Fujitsu Limited (6702) Earnings Call Transcript & Summary

We would like to start the briefing on consulting business that accelerates business model transformation. Thank you very much for attending out of your busy schedules this afternoon. Today's briefing is held at the headquarters of Shiodome of Fujitsu and it's held in hybrid format on face-to-face and online. I would like to talk about the flow of today's briefing. First, we will be having the Corporate Executive Officer, SEVP and CRO, Shunsuke Onishi, to present on today's theme. After that, our Corporate Executive Officer, SEVP, Yoshinami Takahashi; as well as Representative Director and CEO, Toshiya Imai, will join for the talk session under the theme, which further deep dives into the theme for today. There will be Q&A that follows it and photo session. We will finish at 3:00. Hi, my name is Matsumaya, from the Corporate PR division. I will have Mr. Onishi on the stage to present.

Hello, everyone. My name is Onishi from Fujitsu. Those of you on the venue, I would like to thank you for coming when the weather is so bad and cold. So I would like to present something that would excite you. What I'm going to talk today is about consulting business, Fujitsu Uvance Wayfinders. The slide that you're seeing now was included in the MTP of our company. So the message here is that we want to become a technological company that maximizes the net positive. Not just focusing on the maximization of financial returns, we want to contribute to the society. Behind that is our purpose. I think that you remember this purpose, but what we would like to do is to make the world more sustainable by building trust in society through innovation. In order to become what we want to become, we created the strategy to enable it. We will be driving change in the midterm plan. We have our customers, employees and partners in mind. And we need to change our business model with all of the stakeholders in mind. And I am the Chief Revenue Officer, and I am in charge of the customer success strategy. One of the most important items is consulting business, improvement of the consulting capabilities. Why consulting business? Why do we want to enhance the consulting capabilities? There are 3 points. One is that the industry's structure will change. There will be no boundaries in the industries. The digital companies are making cars. So it's -- we are living in a society where there is a game change going on. So we need to change our business straight on, and we need to create new businesses. The second point is, recently, we have made a news release on AI. And you can see from that, the impact from technology is bigger and faster than we had first anticipated, and the scale of the change goes beyond our imagination. The future that would be brought by quantum computing will change the principles of economy and the way that people work as well as the way people live. Considering that, I think we not only need to think about the strategy, but we have to think about how the society will change through technological innovations. The third point is in order to respond to the societal change, we need to change ourselves. One of the significant things that we need to work on is relationship with our customers. We need to ask what they need, and we need to provide them something that's good for them. But at the same time, we need to be equal partners with them to co-create. So it's a change of behavior. Since President Tokita assumed his role, we have taken on various initiatives, and we are changing. And now we need to align ourselves with the change of the society, and we need to change our behavior. And in a nutshell, we need to have the capacity of consulting. We need to enhance our ability of consulting. So what are the menus of our consulting service? So Business Consulting to capture the issues that needs to be solved by looking at the society overall, and we will realize the business transformation, which does not end on a tabletop discussion. That's Business Consulting. And the Technology Consulting using data and technology, we will be providing various offerings for the improvement of business agility. We will capitalize on the R&D capability that we have. The Uvance Wayfinders that we are announcing, which is a consulting brand. So this we want to realize the mindset. There are 2 strengths in this area for us. The first is the consulting business. It was actually segmented by industry as nature. But moving forward in the future society, that's not going to be good because the industry structure is going to change, and we need to make a new business model to fit that. When Uvance was announced in 2021, we have been taking on major challenges. And including those efforts in the consulting area, we will not be locked in the business type or industry. We would like to create consultants that can be cross industry. With the accumulated knowledge and experience, we will create those consultants. And the second strength is technology. As mentioned before, we have R&D facilities around the world. Therefore, together with our global peers, we will make this technology that is going to lead to value proposition as our strength. And in consulting, there's practice, and we will be establishing a practice. In the Business Consulting, there will be six: customer experience, sustainability and verticals, management excellence, operational excellence, employee experience and technology excellence. And for Technology Consulting, we have: application data and AI, agile IT, value transformation, hybrid infrastructure, security and key focus technologies. And through the 3 steps, we will be providing these. Already, at the start of this year, internally, we have been upgrading certified consultants. At this point, we have reached this Wave2 area. So the Wave2 practice is going to start to be introduced in the market. And towards the reinforcing of consulting capabilities, I did comment on this briefly before. Capability and capacity are the words I used. And for us, to roll out this business, of course, we would like to place importance on scale. And that is because if we don't have scale, we will not be able to create a large social impact. So one of the target is, by 2025, have 10,000 consulting personnels. This is including Ridgelinez, which is our group company. Globally, we will be providing 10,000 consulting personnel. And the breakdown is for Business Consulting, 3,000; and technology consulting, 7,000 people. So how are we going to create these consulting personnel? This is something that we would like to have a dialogue with you at the later talk session. In particular, we had large-scale projects or through the projects with our customers, we have accumulated experience and knowledge. Therefore, including those aspects, we will conduct reskilling. And of course, we will be hiring from outside. And the third is through M&A, and through these initiatives, we will definitely like to achieve this 10,000 target. This is the message slide. I will read it. Chart a course across the unknown with Fujitsu’'s consultancy, Uvance Wayfinders. Taking a broad view -- what we'll be announcing today, taking a broad view of society through the lenses of business and technology, we have set our sights on finding undiscovered ways forward. Our approach to confronting challenges is methodical and measured, connecting diverse values to create new possibilities in business and society. Advancing a brighter future for generations to come. That is the society that we would like to create. And supporting by this intention, I would like to announce the Uvance business consulting business. This Uvance Wayfinders, the intention that is incorporated in this logo is that customers, partners, employees and with all the stakeholders, has the image of a compass that will allow us to go on a new adventure. And the experience and knowledge that we have accumulated now, we will be integrating that. And with the partner with our customers with that strong will, we would like to start and move forward this business. That's all from my side. Thank you.

