Trends in Emerging Information Services

1. Trends in Emerging Information Services September 14, 2000 ToshiharuAoki President & CEO NTT DATA CORPORATION

2. Outline • 1. How we should recognize the Internet era • 2. How we should recognize the change in services • 3. How we should recognize the change in business mechanisms and rules • 4. How we should recognize the change in intellectual creation • 5. Summary

3. 1. How we should recognize the Internet era

4. 1981 1983 1994 1996 Perception of development - in a span of 20 years 1980 1990 2000 1980s 1990s Before PC PC era The Internet era 1981 PC Year One 1994Internet Year One PC Gold Rush InternetGold Rush Optical fiberloop 27% Optical fiberloop 36% Analog circuits Digital circuits SPC 1982 Network digitization start 1997Complete network digitization

5. Progress of digitization and creation of new markets • Information appliances • (TV and PC) • Content • Computer • Satellite TV • Optical fiber • xDSL • The Internet • Network Encouraging rise of new markets

6. (billion) $400 $350 $300 360 $250 $200 186 $150 130 $100 $ 50 39 10 10 0 Japan Europe U.S. Business climate in 2000 (Forecast) Manufacturing Non-manufacturing B to B B to C [Source: Electronic Commerce Promotion Council of Japan (Ecom)]

7. The Internet Changes Society and Industry • The Internet frees us from unconscious limitations, and “Consumer-oriented” concept appears Perfect market Free from information imbalance Perfect community Free from time and space limitations Perfect value Free from unified common value

8. Internet Perfect Market • With the information imbalance between suppliers and consumers rectified, we move closer to optimal markets • Consumers can get the information they need to make their own comparisons and selections • Suppliers get information about consumers, enabling them to offer better goods and services • Greater freedom is available in the setting of prices (ex. Internet auctions) Suppliers Consumers

9. Perfect Community • Communities are formed that transcend time and space limitations • People can join global communities anytime • People can carry individual private space around with them wherever they go • Transformation takes place from closed communities to active communities that influence society (ex. development of Linux) • Individual activities influence communities and society in real time

10. CD CD CD Niche Perfect Value • Diversity is recognized with regard to people's • sense of value • Mega-trends and niche coexist • Mega-trends arise easily • Business opportunities arise out of the niche • Individual differences in people's lifestyles are acknowledged. • Saving time for / Taking time for ・Internet shopping vs. Going to the mall ・Personalized newspapers vs. Traditional newspapers Mega-Trends

11. 2.How we should recognize the change in services

12. Internet －－－－－Browser－－－－－ ◆Graph～ ……… ……… ……… ……… ◆Chart～ …………… …………… …………… …………… …………… Change in service creation process • Difference in perception of service between consumers and suppliers Gap News delivery Sales of goods on homepages Building e-mail environment Developing and providing Web browser New Service Environment Service Supplier Consumer

13. Impacts on the market • The Internet has caused a significant change in the market Phase Change Key Word The 1st phase Change in quantity Efficiency The 2nd phase Change in quality Exploration The 3rd phase Change in environment Creation

14. Impacts on the market • The Internet has caused a significant change in the market Phase Change Key Word The 1st phase Change in quantity Efficiency The 2nd phase Change in quality Exploration The 3rd phase Change in environment Creation

15. Change in quantity • New markets generated by the improved efficiency made possible by the network • Change in communications • E-mail • Networking of B to B transactions • EDI • B to B marketplace • From intermediary to info-mediary (The use of the Internet increases efficiency of intermediary service and distribution)

16. Impacts on the market • The Internet has caused a significant change in the market Phase Change Key Word The 1st phase Change in quantity Efficiency The 2nd phase Change in quality Exploration The 3rd phase Change in environment Creation

17. Change in quality • The business emphasis shifts from quantity to quality. • The three perfect states made the formerly untouched area a new market. Manufacturing cost Order production New market Existing market Mass production Market needs Fewer consumers General public

18. Impacts on the market • The Internet has caused a significant change in the market Phase Change Key Word The 1st phase Change in quantity Efficiency The 2nd phase Change in quality Exploration The 3rd phase Change in environment Creation

