Japan picks a domestic firm for government cloud service: Will it work?

TOKYO, Nov. 29, 2023—Taro Kono, the head of Japan’s Digital Agency who’s well-known for his ethnocentric policy decisions, Nov. 28 announced that his agency had chosen Sakura International Inc., a publicly traded Japanese infotech company for ultimately running the entire government cloud service. It’s the first that a domestic IT firm won that service that had been dominated by Amazon and other U.S. services. Can Sakura (cherry) blossom to attract Japanese municipalities that favor U.S. services to follow? The jury is out.

Sakura was picked on condition that it clears all requirements the agency demands, notably cloud service security for data storage, Kono told a news conference. To date, Amazon has been dominating Japanese government and other public-sector cloud services, chased after by Google, Microsoft and Oracle as distant second and lower runners.

That Sakura was picked as a government cloud service provider doesn’t mean that it will be given the power to offer all governmental and public-sector cloud services as municipalities and their IT service caretakers, such as NEC, Fujitsu and NTT Data, are using Amazon and other American cloud services. So in order for Sakura’s cloud service to be selected, hard negotiations and attention-to-detail technical issues need to be cleared among those companies, municipalities and Sakura.

Those Japanese IT services already are predominantly using American cloud services for superior data storage and security services.

Japan Fair Trade Commission research shows that Amazon commands nearly half of Japan’s cloud services through those Japanese IT firms. NEC, Fujitsu and Hitachi and their affiliates are offering government cloud services with the Amazon cloud, the trend that’s gaining impetus in recent years as municipalities seek to reinforce network security and reduce IT-related costs.

Digital Agency data quoted by the Japanese media said that out of 176 government cloud services now being in operation, Amazon accounted for 162, Google 8, Oracle 3, and Microsoft 2.

Then why Taro Kono, a widely-known ethnocentric figure, picked Sakura? He has a delusion that Japan is at the top of the world for everything related to technology, from autos to IT. Koko also prizes himself as the smartest tech guy among Japanese politicians.

Granted, the path forward to change tack looks arduous to say the least: Roughly there are 20 public-sector areas in need of highly secure and reliable government cloud services, including National Health Insurance, public pension, resident registry, property, residential and other taxes.

Municipalities are responsible for safekeeping those data respectively, a highly costly and labor-intensive work. If they can be stored in a cloud service and configured to be shareable among different municipalities and services, cost reductions can be enormous, but it was precisely the reason why not a single Japanese IT failed to clear some 330 requirements sought in fiscal 2022 public tender and the reason why the 4 American firms were selected.

Rather ironically on Nov. 27, LY Corp., a Japanese-Korean IT and SNS provider, said more than 400,000 customer personal data were compromised, a development that is raising concerns about using a Japanese cloud service. LY is offering LINE social network service and Yahoo Japan portal site.

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