Japan IT Services Market Size, Share & Trends Analysis Report By Approach, By Technology, By Deployment, By Enterprise Size, By End-use, By Type, By Application, And Segment Forecasts, 2024 - 2030

Market Size & Trends

The Japan IT services market size was valued at USD 70.22 billion in 2023 and is projected to grow at a compound annual growth rate (CAGR) of 9.8% from 2024 to 2030. A growing focus on artificial intelligence, cyber security, digital technology, robotics, and healthcare IT drives this country’s market growth. The increasing deployment of IoT-based devices across various industries, including consumer electronics, agriculture, construction, and military, is also driving the growth of the IT services market in Japan.

Japan is home to influential IT organizations, including Fujitsu, Sony, NEC, Panasonic, and Toshiba, which further significantly influence the country's expansion as a major IT hub. Furthermore, rising government expenditures on supporting advanced and high-end infrastructures and the proper development of numerous modernization and enhancement projects in the country also drive market growth.

For instance, in November 2022, Equinix, Inc., a digital infrastructure provider, invested USD 115 million in a new data center to expand its digital infrastructure footprint in Japan. By expanding its digital infrastructure footprint in the country, the company aims to strengthen its connectivity for global networks and cloud service providers and enterprises. This initiative will likely benefit businesses looking to scale their operations and exploit Japan's booming digital economy.

The rise of e-commerce and digital payments in Japan presents a vast potential for IT services companies to provide solutions for online retailers, payment gateways, logistics, and cybersecurity. As businesses worldwide increasingly embrace digital transformation, Japan's companies also adopt technology solutions to improve efficiency, productivity, and customer experiences. This trend drives the demand for IT services.

In November 2022, Accenture announced the acquisition of Albert Corporation, a Japanese data science company that would strengthen Accenture's position to assist clients in reinventing their businesses using artificial intelligence and data and boost competitiveness and growth of Japanese companies. The acquisition would reinforce Accenture's services in Japan to digitally recreate the enterprise data and assist Japanese businesses in expanding and becoming more competitive with deep data analytics and AI capabilities.

The adoption of cloud computing services has been on the rise in Japan. Enterprises are leveraging cloud-based solutions for data storage, platform-as-a-service (PaaS), software-as-a-service (SaaS), and infrastructure-as-a-service (IaaS) offerings to improve flexibility, scalability, and cost-effectiveness. Furthermore, as digitalization increases, so does the significance of cybersecurity. Enterprises in this country have been investing in cybersecurity services to safeguard their data and systems from cyber threats, leading to a growing market for IT security solutions. These drivers collectively contribute to the growth and development of the market.

Market Concentration & Characteristics

The IT services market in Japan is characterized by a high degree of innovation owing to rapid technological advancements. The IoT is gaining momentum in Japan, with the deployment of connected devices in various sectors, such as healthcare, manufacturing, and smart cities. IoT presents numerous prospects for IT services companies to provide data security, management, and integration solutions. Japan has been a prominent player in AI research and development. AI and machine learning technologies are increasingly incorporated into various applications, including predictive analytics, customer service, autonomous systems, and natural language processing.

The Japanese IT services market is also characterized by a high level of merger and acquisition (M&A) activity by leading players. This strategy allows companies to consolidate market share, achieve economies of scale, and cope with the rapid growth in the Japanese IT services sector, fueled by adoption of technologies such as cloud computing and big data. M&A serves as a means for companies to swiftly enhance their capabilities and offerings in response to this growing demand.

Regulations play a crucial role in the Japan IT services market. The Japanese government has been actively working to strengthen cybersecurity measures to protect critical infrastructure and sensitive information. The Cybersecurity Basic Act and the Act on the Protection of Personal Information (APPI) are some of the regulations that address cybersecurity concerns. The Japanese government has been promoting digital transformation initiatives to drive economic growth and innovation. These initiatives include measures to support the adoption of emerging technologies like IoT, AI, and cloud computing across industries.