That was the presentation from Mr. Onishi. In order to deep dive into the theme for today, there will be a talk session. Please be seated. From here, the emcee will be Mr. Keiichiro Nishi, who is the Co-Head of CEO Office.

My name is Nishi, and thank you for having me here. So for 25 minutes, we will have a talk session. So we will have a Q&A session like this, as a continuation of talk session. So first, we will talk amongst each other to give you the overview of things that you probably want to know. So we would like to have self-introduction first. Takaha-san?

My name is Takahashi, in charge of Uvance. Nice to meet you.

Imai-san, please?

Hello. My name is Imai, CEO of Ridgelinez. From April of 2020, I have assumed the role back then, and I've been running the company since then.

And I would like to say a few words about myself. And my name is Nishi, and I am in charge of supervising the creation of the strategy of the company. So amongst the 4 of us, we would like to talk about how we would like to accelerate the transformation of Fujitsu to help you deepen the understanding of what we are trying to do. So first, Onishi will talk about why the Consulting Business had been launched. And Takahashi will be talking about how Uvance and Consulting Business would be linked with each other, the necessity in the business for consulting.

So this is Takahashi once again. As you know, Uvance has 7 focus areas, and we are trying to solve various societal issues using not only Fujitsu's IP but also by using various IP. We are trying to solve a variety of issues in the society. For example, minimization of CO2 -- simulation for minimization of CO2, more efficient business management with data integration and drug discovery using the computing systems. We want to be able to provide value to the customers. And in order to communicate that to the customers, consulting capability will be critical in the process of solving societal issues. We need to capture the needs. And those needs should be met by utilizing the various capabilities, not only the industry-specific knowledge. So we have the -- so we have the target of Uvance for the sales of JPY 700 billion and Consulting Business will play an important role in that.

So Uvance's offering will enable the customers to solve various management issues. And in order to align Uvance and the needs of the customers, consulting capabilities will be absolutely necessary.

So may I supplement to what you have just said? So I think I should add that in the past, in thinking about automation, we will say we will implement ServiceNow or SAP, and we will provide a single category of services. But what we will do is we will have process mining and think about how the process will be changed for automation. So the Technology Consulting is necessary across the board. We would not be able to do the siloed approach anymore. By enhancing the consulting capability, we would be able to capture the customers' needs in an integrated manner, and we would be able to provide necessary solutions.

So I would like to also ask Onishi-san. Onishi-san is supervising the frontline. And so we have consulting, Uvance and technology. And by having the integration of those things, how do you think the provision of volume will change? So you are already working together with Ridgelinez and then you will be rolling out this service worldwide going forward. But what are you going to do going forward?

