Future Software-as-a-Service (SaaS) sector capital of the world – Japan?

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Growth forecast for the SaaS sector

The Software-as-a-Service (SaaS) sector is slated to offer impressive growth potential worldwide over the next few years. Popular SaaS companies such as Salesforce and Adobe, are expected to generate close to $ 76 billion in revenue this year, and that figure is only expected to exceed $ 117 billion by 2021. There is no doubt that SaaS products can bring in a lot of value and benefits to the companies that choose to adopt them. The subscription model makes powerful software more affordable and accessible, while cloud-based solutions are an effective way to leverage data and communication in real time.

Japan – A Potential SaaS Giant

As far as the SaaS industry is concerned, no market is as charming as Japan. As the industry continues to expand there, the Japanese market seems to have the potential to become a global leader. Last year, the software market in Japan was valued at about $ 11 billion and SaaS at 31%, or $ 3.5 billion. According to the Fuji Keizai Group, the software market is expected to reach $ 19 billion by 2021, with the SaaS sector slated to cross $ 6 billion.

The reason for Japan’s growth in the SaaS sector

One of the primary reasons for Japan’s growth is the decline as well as the aging of its population. According to Mitsubishi UFJ Research and Consulting, Japan is expected to lose an additional 2.3 million people between the ages of 15 and 64 by 2030. The Ministry of Economy, Trade, and Industry also estimated 590,000 number of technology-related positions that will not be filled by 2030. This labor shortage will respond to companies’ urgent demand for increased automation and effective solutions that require less labor-intensive business approaches. The SaaS model seems to be a viable solution to solve the problem.

In addition, venture capital investments in Japanese startups are focusing on SaaS have also grown. With more than $ 230 million invested in such companies last year, this is the highest figure in the last ten years. And to give a little more context, Japan’s venture capital spending for 2017 is about $ 2.5 billion. That means that about 9.2% of all venture capital goes directly to SaaS companies. Earlier this year, a SaaS accounting firm called Freee was able to raise $ 57 million. This figure is significant, given the size of the venture capital industry in Japan.

The rise of Japanese startups

In recent years, Japan has seen many SaaS companies go public on the Tokyo Stock Exchange. One such company is Money Forward – a financing platform for individuals and companies, with an initial public offering and a market capitalization of over $ 600 million. Rakus is another supplier of several SaaS products for small and medium-sized businesses with a market value of approximately $ 780 million. Finally, Uzabase has reached a value of $ 730 million as a provider of market research and enterprise products. There is much hope that more SaaS companies become public in the next few years and it will not be surprising if many of them realize a valuation exceeding one billion dollars.

The SaaS revolution seems to be happening in Japan. For the country to continue its economic growth in spite of the shrinking population, the technology sector will have to make the workforce more productive and efficient. And the need will be particularly acute for labor-intensive industries such as manufacturing, food production, construction, logistics, and the medical and financial sectors. Japan needs SaaS desperately because of its aging populations and to continue to sustain its robust economy which has been losing out to other Asian neighbors (especially China and India) in the recent past. The country is certainly well placed to play a leading role and we are still in the early stages of the SaaS revolution, which promises to have a significant impact on Japan and other countries.

About Harish Datta Chitneni 19 Articles
Being an energetic and innate self-motivated guy, Harish is ambitious to learn new things. He worked for more than 4 years in the field of market research, consulting and advisory of Wealth Management, Agriculture and Healthcare sector. He is a professional in performance management metrics in business functions with the ability to scrutinize, analyze, integrate and use the unstructured data source to develop innovative solutions for the business problems.