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HOME NRI JOURNAL Shortage of IT Human Resources in the Digital Era

NRI JOURNAL

Innovation magazine that generates hints for the future

Shortage of IT Human Resources in the Digital Era

Noriyasu Kogure
Managing Director and General Manager of Kansai and Chubu Branch
Managing Director, Nomura Research Institute (NRI)

Jul. 08, 2019

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As Japan grapples with a declining population, all industries are seriously affected by the problem of shortage of human resources and labor. For instance, increases in logistics costs due to a shortage of drivers and in construction costs due to a shortage of construction workers have reached an alarming level, threatening to disrupt the smooth running of society.
The IT industry is no exception to this, and one can often hear people talking about resource shortages. According to the “Findings of METI’s Study of Recent Trends and Future Estimates Concerning IT Human Resources”, there was already a shortage of 170,000 IT resources in 2015, and this is estimated to increase to around 370,000 by 2020 and 790,000 by 2030. Of course, there is a possibility that these figures may change significantly due to improvements in labor productivity, but in any case, it is true that the shortage of IT personnel is becoming a serious issue.
The use of IT is expected to expand dramatically as digitalization progresses in the future. However, because of the shortage of IT personnel, Japan will not be able to keep up with global digitalization.

Japan is ahead in digitization, but other countries lead in business-creating digitalization

In the last two to three years, I have been hearing the words digitalization and digital transformation (DX) constantly. Many entrepreneurs believe that without digitalization, disruptors will harm their existing businesses, and there is an increasing sense of crisis about the delay in digitalization.
The United States once stated that even though people always say that Japanese people are lagging behind in digitalization, it has long been promoted in Japan. Americans regard digitalization as equivalent to data digitization. If we look at it from this perspective, it is true that a variety of systems, from accounting vouchers to payment and product sales, were digitized at a very early stage in Japan. It was a global pioneer in mobile data communication services and electronic money in particular.
However, digitization and digitalization are clearly distinguished in Japan. Digitalization refers to the conversion of the movement and status of goods into the digital form. This makes it possible to grasp the status of goods (assets) in real-time and to make effective use of them. In this sense, Japan has indeed been a pioneer in the world of digitization, but it has not been able to create effective services and businesses in that of digitalization. This is Japan’s biggest difference from the U.S. and China.
A typical example of effective utilization of goods (assets) through digitalization is the sharing economy. Uber and Airbnb are often brought up, but we cannot talk about the progress of digitalization without mentioning Amazon. As you know, Amazon originally became a disruptor by digitizing books. Subsequently, the company began selling products, and as a result, the first sharing business was launched, which was the cloud service.
The IT industry's greatest concern is the effective use of assets. In particular, computer resources are expensive and must be prepared for emergencies. In the case of Amazon, they have to own an enormous number of servers that are normally not used just for the sake of Black Friday that comes once a year. Therefore, they started a cloud rental service when they did not use the servers. In this sense, Amazon is the largest successful company in the sharing business.
Amazon's next strategy was to move from the virtual world to the real world with Amazon Go and Amazon Echo. This will digitalize brick-and-mortar stores and homes and enable them to understand the behavior of their users in both the real and virtual worlds. Amazon is skillfully using IT to expand the scope of its businesses.

Securing digital human resources is becoming an important management issue

In order to take up the challenge of such new businesses, the role played by IT is extremely important. It is thus essential for companies to secure IT personnel who can support them. In the United States, IT personnel (especially DX personnel) have been acquired by establishing a remuneration system not constrained by the existing framework and a work system with a considerable degree of freedom.
Major Japanese companies have also become aware of the importance of IT personnel and are trying to increase their recruitment. However, they have not been able to succeed in their attempt. The number of talented IT personnel is limited and the competition to acquire them is expected to grow increasingly fierce in the future.
In order to make effective use of valuable IT personnel, IT service companies have begun to be selective about the projects they take up, choosing those that are more profitable and those that are expected to contribute to their future growth. These trends are likely to become more widespread in the future.
Businesses are already no longer viable without IT. So far, IT was only talked about in relation to cost reduction, but it may be necessary for the management to fundamentally rethink their approach to IT in the wake of digitalization.
Companies should regard the acquisition of IT personnel as an important management issue.

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Nomura Research Institute, Ltd.
Corporate Communications Department
E-mail: kouhou@nri.co.jp

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