Dialogue with the Chief Lumada Business Officer
Nikkei Business Online Edition: March 2023 Special Feature
In many different businesses and industries, DX*1 is spreading, and more and more companies are wrestling with issues related to agile development, the modernization of core systems, and operations that are becoming increasingly complex, for example, due to the use of cloud services. Providing high value‑added digital engineering and managed services to help companies tackle such issues is the Services & Platforms BU*2 of Hitachi, Ltd. (hereinafter Hitachi). Here, Takeo Ishii, Chief Lumada Business Officer of the Services & Platforms BU, and Madoka Sawa, Hitachi’s Lumada Innovation Evangelist, discuss how Hitachi helps its customers create value.
―Following the COVID‑19 pandemic, society and business environments alike have undergone significant changes. Working toward data‑driven management, companies have been focusing on efforts such as business process reforms and DX to create new business models, and conducting various trials. However, for a company to move forward with DX, it must modernize the many business platforms and core systems that support its main businesses and sources of revenue. Against this backdrop, what is the Services & Platforms BU’s stance on promoting business?
Ishii: Hitachi’s digital strategy for promoting social innovation is carried out through close coordination among three sections: the front‑office business section, which often comes in direct contact with customers and handles such systems as financial systems and social infrastructure systems; the IT services section, which provides solutions and services to facilitate DX in various industries; and the services and platforms section, which provides the methods and newest digital technologies needed to implement DX. Within this structure, salespeople and system engineers work closely with customers in a variety of industries and fields to identify their diverse DX- and cloud‑related issues and needs. Then, the Services & Platforms BU objectively applies those issues and needs to our IT platforms, solutions, and services, which we then scale and provide to customers in a wide range of industries.
Sawa: The Services & Platforms BU plays a very important role, having a cross‑sectional view of Hitachi’s digital strategy. During my time at Microsoft Japan, I served as head of the Microsoft Technology Center, which supports customers’ IT strategies across their internal divisions. While managing the Center, I knew that simply accepting the customer’s needs from the perspective of a front‑office group did not always lead to the best solution. For example, former automobile king Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” Before cars became commonplace, when people talked about transportation, they automatically thought of horse‑drawn carriages. In other words, Ford considered customer needs on a higher, more abstract level, thinking about and designing technology that would most effectively address those needs. That’s how he came up with the solution of mass‑produced automobiles. I think this stance is very important.
Ishii: To build on what you said, our job is to consider the needs of different customers and identify elements from which we can produce common value. For example, we can take some common aspect or element that provided value to one customer, and then extrapolate from that to create something for other customers. In this way, we can help customers resolve their DX challenges more quickly and in a wider range of areas.
What has led to this perspective becoming so important is the sudden increase in the need to incorporate mode‑2 systems (DX‑oriented systems that emphasize things like usability and the speed of development and improvement) alongside mode‑1 systems (traditional core systems and other systems that emphasize high quality and stability).*3 We began to see a change in our customers’ minds where, in addition to ensuring the stable operation of mission‑critical systems, they also needed to develop new businesses with speed and flexibility through agile development and DevOps. That was the only way to stay competitive in the market. Thus, we needed a way to quickly and continuously create new value to respond to these demands.
Sawa: As you say, when it comes to DX, speed is crucial. I won’t go as far as saying that the conventional waterfall methodology never works, but for example, even if you start developing something after planning out the year’s budget, by the time you’re ready to implement it, times may have changed. These days, systems are not finished products that you can just install and be done with; you have to constantly take care of it and develop it, continuously updating and revising it to meet the demands of the market.
Another thing indispensable to DX is automating operation. In Japan, people often say, “We’ll make up for it in operation,” but if we depend on specific individuals to handle certain tasks, the risks and costs associated with that business process or system skyrocket. To prevent this, we take an overarching look at the whole system and try, wherever possible, to eliminate any dependencies on specific individuals. That’s the baseline for DX.
―Many companies don’t know how to go about planning for DX. We also often hear comments such as “We wanted to launch a new service as quickly as possible, but things just aren’t going the way we’d hoped” or “We built a system, but now we don’t have anyone who can operate and manage it.” Can you elaborate on your strategies and thoughts behind launching services?
Ishii: To totally resolve DX‑related issues as a whole, Hitachi uses a value creation cycle consisting of the steps “understanding the customer’s business issues,” “creating a solution by combining IT, OT*4, and products,” “building a system that implements the solution,” and “moving on to the next issue while continuing to operate and maintain the solution.” Through this cycle, we provide our customers with continuous DX support.
The customer’s DX growth cycle and Hitachi’s support
Made up of four quadrants: digital engineering in the planning phase, system integration for implementing the solution, connected products (such as devices and equipment) that form the base of the digital service, and managed services for operation and maintenance
Sawa: One concrete example of the cycle in action is the Hitachi IoT Platform for Industry Cloud Service.
Ishii: Right. With this service, we provide customers, mainly in the manufacturing industry or social infrastructure field, with all of the support they need in a single package. This includes support for everything from DX concept formulation to the design and construction of a data utilization platform (which is essential for data‑driven management) and even secure data‑management operation.