There are a limited number of direct substitutes for Japan IT services. While there are alternative ways to address certain business needs, the increasing complexity of technology requirements often makes specialized IT services essential. The need for customized IT solutions is prevalent in various industries. Customized services provided by IT service providers offer tailored solutions that off-the-shelf alternatives can't easily substitute.

End-users encompass a wide range of businesses, organizations, government agencies, and individual consumers that utilize IT services to enhance their operations, improve efficiency, and achieve their goals. Businesses implement customer relationship management (CRM) tools, enterprise resource planning (ERP) systems, and other solutions to optimize their processes. IT services support public service delivery, data management, and policy implementation. Government entities in Japan at local, regional, and national levels also employ IT services for e-governance initiatives, digital citizen services, and administrative efficiency.

Application Insights

The application management segment accounted for the largest market revenue share in 2023. In Japan, businesses can leverage application management to boost application performance and reliability, enhance application security, and maximize the overall value of their applications. Application management solutions play a crucial role in monitoring, optimizing, and maintaining applications effectively within the Japanese market. Beyond performance and reliability improvements, application management in Japan also offers cost-saving benefits for businesses. Furthermore, robust application management practices assist in identifying and mitigating potential security vulnerabilities, protecting sensitive data, and ensuring compliance with industry regulations.

The data management segment will witness highest growth in the coming years. This growth is driven by the escalating volume of data generated by businesses and individuals, coupled with the need to leverage data for improved decision-making and gaining a competitive edge. The increasing adoption of cloud computing, which offers cost-effective and scalable data management solutions, further accelerates segment expansion in the Japanese market. Key growth areas within data management in Japan encompass data analytics services, big data handling, cloud-based data management, and data governance solutions.

Approach Insights

Reactive IT services segment led the market and accounted for 55.3% of the global revenue share in 2023. This surge in reactive IT services in Japan is due to the escalating complexity of IT systems, making it challenging to prevent issues and prompting businesses to adopt robust reactive IT solutions. Moreover, rising costs associated with downtime are driving Japanese companies to invest in these services as a preventive measure against productivity and revenue losses. Cloud-based services play a pivotal role in facilitating the implementation of reactive IT services in Japan, offering monitoring, alerting, and incident management capabilities. As Japanese companies prioritize safeguarding IT assets and ensuring uninterrupted operations, the demand for reactive IT services is expected to grow consistently.

The proactive IT services segment is predicted to foresee significant growth in the forecast years. This growth is fueled by factors such as complexity of IT systems, the escalating threat of cybercrime, and a growing demand for enhanced IT performance and agility. These services play a pivotal role in assisting businesses to proactively identify and resolve potential issues before they lead to downtime or data loss, reinforce security measures, optimize IT resources, and achieve greater IT agility. Thus, businesses in Japan are increasingly adopting proactive IT services to stay ahead of challenges and ensure secure and smoother operations.

Type Insights

Operations & maintenance segment accounted for the largest market revenue share in 2023. The segment's growth in Japan is propelled by the surge in cloud computing adoption, leading to a shift towards cloud-based operations & maintenance solutions offering scalability and cost-effectiveness. Automation technologies, including RPA, ML, and AI, are enhancing efficiency and resource utilization within the Japanese market. Additionally, the growing significance of data analytics allows organizations in Japan to gain insights into IT system performance, proactively preventing disruptions.

Growing security concerns in Japan are driving investments in robust security solutions to safeguard against evolving cyber threats. These trends are shaping the IT services landscape in Japan, with businesses prioritizing the optimization of their operations & maintenance strategies to achieve improved performance and resilience.

The design & implementation segment is poised for significant growth. A combination of technological advancements, a growing demand for user-centric solutions, and the urgent requirement for swift IT deployment drive the segment's growth. In Japan, businesses are actively engaging IT service providers to aid in the design and implementation of their IT systems and applications. These providers are increasingly becoming indispensable partners for organizations navigating the complexities of modern technology landscapes and aspiring to achieve seamless digital experiences, leading to heightened demand for these services and subsequent market expansion.

