Mid-term Strategy
SHIFT has set “SHIFT3000” mid-term strategy targeting net sales of ¥300 billion by 2028-2030. As part of our efforts to achieve our goals, we are promoting our business with the aim of achieving accelerated growth based on the 3 domains. The size of the software testing (quality assurance) market, which SHIFT considers to be its main business area, is approximately ¥5.5 trillion, or about 1/3 of the ¥16 trillion of software market in Japan. As there are no competitors that could pose a threat in this market, we believe that the key to future growth lies in how quickly we can capture the market share in this “Blue Ocean”.
Organic Growth in Existing Businesses
In our current main business, software quality assurance business, “sales capability” and “recruitment capability” would be two important basics to grow.
1．Recruiting Activity
SHIFT is focusing its efforts on recruiting activity to hire talented personnel to meet the growing demand towards our business.
SHIFT implemets several tactics to recruite more engineers under this circumstances where Japanese IT market faces shortage of IT personnel.
- Developing and introducing SHIFT’s original examination, called “CAT examination”
- Conducting video recording job interview
- Focusing on referral recruitment
Utilizing CAT examination enables SHIFT to recruit talented personnel who are not neccesarily experienced ones in IT market. At the same time, those who was “non-IT personnel” could grow to “IT personnel” through experiences in SHIFT, which not only brings success to our further growth, but also, consequently generates IT personnel and contribute to mitigating a social issue in Japan.
2．Sales Activity
SHIFT enforces its sales system, by cultivating existing customers (increasing net sales per customer) and increasing the number of new customers. Here below includes actions taken to strengthen sales activities.
- Increasing the number of sales personnel
- Improving quality and quantity of sales activity through holding internal seminars
- Visualizing sales activity thouroughly and overseeing KPIs
Further M&A-Driven Growth
We are aggressively conducting M&A with the objectives of strengthening our service structure, enriching a comprehensive service portfolio in software development projects, enhancing our service provision capabilities, and acquiring a customer base. SHIFT segments the roles in the software development area and prepares M&A mappings. In this context, we are promoting the selection of target areas and companies.
1．M&A policy for selecting candidate
- Companies which covers areas that SHIFT currently does not.
- Small and midium sized IT companies that employ talented engineers but struggle with business succession.
- Major prime vendors which have user companies as thier customers.
- Companies which handle information about personnel, products, and resources to strengthen our platform business.
*Refere to below for further information about platform business.
2．M&A decision making policy
Additionally, SHIFT also considers perspectives below to make decisions in M&A.
- Whether their added value is high enough and unit price improvement can be expected
- Whether their customer population be utilized
- Whether they immediately contributes to profit over its goodwill
- Whether the acquisition price is relatively cheap (around 10 or less than 10 times EBITDA)
Check the link below for further information about group companies.
＞＞＞Group Company
３．SHIFT Growth Capital
SHIFT Growth Capital conducts further enhancement of M&A and PMI. Combining the know-how of M&A / PMI that SHIFT has cultivated, SHIFT Growth Capital implements M&A targeting various companies and supports the growth of group companies in each stage.
Platform Business
SHIFT has developed various kinds of business including our current main business, software quality assurance, and accumulated wide range of knowledge about IT industry. Such knowledge includes software development by industry or sector, infromation about skill and unit price for engineer, order amount and credit information for development projects. SHIFT would develop a matching platform based on our knowledge accumulated, which could match engineers who seek projects to work on and projects who seek engineers to assign.
Check the link below for our Information Security Policy and Privacy Policy.
＞＞＞Information Security Policy
＞＞＞Privacy Policy
Risk Management
Although we carefully manage risks on both strategic and operational level, there may be still risk factors that may affect SHIFT Group’s operating results and financial position including followings.