This service was developed based on an IoT platform for automating the collection and processing of factory data. The platform itself was part of a digital twin traceability system built for and in collaboration with Suntory Beverage & Food. Now, it’s a fully managed cloud service, where customers in a wide range of industries can choose the features they need. Because it’s based on customer cases that Hitachi cultivated through actual co‑creation projects, we can customize it for customers even if they are in completely different industries, as long as they share common requirements for issue resolution. As a result, projects that previously took around two years from proof of concept until launch can now be completed in about half that time.
Sawa: Now, Hitachi’s goal is to use the data utilization technologies and expertise it gained through Lumada to provide an industry cloud—essentially a package of services tailored for a particular business or industry. The Hitachi IoT Platform for Industry Cloud Service is positioned as the first step towards achieving this goal.
Hitachi IoT Platform for Industry Cloud Service
Basic functions for the collection, storage, management, and use of data vital for corporate management, packaged into a service platform and provided as a fully managed cloud service that helps customers formulate DX strategies and business concepts based on Hitachi’s wealth of customer cases accumulated over the course of numerous co‑creation projects
―So, basically, you apply your knowledge of data management and cloud use to other fields, right? Are there other things you do to resolve your customers’ issues?
Ishii: To continuously implement DX, it’s important to first plan it out based on an understanding of the customer’s business issues and to create a grand design for modernizing their IT infrastructure. In charge of the consulting and digital engineering for design thinking is GlobalLogic, which became part of Hitachi in 2021.
With a clientele of over 400 companies worldwide, GlobalLogic has three major strengths: experience design for visualizing each company’s goal or vision, advanced software engineering that brings that vision to reality by leveraging the newest technologies, and content engineering whereby data is collected and analyzed after the system is installed. By working with GlobalLogic, customers are able to identify latent issues and easily take the first steps in DX, for example, by modernizing their IT platforms and migrating to the cloud.
Next is system integration, which is when the solution is applied to the system. System modernization—including the migration of core systems and the shift to cloud environments required for DX—falls into this realm. If a customer were to install, build, and operate a new IT platform all by themself, they would need to spend quite a bit in both money and resources. That’s where Hitachi comes in. By using the right combination of on‑premises and cloud environments, we provide a hybrid cloud environment that cuts down the customer’s operation and management work. To reliably integrate systems like this, you must have a wealth of experience and know‑how in mission‑critical areas. Hitachi’s capabilities have garnered us strong trust in the world of mode‑1 systems for many years, and GlobalLogic has a rich arsenal of microservice components, which are essential for mode‑2 systems. Our synergy lets us build optimal systems for our customers, with speed and high quality.
Sawa: Being able to provide a combination of Hitachi and GlobalLogic assets is really groundbreaking. It’s like fusing Hitachi’s practical field capabilities and track record in various fields, with GlobalLogic’s world‑class digital technologies and expertise.
Ishii: Moreover, we can provide services that include the operation and maintenance of the whole system forming the DX platform. By using a hybrid cloud environment as a managed service, the customer is relieved of their operations‑related troubles and can achieve both agility and reliability. On top of that, resources previously set aside for operation can now be redirected toward their core businesses. To accomplish this, we use EverFlex from Hitachi to implement transparent, highly reliable data linkage in hybrid cloud environments that include on‑premises data centers. Outside of Japan, Hitachi Vantara (which operates, maintains, and assesses customer systems running on diverse cloud platforms) facilitates stable system operation, automation, and continuous improvement on an application level. Last year, Hitachi Vantara opened Hitachi Application Reliability Centers (HARC) in the United States and India. These cloud engineering centers help customers reform and modernize their IT operations. We also make use of these assets to help reduce the operating costs and risks of our customers’ systems.
EverFlex from Hitachi, a hybrid cloud solution
Combining service‑type cloud solutions with a variety of digital IT‑infrastructure solutions to modernize core systems and build the right hybrid cloud environment for the customer’s business, and providing the digital IT infrastructure essential for DX
Sawa: By making Hitachi their DX partner, customers can free themselves of the vexing work related to DX planning and implementation as well as system operation, and instead focus on enhancing their business foundation and developing new businesses. This is the forte of Lumada and Hitachi, which helps customers resolve DX issues in all areas, and what separates Hitachi from other vendors. To use a metaphor, we’re not simply movers who move the customer’s existing system to its new home in the cloud; we also help them get set up in their new home. What components or services does the customer need? What can we do to improve life in their new home? As the customer’s partner, Hitachi listens to their concerns on all sorts of matters and helps them address those concerns. Playing a key role in this process is Lumada, an industry cloud whereby examples of other companies’ successes can be applied to other fields.
―Going forward, how does the Services & Platforms BU plan to provide value to its customers?
Ishii: One of Hitachi’s greatest strengths is the trust we have gained from our many customers over the years working in mission‑critical areas. As we fuse that with the capabilities of Group companies that have built up proven track records around the world, I hope our customers will recognize and choose us as a DX partner with the skills to stably operate and digitally transform their core systems. After all, that’s our mission: working closely with customers and accompanying them on their value creation journey.