So Mr. Tokita provided a message. To become a service company, the DX company when he assumed the role of the President. And the system would -- alone would not be able to solve customers' problem. And considering that DX's digital transformation, there is IT strategy, management strategy change, the structural change, the background for the company, the culture of the company, everything needs to be considered in providing the prescription for optimal service. I joined Fujitsu 5 years ago. And I worked on the integration of SE and sales. And the frontline required the consulting capabilities in order to win the competition, and I knew that this will be happening and Ridgelinez had led the way. And in the past year and in the years prior to that, Imai-san's sales team and our frontline team had worked on various deals with the clients, and we would like to expand this to the global business.

Thank you very much. The word transformation, the keyword, we place importance on it. Not just the background transformation, but the business itself has to transform to change the company. And one method is through the Uvance technology, and we would like to link that with a consultancy. And this initiative, as Onishi-san explained before, in Ridgelinez, they have already taken on the challenge of moving forward. And given that, from Mr. Imai, in your eyes, as a consulting company -- as a pure consulting company position and collaborate with Fujitsu, you have those 2 perspectives. And from that perspective, what was good to collaborate in what way? And if you have any challenges that you think exist, can you share that with us?

Well, Onishi just spoke right now, the DX, this X part, the Japanese companies, what they cannot really do or achieve is the X part. Because technology was incorporated, it's not going to change the organization. You all know about that. So then what truly needs to be changed? Are there are many things that need to be changed? My golf stance, form needs to change. And if people try to correct it, I just collapse. So it needs to be narrowed down to 1 or 2 and thoroughly corrected. And that is going to lead to the evolvement of an organization, and I've been working on that for the last 2 years. And as Ridgelinez and Fujitsu collaboration is extremely simple, as Ridgelinez is client first, meaning that we receive money from the client. So we will provide the best solution for the client or the solution. That is the nature of a consulting company. So what is the relationship with Fujitsu? The contract with the customers, Fujitsu has a broad customer base. And they refer those customers to us. Well, in a way, up to now, the companies that play that role, there were not many companies within the group. So they are referring and introducing many customers to us, and we utilize that opportunity. And together, we listen to the voices of the customers. And we look at the issues that the customers have and prioritize the issues that the customer really needs to solve. That's the role we played. And this way of doing things, I think, went very well within the last 4 years. And I, myself, been in a consulting company for many years. And the PowerPoint presentation explaining consulting is what was done by Onishi. And as explained in there, whether we can create an action plan or can we implement a system that's going to change our behaviors. We really have to go that far or things will not truly change. So in order to do that, the technology base, because there's an abundance of resources. Until now, the customers that Mr. Onishi-san's team has been handled, I think we've done very well.

Sorry, I add the san at the end of the name, but I would like to continue to call you that way. A lot of the operating companies are working together with the consultant companies as a consulting company provided consultancy. And this Wayfinders, what is the difference than the conventional way of doing things?

Well, I did show our intention in the slides. Our strength is still -- some may be still developing. But it's -- one thing we want to do is cross the vertical. For those of you who know very well the consulting business, the frontline organization is segmentated by industry, like automobiles, financial, industry or consumer goods, et cetera. But that segmentation itself is outdated. Just look at the company, E.ON or Sony. We can't actually limit the industry when we deal with these customers. So -- and this type of setup is going to start to combo beyond the borders of our companies. So what will respond to that is Uvance. This cannot be done by just one company nor having a segmentation of the industries. And so not having that is the difference in the approach we're taking. And also technology wise in the world, having this much an R&D facility globally, there's not that many companies as us in the world. Israel, Bangalore and in the United States, we have the technology knowledge that is accumulated. And from the technology focus, what kind of changes can we make in the societal structure? And by providing the consultancy, including that intention is the difference. Meaning that the issue is whether we will be able to build up the capability in a sufficient level.

Well, Takahashi-san, well, Onishi-san just made a comment that this part is going to be accelerated and technology side, we've been working on the Uvance up to now. But having the technology consultancy, how can it accelerate? And why can you all explain that?