SHIFT Group’s policy is to recognize these risk factors and manage to avoid their occurrence or to respond in the event that they occur. However, these risk factors below are not complete, and there are unforeseeable risk factors. Therefore, we believe that investment decisions must be made after careful consideration of all the risk factors other than following items.
| (1)Software Testing Market Trends | |
|---|---|
| The content of risk | SHIFT Group is working to develop its business, centered on software testing services. The outsourcing market for software testing offered by SHIFT Group is expanding with a background of increasing demands such as growing quality awareness among software development companies and a shortage of IT personnel in Japan. We expect this trend to continue in the future. However, if the outsourcing market for software testing does not expand as expected, our operating results and financial position could be affected. |
| Probability of occurrence | Small |
| Impact | Large |
| Countermeasures | We are working to expand our service lineup in order to strengthen our ability to respond to IT-related markets other than software test services. |
| (2) Possibilities of Intense Competitions | |
| The content of risk | Recruiting is an important key factor in SHIFT Group. While the number of engineers in Japan remains around one million, the amount of IT investment is increasing. As a result, the ratio of job openings to applicants in the IT industry is 11 times higher than in other industries. SHIFT Group is working to secure sufficient human resources by conducting certification tests for the abilities necessary for various operations, which were originally created to accelerate hiring, hiring non-IT personnel, reducing the turnover rate, and strengthening cooperation with partner companies. However, SHIFT Group’s operating results and financial position may be affected if we are unable to secure sufficient engineers for its operations due to intensified competition or for any reason. |
| Probability of occurrence | Medium |
| Impact | Large |
| Countermeasures | In order to stably secure employees with high-level skills, we are working to strengthen the human resources division, mainly in charge of recruitment, to secure competitive salary levels with an awareness of market value, and to strengthen approaches not only for those with career change but also for those with career change potential. In addition, in order to reduce the turnover rate, SHIFT Group conducts fixed-point observation of employee engagement status, implements measures to address identified issues, and strives to improve them. In addition, we are also engaged in various initiatives to support career development including group companies. In addition, in order to secure a large number of high-tech business partners other than employees, we have established a system of collaboration with each business partner using engineering platforms, etc. |
| (3) Prevention of unprofitable projects | |
| The content of risk | SHIFT Group provides services in the form of contracts centered on business outsourcing. When implementing software testing services, which are our core business, we strive to fully explain to our customers that software testing services do not guarantee the discovery of all defects and other defects contained in software, and do not guarantee the integrity of software, etc. In addition, regardless of the nature of the business, our policy is to establish certain disclaimers regarding liability for damages under the contract. However, if, for some reason, communication with client companies is not fully implemented and problems arise in the performance of operations, resulting in the pursuit of liability for damages and resulting in liability, there may be a loss in the project and the Group’s operating results and financial position may be affected. |
| Probability of occurrence | Medium |
| Impact | Large |
| Countermeasures | SHIFT Group fully explains its warranty terms and liability for damages to client companies when signing contracts. In principle, we coordinate with client companies so that they can provide services in the form of quasi-mandate without liability for non-compliance. |
| (4) Leakage of Confidential Information | |
| The content of risk | With regard to the services provided by SHIFT Group, we have entered into a confidentiality agreement with employees, etc. to ensure that confidential information regarding the development of software, etc., is not leaked outside the group. For terminals used by employees, we strive to preserve data including at home by encrypting data, restricting access and monitoring log acquisition, and introducing an ID management system (including multi-factor authentication) for various systems. For highly confidential operations, we have implemented a variety of measures to prevent leaks, including the use of fingerprint authentication systems for access control and surveillance cameras for 24 hours a day, 365 days a year. In addition, we have acquired ISO27001 (ISMS) certification, the international standard for information security management systems, and are implementing proper handling and strict management of information. However, in spite of these measures, if confidential information or personal information is leaked outside for any reason, SHIFT Group’s operating results and financial position may be affected by the pursuit of liability for damages and loss of social credibility. |
| Probability of occurrence | Medium |
| Impact | Large |
| Countermeasures | In order to respond to the risk of leakage of confidential information, in addition to the above measures, SHIFT Group continuously provides employee education through e-learning, etc. regarding the handling of confidential information.Moreover, in the event of minor incidents, we make efforts to prevent recurrence by thoroughly disseminating such information through the Compliance Committee and the Information Security Committee. |