Technology Insights

AI & machine learning segment accounted for the largest market revenue share in 2023. The abundant availability of data empowers AI to extract valuable insights, analyze extensive datasets, and optimize decision-making processes, resulting in improved personalized customer experiences and streamlined operations in the Japanese market. As costs of computing power decrease, businesses in Japan are increasingly adopting AI solutions at a more affordable rate, enabling real-time fraud detection and predictive maintenance. The increasing need for automation propels the integration of AI and ML to streamline tasks such as customer service, freeing human resources for more complex roles and contributing to market expansion.

The big data analytics segment is predicted to foresee significant growth through 2030. The rise of edge computing, characterized by bringing computation and data storage closer to data sources, provides reduced latency and improved performance, thereby creating new opportunities for specialized big data analytics providers in Japan. Additionally, the increasing importance of real-time analytics for swift decision-making in response to market changes presents prospects for IT service providers offering real-time analytics solutions in this market. Moreover, growing demand for cloud-based big data analytics solutions, with their scalability, flexibility, and cost-effectiveness advantages, offers lucrative opportunities for IT service providers in Japan.

Deployment Insights

On-premises deployment accounted for a greater market revenue share in 2023, as numerous businesses in Japan prefer this deployment method. It provides them with greater control over their IT infrastructure, enabling effective management of data and applications. On-premises solutions in Japan offer the advantage of customization to meet specific business needs, allowing companies to tailor their IT infrastructure precisely. Additionally, some Japanese companies perceive on-premises solutions to be more secure, as data is not stored on remote servers that could be susceptible to cyberattacks. Thus, the on-premises approach in Japan provides businesses with control, customization, and security that aligns with their unique requirements.

The cloud segment is poised for significant growth as businesses of all sizes increasingly adopt cloud computing, leading to a surge in demand for cloud-based services such as disaster recovery, business continuity, and k. The availability of cloud-based infrastructure and platforms is also on the rise, further fueling expansion of cloud services in Japan. Additionally, the declining cost of cloud computing and adoption of hybrid cloud and multi-cloud environments contribute to its growth. Cloud-based managed services, analytics solutions, and security solutions are experiencing an increase in demand within the Japanese market. Thus, the cloud segment is growing as businesses in Japan embrace its flexibility, scalability, and efficiency for their IT needs.

Enterprise Size Insights

Large enterprises accounted for the largest market revenue share in 2023. As IT systems and infrastructure become more complex, the need for specialized expertise and resources becomes crucial for effective management, providing large enterprises in Japan with better capabilities to meet these demands. Moreover, larger enterprises in Japan are better positioned to invest in new IT services, including cloud computing and other technologies, owing to their financial resources and scale of operations. With a growing focus on digital transformation in Japan, there is increased demand for IT services that can enhance efficiency, agility, and customer experience, driving large enterprises to lead the market in seeking these solutions.

The small & medium enterprise segment is poised for significant growth. The availability of cloud-based IT services has played a crucial role in this expansion, making it more accessible and affordable for SMEs in Japan to adopt new technologies. Cloud-based solutions, with their on-demand access, are advantageous for SMEs with limited resources to invest in costly IT infrastructure. Moreover, the rise of mobile technology in Japan has created new opportunities for SMEs, enabling them to utilize mobile devices for sales tracking, customer communication, and inventory management. Thus, this segment continues to grow as SMEs in Japan leverage technology to enhance their growth and competitiveness in the market.

End-use Insights

The IT & telecom segment accounted for the largest market revenue share in 2023. This sector in Japan is undergoing rapid growth as telecom operators increasingly embrace cloud computing and other digital technologies to modernize their infrastructure and services. The growing demand for managed services and IT solutions from these operators further expands segment growth in Japan. Moreover, a convergence of IT and telecom technologies is becoming more prevalent, leading to an increased need for specialized IT services that cater to the industry's evolving requirements. Thus, the IT & telecom sector in Japan is poised for substantial growth as it continues to adapt and integrate various technologies.

