Value Creation by Collaboration

2.1 Towards the collaboration era

How, then, have cloud services affected the business of the NTT Group? For users, the cloud era has expanded the range of carriers and vendors to choose from and has made it easy to combine them as desired. It also means that users can immediately switch to a newly available service and do so at very low cost.

In the cloud era, how should competitiveness be defined? Since users now have a greater number of choices, we could say that being competitive means the ability to be selected. However, being chosen once does not exclude the possibility that a user will soon switch to another provider. For this reason, I would define a competitive edge as having the ability to be “continually selected.” I would like to transform the NTT business model in order to acquire this ability to be continually selected by customers.

The cloud era corresponds to a business environment in which many and varied players can participate. There is no doubt that a telecommunications carrier is simply one of them. I believe, however, that the NTT Group should become one of these players “with value,” which we define as a value partner.

Becoming a value partner means, of course, that the NTT Group will have to compete with a variety of players, but it also means that we will have to incorporate collaboration into our business model (Fig. 3).

Fig. 3. The collaboration era.

2.2 Towards the Next Stage 2.0

In November 2012, NTT announced its Medium-Term Management Strategy called “Towards the Next Stage.” The idea at that time was that the NTT Group needed to transform itself beyond its traditional role of being a provider into being a value partner who could help transform the user’s lifestyle and the corporate customer’s business model. To this end, two main objectives were established: make global cloud services the cornerstone of NTT’s business, and thoroughly enhance the competiveness of NTT’s network services within Japan.

We are upgrading this Medium-Term Management Strategy to “Towards the Next Stage 2.0” with the aim of clarifying the path to recovery of profitability and growth. Specifically, we are slightly modifying our objectives in two ways: to accelerate the speed of generating profits from global cloud services and to enhance the profitability of network services.

We can also consider expansion of the B2B2X (business-to-business-to-X) business to be a pillar of this updated strategy. In fact, we are treating our Hikari Collaboration Model, which involves wholesaling of optical-fiber access services, as a manifestation of our new business model. Moreover, to solidify our role as a value partner, I would like to see the entire NTT Group make significant contributions to themes and initiatives that are currently being undertaken by the Japanese government such as regional revitalization. The ‘X’ in B2B2X may be ‘C’ for consumer, ‘B’ for business, or even ‘G’ for “government.” With this new type of business as a pillar of the NTT Group, I plan to announce a new Medium-Term Management Strategy in May 2015.

3.1 Global cloud business promotion system

The formation of NTT Group global business covering all layers and stages of cloud services has been completed (Fig. 4). I can say that there are no other corporate groups in the world with such a system, which has been highly evaluated as a very unique approach even by parties outside NTT.

Fig. 4. Formation of NTT Group global business.

Let me give a few examples here. As of the end of September 2014, the NTT Group operated 239 datacenters in 19 countries around the world with a total floor space of about 1 million square meters. This amount of floor space is currently ranked as No. 1 in the world. Of course, our efforts are not limited to datacenters; we are also working to build up our services and technologies. In January 2014, NTT DATA acquired the Spanish company everis, while NTT Communications acquired the U.S. companies RagingWire and Virtela. In addition, Dimension Data is expanding its footprint and service expertise through its acquisitions of NextiraOne and Nexus IS.

3.2 Promotion of cross-selling

A major strength of the NTT Group is its ability to provide one-stop cloud services and to form tie-ups with a variety of partners. Additionally, to further expand the scope of its business, we are intensifying our promotion of cross-selling within the group. Last year, we brought together for the first time NTT Group companies that had achieved results in cross-selling and held a cross-selling award ceremony. Three awards were given for cross-selling achievements in Europe, Asia, and North America. I would like to continue these efforts into the future.

4.1 Becoming more competitive through innovation

I will now introduce our activities in network services.

Our first undertaking here is a new billing plan, which was announced by NTT DOCOMO in April 2014. In the past, a user who purchased a mobile phone would receive a discount in monthly usage fees under the condition that the phone would be used for two years. However, amid the situation in which major carriers were selling the same kinds of terminals, a cash-back incentive war arose in the industry, which began in March of last year.

Wishing to extricate itself from such an unsophisticated approach to attracting customers, NTT DOCOMO decided to provide its loyal, long-term customers with more cordial and attentive service and to migrate to a new billing scheme that would enable individual households to enjoy a rich broadband environment.

Our second undertaking in network services is the full-scale wholesaling of optical-fiber access services under the Hikari Collaboration Model of NTT EAST and NTT WEST, announced in May 2014.

This initiative is part of a theme that I have been involved with for many years. Although it began with NTT DOCOMO’s offering of simple package discounts to promote the combined use of mobile and optical broadband services, our aspirations did not stop there. Today, our fundamental objective is to further expand the value of Hikari services by encouraging the participation of diverse market players and to create new B2B2C business using NTT’s extensive optical fiber infrastructure.

5.1 Explosive increase in data traffic and growing security risks

Worldwide mobile traffic, which stood at 240 peta­bytes in 2010, is expected to increase to 40 exabytes by 2020 (Fig. 5). Additionally, the number of malware programs, the detection of which is a specialty of NTT laboratories, is expected to increase by more than 100 times from 2010 to 2020. According to the National Institute of Information and Communications Technology (NICT), there were 25.6 billion cyber-attacks directed at the Japanese government and Japanese companies in 2014. We can expect the volume of cyber-attacks to intensify during the period that Tokyo hosts the 2020 Olympic and Paralympic Games.

Fig. 5. Explosive increase in data traffic and growing security risks.

5.2 Building a sophisticated network

Building a sophisticated network and performing security tasks will, of course, be important from a technology viewpoint, as in network functions virtualization (NFV) and software-defined networking (SDN). Yet it will also be important from the viewpoint of performing thorough and reliable network operations to establish usage rules together with our partners (Fig. 6). This incorporation of rules into the network usage method will be taken up in future activities.

Fig. 6. Sophisticated network.

5.3 Cybersecurity management

Our plan is to create a system that can provide a certain degree of training in cybersecurity management not by 2020, but by 2018 (Fig. 7). Then, we would like to implement countermeasures while performing simulations over a two-year period. The time that we have left to accomplish this is limited, so I would like to pursue this initiative in collaboration with a variety of partners.

Fig. 7. Integrated security.

5.4 Development of cybersecurity personnel

The development of cybersecurity personnel is a matter of urgency. At present, NTT Group companies have a cybersecurity staff of about 2500, from novice to advanced members. This number will be increased by four times by 2020. As for cybersecurity training on the outside, we are working on setting up endowed courses at universities and establishing collaborative efforts between government, industry, and academia. Looking forward, I believe that cybersecurity personnel should take on the role of cross-company specialists.

5.5 New endeavors

NTT announced a service called “t-Room” some years back [1]. The t-Room service presents images of location A at location B and vice versa to make it feel as if all users were gathered together in the same room. I wondered if the technology used by t-Room could somehow be applied to the 2020 Olympic and Paralympic Games. For example, if we attached a camera to a wheelchair of an athlete playing in a wheelchair basketball game and applied the t-Room concept, viewers could experience for themselves the remarkable athletic ability of these amazing athletes. I think this is a real possibility.