19. Change in environment • The Internet establishes itself and changes business. • Business mechanisms were replaced • Changes in market principle create new businesses • New businesses taking advantage of the potential of the new environment are expected to emerge

20. Entertainment News, information Ticketing, billing Financial services Maps Dictionary Travel information Dining, cooking i-Mode Service i-Mode Mobile Phone Game Distribution of accesses by content category Shopping Ticketing

21. 1 2 3 4 5 6 ℡ 7 8 9 ℡ * 0 # Appearance of new services • The i-mode, which integrates the Internet with a cellular phone, is bringing a great change to our life style. Rapid and accurate decision making i-Mode Cellular phone functions !! Mobile and portable. Get necessary information on the street (train time table, guide on restaurants, etc.) Internet ??

22. 3. How we should recognize the change in business mechanisms and rules

23. Hype Cycle • Cycle of e-business (business service) Europe 1999 IPO Post-Internet business Degree of expectation The U.S. 1998 “e-Christmas” Plummeting of .com company stocks Dwindling interest by inventors The U.S. 1997-1998 Initial Public Offering （IPO） Failure of conventional “stores” Optimization of e-business Collapse of .com company stocks Disclosure of e-business failure Start of “.com” Dwindling interest by companies Internet Web Rise of real e-business Over-expectation at its peak Dawn of the technology Disillusionment Stable production Awareness activity 1990-96 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 [ Source: Gartner]

24. Technology Business Rules Business, technology and rules • Waves of e-business rules Market demand push Technology pull Degree of expectation “Real” e-business ･Business model ･International agreement (GBDe、WTO) • ･ASP • ･WebSI • ・Security • ・RASIS • ・etc…. Establishment of life style in which technology and business, as well as technology and service, converge and are in harmony Technology revolution on usage Creation of a new framework as a base for real e-business Provision of a stable base Base=Technology, rules Base=Technology Awarenessactivity Dawn of the technology Over-expectation at its peak Disillusionment Stable production 1990-96 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

25. Approach to new service creation • Technology alone cannot solve service creation problems. • It becomes important to devise business mechanisms and rules if new businesses are to be created. • - From technology-based service proposal to creation of real services Technology • Protocol/procedure • Encryption and authentication • Standard codes and format, etc. • Billing and transaction ･Information disclosure ･Intellectual property ･Prevention of unauthorized access ･Protection of privacy • Change in procedure • Change in business practice Business model Rules (legal system, regulations)

26. What rules are • Rules as viewed from market push. Promote and help advancement of the Internet society Market mechanism Rules Crime prevention Encouraging people to do new biz.

27. Market consensus in the consumer-driven era • Generation of new consensus suitable for the network society • Basic consensus • Consensus on value • The network society moves forward as mechanisms are put in place Consensus Internet (bazaar) $ Perfect market Perfect community Perfect value

28. To build a consensus • System for building a consensus in the network community Business/service Business model Mechanism Methodology Consensus on value(Price vs. value of services) Creation of new services Rules Standards and specifications Unification of data format, transaction rules, etc. e.g.) EDI, XML legal system, rules (GBDe, WTO) Technology Common functions Essential functions in transaction process e.g.) authentication, settlement of payment Basic consensus (Mechanism for smooth information sharing and distribution) RASIS* Physical assurance for services on the network e.g.) No system failure RASIS: Reliability, Availability, Serviceability, Integrity and Security

29. 4. How we should recognize the change in intellectual creation

30. Business model (E-commerce mechanism) Changes in intellect creation Software technology (Applications, architecture) Basic technology and theory Hardware technology (Optical, digital and LSI) • R&D responding to needs of the new era is required Expansion of R&D area Base = Technology Base = Technology and rules Era

31. 5. Summary

32. Summary • The development of the Internethasgreatly changed the business environment • From supplier-driven to consumer-driven environment • Convergence of technology, service and rules builds new business infrastructure • Consensus suitable for the network era (creation of new values) is essential