Japanese Tech Companies to Bid on Provider Job for Government Cloud, amid Push for Domestic Hosts

The Yomiuri Shimbun

1:00 JST, October 13, 2023

Two domestic tech companies bid Thursday to be providers of government cloud services that handle personal information held by municipalities, among other data, they said.

Internet Initiative Japan Inc. (IIJ) and Sakura Internet Inc. became the first domestic providers to submit bids to host the Japanese government’s cloud, which is currently managed by U.S. tech giants.

The moves by the two tech firms will likely help ease domestic companies into the role of providers for the government cloud. These cloud services, which the government needs to manage its data, are vital to Japan’s economic security.

The Digital Agency opened the application process for fiscal 2023 in mid-September, and the deadline was set for Thursday. The agency will screen candidates’ proposals and select providers as soon as early November.

Currently, Amazon.com Inc., Microsoft Corp. and two other U.S. tech giants manage the Japanese government’s cloud services. Domestic firms have shied away from bidding because applicants have been required to meet numerous criteria by themselves.

This led the agency to encourage domestic firms to serve as providers for the government cloud. The agency revised the criteria for the selection process for this fiscal year, including by allowing prospective providers to use other companies’ services to meet requirements.

Domestic companies were being watched to see whether they would submit bids under the revised criteria, and IIJ and Sakura Internet appear to believe they can meet the demands.

IIJ plans to provide its own basic cloud services while using Microsoft’s services for data analysis and other functions. The tech firm will work with several other domestic companies to develop necessary technologies, aiming to ultimately provide “mostly domestic” cloud services without relying on overseas firms, according to sources.

According to the Digital Agency, a briefing session held in late September for business operators was attended by dozens of firms, including some major Japanese companies.

Mikiya Kabuto, a chief analyst at MM Research Institute, Ltd., said Japan will be “completely left behind” in cloud computing if nothing is done to address the situation, as more and more IT systems will be transferred to the cloud.

“Expectations are high that the government will pave the way for Japanese companies to host its cloud platform, as such a move will also help develop domestic firms,” he added.