Understood. First of all, the other day, we made an announcement. The world of data intelligence as Fujitsu would be path layer -- we call it Kozuchi, which is an AI technology. We want to roll that out to customers. And within that process, there is the auto machine learning and generative AI and there's a hallucination of countermeasures. And there are various technologies that exist. And the customers will deploy that on their own moving forward. Moving forward, what is asked from the market is that us, as Uvance, not just rolling it out, but the customers themselves will deploy these technologies within their company and increase the priority level of that and achieve evolution. So having -- so we have the various knowledge in that area. And the data scientists will work together with the customers, and it would not be onetime. It would be a continuous process. Utilizing the customer's technology for the purpose of transformation will be made possible. We have data scientists, but we also have sustainability consultants, process mining experts, data aggregation experts. So we have various kinds of experts. And we want them to go to the customers to support the digitalization efforts of the customers.

So this is a reminder for our guests. So solving of the cross industry issues, there are -- there are things that's already imminent. So we will go solve them and we have technology. And we will be making adjustments to our technology so that we would be able to systematically work on the issues of the customers. So we will work together with the customers using the overall technology that we have. So I think that there, we can differentiate from other players. So from the perspective of the consulting firm, do you think that Fujitsu would be able to differentiate from other players?

Well, I would not be able to say that we cannot differentiate ourselves. But I think that there would be a differentiating point at Fujitsu. From the experience of Ridgelinez, we have the strategy, operational and the technology at consulting. And we approach the customers one by one. However, what has happened in the recent years is that in one team, we needed all 3 types of consultants in order to solve the customers' issues. So it's a concurrent initiative. Tools and technologies are improving. So we can provide concurrent service. What Takahashi-san has mentioned is just that. Fujitsu is preparing to provide concurrent services. So with a deeper understanding of the issue, I think that the capabilities can be used for the sake of the customers, and that would have a significant meaning for the customers. So the management issues and the technology issues, operational issues, that can be solved. And Fujitsu has technology and operational capabilities. And using Uvance, we would be able to systematically provide the service to the customers.

So we need to roll that out globally. That would be the next challenge. So how would you be doing that in the U.S., APAC, Oceania, European region? Do you have any ideas for how to roll that out? So I'm sure that the attendees I would ask, what will be the realistic way of approaching this business?

So in Japan, there are 100,000 SEs, and they have been able to nurture a very good relationship with their customers and Uvance will be added on to that, and we will reskill our experts. Of course, we will be hiring and conducting M&A, but our existing SEs will play an important role. In terms of the overseas market, we need enhanced initiatives, and one of them will be M&A initiatives and also senior hiring. We have already started initiatives on those 2 things. In APAC region, we acquired several consulting firms. We do have some others in the pipeline and we will conduct strategic hiring. In the overseas market, there are areas where re-skillings would not match. So the team could be created using hiring process.

So GK Software had been bought, and their approach to the retail has changed, and now it's more across industry. So the new capabilities have been introduced and you are trying to roll out the overseas market. So what are the initiatives that you're taking now?

The ServiceNow Specialty business has been acquired several years ago. It's a company called Enable. They have rolled out the case management, and they are promoting the automation on the side of the customers. It's not onetime deployment. It's a provision of continuous services so that the usability on the side of the customers will be improved over time. And one thing that we will do is to make global practice, the knowledge that we have accumulated from the acquired company. And the GK software, we have 800 experts who are able to do the Agile development. And the Agile development capabilities, if it can be used on the frontline of the customers or use it for upskilling of the employees, that would be a great benefit. So we are working on that.

So in the global sites, rather than having the Japanese employees go there on a business trip basis, we will be enhancing the capabilities on site and respond to the customers in the language in which the customers uses. So we will utilize the hiring process for having capable talents, and we will focus on the speed. So to all of you, I want to ask that you want such a type of people to join and you want to create such a team. Well, it was a bit of a mentioning, but from you, Imai-san?

Well, this time, we have created a logo, Uvance Wayfinders. And overseas, there is the job type HR system. That is the mainstream. Therefore, at this timing, utilizing our technology and changing the conventional way of business, doing business, the people who have this transformational mindset as it's a conventional consulting company. Even though it's a consulting company, there is a legacy that exists. So not be trapped in this legacy, but want to take on new challenges. That type of -- the people who have that type of will, we will welcome. And also, the customers' business and operation, people who like to improve that. Somebody who has a high level of aspiration are the people that we would like to attract.

So from your perspective, Imai-san, this Fujitsu's consulting business, if you take on this challenge, is it something that you feel that these type of benefits or advantages will exist?

