Three things we learned at Fujitsu Forum 2018

Fujitsu’s latest annual Forum event in Munich took place just weeks after the company announced an acceleration of its restructuring programme that will see some significant changes at its European business.

Here are three key takeaways from our briefings with the company’s leadership:

Same strategy, but on fast-forward.  Duncan Tait, head of the EMEAI region insists that the company’s strategy has “fundamentally not changed” as it continues its journey to becoming an increasingly services-oriented business. This time last year, the company announced that it would spin out its PC business through a joint venture with Lenovo, and the mix of the business has evolved during the last decade with services growing from 48% to 63% of total sales. 

Fujitsu announced last month that it would take a number of steps to improve its bottom line and quicken its transition from managing legacy environments to supporting new digital initiatives. This included rebalancing its workforce in Japan by adding 5,000 new sales recruits, while cutting 5,000 roles in the back office. It is currently in discussions over the closure of its manufacturing site in Augsburg, which could potentially impact up to 1,800 jobs. 

These steps are designed to ensure that it hits its operating margin target of 10%. The company turned in a margin of 5.2% in the first half of its current year, while Fujitsu’s closest peer IBM hit a margin of 12% in the first nine of 2018. Tait said that the company has become less obsessed with revenue volume, and more focused on revenue quality. As a result, Fujitsu is reviewing its long-standing target of generating 50% of revenue from outside its domestic market and is also weighing up its long-term position in half of the 40 countries in which it operates in the EMEAI region.

Life in the cloud after K5. An important focus this year – as at other vendor events worldwide – was progress within the key cloud computing sector. While cloud is no longer the subject of remorseless hype, it is the critical foundation for many of the new IT services being deployed by Fujitsu and its customers.  In this context, the announced end-of-life of Fujitsu’s own K5 cloud capability in its international markets could have cast a shadow over cloud conversations at their event. In reality this was not the case, because by refocusing on partner cloud capabilities – AWS, Azure, Azure Stack, VMware, Cloud Foundry – the company is simply focusing on the services and solutions that enterprises actually want.

For Fujitsu this is also a sign of it maturing as an organisation – which is quite something for an eighty-year-old business. However, this year for the first time, several of the most senior company representatives repeated the reality that they cannot do everything themselves any more. This realisation must have been hard for the company to swallow – it persisted in its own public cloud alternatives well after most of its competitors had conceded the market to the hyperscalers. But this new reality has given even greater importance to Fujitsu’s partner ecosystem, and at this week’s keynote presentation, Microsoft announced Fujitsu as a global partners for Azure and Azure Stack.

AI is hitting its mark in retail. One of the ways that Fujitsu is trying to become more of a global organization is by pushing more of its research efforts further away from its highly regarded Japanese labs. The company recently unveiled a new global AI headquarters in Vancouver, Canada, with the aim of ensuring that new development takes place closer to a global customer audience, who can help to influence and shape it into propositions that are more likely to succeed in the real world. 

Increasingly Fujitsu is applying its AI chops to its retail vertical capabilities. Retail has long been a fruitful sector for AI, with applications ranging from pricing, to ranging and category management to supply chain. The new AI capabilities that Fujitsu showed off included two very different applications of deep learning / image recognition at the point of sale. To reduce fraud at self-service checkouts, Fujitsu is piloting a solution that correlates the bar-code scanned with an image of the product scanned. When there is a mismatch, a sales associate can intervene, potentially stopping high-value items being fraudulently mis-scanned as a lower value  purchase. To reduce the number of lane blockages where a sales associate has to validate the purchaser’s age, Fujitsu is also providing age validation based on AI / image recognition. This currently allows buyers aged 30 years or older to make purchases of restricted category items (alcohol, pharmacy items etc) without the need for sales interruption / disruption.

Overall, the event showcased a lot of intriguing technological innovation, and it was interesting to see that a couple of Fujitsu’s recent acquisitions are starting to bear fruit. The RunMyProcess business is doubling in size and now has a base of well over 1,000 clients, including a growing proportion in North America. The purchase of Symfoni ESM in 2016, has given Fujitsu a much closer relationship with ServiceNow, and its practice is also increasing at an annual lick of 100%.

Tait rightly pointed out that the company faces a choice of trying to push its legacy portfolio and returning a 5%-10% annual sales decline, or getting on the front foot with its digital portfolio and shooting for a 5%-10% increase. Key to this will be its ability to reach new stakeholders beyond the traditional enterprise IT function, and the establishment of a new consulting and process services (C&PS) wing and the ongoing reinforcement of its network of digital transformation centers are steps in the right direction.

Like all its peers, Fujitsu has a distance to travel with the painful restructuring of its legacy business, but its push to get closer to partners and customers are both positive moves.