The retail segment will witness significant growth in the coming years. The rising adoption of e-commerce and omnichannel retail strategies drives demand for IT solutions in the retail sector in Japan, supporting seamless online and offline customer experiences. The need for automation and streamlined operations also contributes to increased demand for IT services in this sector within Japan. For instance, customer relationship management (CRM) systems enable retailers to build stronger customer relationships and provide personalized services. In contrast, inventory management solutions help them track inventory levels and prevent stockouts. Thus, the retail industry's growing focus on efficiency and customer satisfaction drives a significant surge in demand for specialized IT services tailored to its unique needs in Japan.

Key Companies & Market Share Insights

Some key players operating in the market include DTS CORPORATION,Fujitsu Limited, and Hitachi Systems, Ltd.

• Fujitsu Limited is a Japanese multinational company that offers a wide range of services, including application development, business transformation, cybersecurity, network and communication services, and cloud solutions.

• Hitachi Systems, Ltd. is a Japanese IT services company specializing in offering comprehensive IT solutions. This includes system integration, cloud services, data center solutions, and IT consulting.

• DXC Technology Company and SORABITO Inc. are some of the emerging market participants in the Japan IT services market.

• DXC Technology Company specializes in technology consulting, outsourcing, and support. The company's operating segment includes Global Infrastructure Services (GIS) and Global Business Services (GBS). The GIS segment offers IT outsourcing, cloud and security services, and workplace and mobility services.

• SORABITO Inc. is a Japanese company that provides IT solutions for the construction equipment rental industry. SORABITO’s main product is RENTALAPP, a cloud-based rental app that serves as an application for equipment rental order management. It provides digital support for rental companies to evolve and expand sales and marketing capabilities.

Recent Developments

• In August 2023, Fujitsu Limited introduced an innovative AI module tailored for retailers, designed to produce AI avatars and personalized promotional content on digital signage by analyzing in-store consumer behavior data. The objective is to tackle labor shortages by automating certain tasks and delivering tailored services that cater to individual customer preferences, achieved through practical and innovative AI solutions

• In August 2023, Accenture and Coca-Cola Bottlers Japan Inc., a Japanese soft drinks manufacturer, announced their collaboration to create a joint venture that would begin operations in January 2024. This partnership aims to assist Coca-Cola in transforming into a data-focused organization with more efficient back-office and administrative functions. Accenture will play a key role in delivering localized business process-managed services as part of this initiative

• In July 2023, NEC Corporation developed a generative artificial intelligence (AI) system that can be tailored to the specific needs of individual customers, enabling companies to adapt to evolving business landscapes influenced by emerging technologies. Commencing in July 2023 in Japan, NEC launched the "NEC Generative AI Service," offering licenses for exclusive large language models (LLM), software, dedicated hardware, consulting services, and additional support. Subsequently, expansion into new markets is planned after the fiscal year 2024

Japan IT Services Market Report Scope

Japan IT Services Market Report Segmentation

This report forecasts revenue growth at a country level and provides an analysis of the latest industry trends in each of the sub-segments from 2017 to 2030. For this study, Grand View Research has segmented the Japan IT services market report based on approach, type, application, technology, deployment, enterprise size, and end-use.

• Approach Outlook (Revenue, USD Billion, 2017 - 2030)

  • Reactive IT Services

  • Proactive IT Services

• Type Outlook (Revenue, USD Billion, 2017 - 2030)

  • Design & Implementation

  • Operations & Maintenance

• Application Outlook (Revenue, USD Billion, 2017 - 2030)

  • Systems & Network Management

  • Data Management

  • Application Management

  • Security & Compliance Management

  • Others

• Technology Outlook (Revenue, USD Billion, 2017 - 2030)

  • AI & Machine Learning

  • Big Data Analytics

  • Threat Intelligence

  • Others

• Deployment Outlook (Revenue, USD Billion, 2017 - 2030)

  • On-premises

  • Cloud

• Enterprise Size Outlook (Revenue, USD Billion, 2017 - 2030)

  • Large Enterprise

  • Small & Medium Enterprise

• End-use Outlook (Revenue, USD Billion, 2017 - 2030)

  • BFSI

  • Government

  • Healthcare

  • Manufacturing

  • Media & Communications

  • Retail

  • IT & Telecom

  • Others