Well, this relates to the outcome of what we tried in Ridgelinez for 4 years. Mentioning implementation, new operation, new technology to actually implement that and execute that. If that is realized, it will be implemented in a very speedy manner. Not in the speed of the conventional development, but based on the technology capability, it will be implemented in a speedy manner and the operation of the customer side in the short term will change drastically. If we can realize that, the image towards the conventional consulting business can be changed is what I think.

So Onishi-san, what kind of team do you want to create? What kind of people do you want to join?

I, myself, about 20 years ago, I was actually a consultant. There are times like that. And I call Imai-san, Imai-san. But he is the -- like my master of the consulting industry that I met for the first time. It's -- the relationship has continued till now. And when Fujitsu I thought we will step into this world, what I was really focused on is the reality and the sociability. We can actually draw this nice comic or nice drawing to the customer, but sometimes the customers will not be able to digest that. Or for the management transformation, the top-down communication is important, which is something that you read out of the book or spoke out of a book. Many consulting companies do such a thing. And how do we give approach to the customer? What kind of prescription are we going to provide the customer? If we don't think about those things, the transformation will not move forward. That is the reality. And looking at the Japanese market, the Nikkei major companies have taken on this challenge, which is the changing the social system. But what is the background of that? And these senior management people, what kind of values do they have? So we do need to have this social ability that can understand that. Therefore, the great point of Fujitsu is that there are many opportunities that the people have been experiencing that. And the output will be the consulting service that has the reality and sociability as well.

So internally create the materials and have a meeting and coming up with the output, we say this is the output. But not that actually go to the customer's site. That is the difference. And for those who have motivation to do so, it will be good.

So the implementation that I mentioned and what Onishi-san said, the reality, those are same meaning.

Takahashi-san, how about you?

Instead of speaking from the technology perspective, it's close to what the previous mentioned. Within the constructive tension, somebody who can guide the customers through that path is the people that I would like to say. The constructive tension is meaning that we're not going to stop here. But going one step further in implementing such a technology what the customers are seeking for the automation by far or the technology advancement can be realized. So somebody who can actually guide that. Of course, if the person who has a technology knowledge and experience is great. But when these people meet with the customers, having this constructive conversation with the customer that they can go a step or 2 steps forward, somebody who can guide or lead that way is what we look for.

I was involved in a consultancy in the development side. But we went along -- ran along with the customers. But utilizing the Fujitsu's technology and running aside the customer, that was the business organization we had. But with this Uvance, we really can realize that. And of course, we have the strength in the Japanese companies. But a company that has a footprint in the global companies is quite attractive as well. And one of the capital risks is that we'll be able to implement this in the overseas companies as well. And there are people who had the consultancy experience joining us, the possibility that they can be involved in such business. So can you speak about the career opportunity?

Well, those people may be involved in consulting in our business. But Fujitsu, ourselves, are saying that this transformation is not going to easily be completed. So we have to keep passing on the baton to the next. And so you'll be able to be involved in such thing. And the transformation that Fujitsu is conducting right now for our consultant, this is a good opportunity to build up one's knowledge and also increasing training themselves.

So we are going through a big change. So we need to materialize this transformation within Fujitsu and roll that out to the customers. I think that will be our strength, that we would be able to do that. We will change first. We will transform first. And the value that has been derived from that, it could be rolled out to the customers. So we would like to work hard on that.

Imai-san, you have received the employees from Fujitsu, and they -- you are training them as consultants. And I think you are serving as a bridge. So anything -- any comments about that?

So I have been doing a lot of business consulting for many years, but I have never done technology consulting. So we were trying to think hard about how technology consulting should look like. But the Fujitsu engineers came to us, they went through trial and era for about 1.5 years. They tried at the various service menus, and they failed sometimes. And they went through this trial and error and created new ways of doing things. And now we have a technology consulting service as part of the menu that we provide to our clients. You talked about reskilling earlier. But I think that -- I think that the Fujitsu people have the basic experience and the skills. And what they have to do now is transform. I think that the IT service industry quality could be improved through those kind of efforts. So business consulting and the technology -- in technology and consulting, there are a lot of passive knowledge, and it's a competition of that knowledge, and we would be able to -- by adding on various capabilities, I think that we would be able to materialize the tacit knowledge that we have in place.

So now we need to put a stop to the talk session and go into the Q&A. [Statements in English on this transcript were spoken by an interpreter present on the live call.]