see.

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It's true that many other countries really churn out the technology required for today's devices, but no country sells it better than the US. It's a shame, really. If only Japan could get on top of marketing their tech like the people outside the country want.

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