IT market rides Asia boom

Before he made his first sale, Japanese entrepreneur Osamu Todaka spent years touting the virtues of Lotus Development's Notes groupware to systems engineers and chief executives at his country's largest corporations.

"Every night--five days a week--we were conducting demonstrations," said Todaka, president of systems integration firm Computer Intelligent Systems.

Last year, his hard work finally paid off. Lotus increased the number of installed Notes seats in Japan by 500 percent--one million seats in all--with Todaka's company installing one in every five. Japan sales accounted for slightly less than a quarter of Notes' worldwide market expansion. In fact, for the first time, sales in Asia last year came in higher for Lotus than Europe.

Todaka's success story is but one in an increasingly wired Asia, where the appetite for information technology has proven nearly insatiable. The region's demand for computer and telecommunications equipment and service beckons to developers; the market is now growing annually at about double Europe's pace and slightly faster than even the U.S. market.

Annual spending in the Asia-Pacific region increased by 16 percent in 1996 and will rise by about the same percentage again this year, according to International Data Corporation. The market research firm also estimates that Asia spent $143 billion on information technology last year out of a worldwide total of $610 billion.

Some of the high-tech world's biggest companies have responded by setting up operations and establishing a stronger market presence in the region. Among them are Lotus's parent IBM and Microsoft, which cut a deal last month with a Chinese Internet service provider. Other companies with plans to address the growing Asian demand include virus fighter McAfee, which has announced plans to acquire the Japanese antivirus maker Jade KK in a $17 million stock swap, and Digital, which will launch a clone of its AltaVista search engine in Malaysia.

Japan dominates the Asian marketplace, spending $97 billion on information technology purchases last year, according to IDC. About a tenth of that figure went for packaged software as many corporations moved to phase out old mainframe systems in favor of desktop PCs linked by a network, IDC analyst Donald Bellomy said. He estimates that this year shrink-wrapped software sales will grow to $11.5 billion.

It is a transformation that Todaka has experienced first hand. The former Sony executive decided that Notes' collaborative computing approach would mesh with Japan's team-oriented work culture during a visit to Lotus's headquarters in 1991. That was two years before the first Japanese version came onto the market.

Todaka began showing it to systems engineers that very year while he kept his fledgling company in the black by selling Lotus 1-2-3 spreadsheet software and performing Unix system integration.

By the time the Japanese version of Notes rolled out, Todaka said he noticed changes in the Japanese business climate. The economy had fallen on hard times and top executives were looking for ways to freeze hiring and keep their operations running with fewer employees. Mainframe sales were declining and chief executives, board chairmen, and founders of some of Japan's largest industrial concerns started showing up at the nightly demos, he said.

"They did not understand the technology, but they understood the tool's collaborative potential," said Todaka, who sold the first 50,000-seat license to the chairman of Orix, a large Japanese leasing company, in 1994.

That year only 70,000 Notes seats were sold in all of Japan, according to Lotus. Sales began to pick up in 1995, rising to 150,000 seats. Then the number skyrocketed to a million seats last year, when CIS captured 20 percent of the market with its CIS Notes Application Package, according to Lotus's Japan office.

Todaka also plans to follow Lotus's lead and turn his focus to the Domino Web server software. The software, which brings Notes to the Web and can be used for an array of other online activities, has received good marks from industry analysts since it was introduced late last year.

Domino is just starting to play to the Asian market, where the concept of the corporate intranet is expected to take hold this year.

To handle growing demand in the region, Lotus has also increased its presence. The company, which did not even have a Japanese-language version of Notes until 1993, now has versions available in Chinese, Korean, and Thai. In addition, the company said it has signed up nearly 1,400 Japanese business partners and 600 additional partners in other Asian countries.

"At the end of last year we were doing business in different market segments," Todaka said. "By this time next year we are all going to be on the same Internet battle field. It is going to be extremely competitive."