| (5) Employee fraud | |
| The content of risk | As the number of officers and employees increases year by year in line with the business expansion of SHIFT Group, we have established compliance-related regulations to prevent bribery, embezzlement, insider trading, and other misconduct by officers and employees and other internal parties. In addition, we continue to educate employees through e-learning about the laws and rules that officers and employees of SHIFT Group should comply with. However, SHIFT Group’s operating results and financial position may be affected if there is a conflict of laws or regulations, or if there is a situation in which an internal control system cannot be established due to rapid business expansion. |
| Probability of occurrence | Small |
| Impact | Large |
| Countermeasures | Other than above, we implement various measures against fraud and scandals such as the establishment of hotline as internal reporting system. SHIFT Group put the best effort to find frauds and scandals by directors and employees quickly and to respond to them appropriately. |
| (6) Regulations in the Software Test and Software Development Business | |
| The content of risk | SHIFT Group’s software testing and software development are provided in the form of sub-delegation or contract based on outsourcing contracts concluded with client companies. Unlike a dispatch contract, an outsourcing contract refers to a contract in which SHIFT Group, which is the employer, has the command and orders for workers to perform their duties. However, while the contract form is an outsourcing contract, the problem of fraudulent subcontracting, in which the actual command and orders are given to the workers by the client company, has also been raised socially. Because fraudulent contracts violate the Employment Security Act and the Labor Standards Act, in the event that SHIFT Group concludes a business contract with a client company, even if it becomes necessary for employees of SHIFT Group to conduct business within the premises of the client company, we have established a system in which a person in charge of administration is always appointed and the person in charge of administration is responsible for directing and ordering employees. However, SHIFT Group’s operating results and financial position may be affected if administrative authorities point out the problem of fraudulent contracts and we are subject to penalties such as business suspension. |
| Probability of occurrence | Large |
| Impact | Medium |
| Countermeasures | In addition to continuing e-learning on legal compliance for employees of SHIFT Group, including the prevention of fraudulent contracts, we established the Group Compliance Committee, which focuses on the eradication of compliance violations in SHIFT Group, and strives to educate employees and develop systems for compliance with various laws and regulations. |
| (7) New Business Development | |
| The content of risk | Our corporate philosophy is to create world-class services with the aim of “creating new value concept.” Therefore, we recognize the importance of developing new business proactively in fields other than software testing in order to nurture our brand as a company that “creates new value.” In order to respond to these challenges, while expanding software testing services as our core business, SHIFT Group is actively investing to develop new businesses in a certain range, taking into account compatibility with existing businesses, profitability, sociality, and the impact on employees’ motivation. However, SHIFT Group’s operating results and financial position may be affected by the burden of investments made in these activities if SHIFT Group is unable to achieve its business plan due to numerous uncertainties. |
| Probability of occurrence | Large |
| Impact | Small |
| Countermeasures | With regard to the development of new businesses, we conduct trials with a small start to minimize risks, after careful consideration is given to the relationship with existing businesses and profitability. |
| (8) M&A | |
| The content of risk | SHIFT Group is actively promoting M&A with the aim of strengthening its ability to provide services and expanding into new business areas. In addition to the fact that SHIFT Group may not be able to achieve the initially anticipated synergies and business expansion in the development of business through M&A, risk factors specific to new business areas may be added through M&A. Moreover, SHIFT Group’s operating results and financial position may be affected in the event that goodwill impairment losses occur due to the deterioration of business performance after joining SHIFT Group. |
| Probability of occurrence | Medium |
| Impact | Large |
| Countermeasures | In actively promoting M&A, the Board of Directors conducts due diligence including advice from external experts such as attorneys, tax accountants and certified public accountants with regard to the financial content and contractual relationships of the target company, and fully examines the results at the Board of Directors Regarding governance and management of subsidiaries after investment, we hold the Group Management Council and the Group Performance Council, monitors monthly performance, and reports to the Board of Directors of SHIFT. As a result of the monitoring, we immediately implement measures as a group for companies that are not achieving their budgets well. |
| (9) Dependence on President | |
| The content of risk | Masaru Tange, President and CEO, is the founder of SHIFT and has been CEO since its foundation. He has taken an important role in formulating business strategies and utilizing connections in the industry. In order to avoid excessive dependence on him, SHIFT Group is working on strengthening its management control system and developing and hiring senior executives. At this point, we believe that SHIFT Group depend on him at a high degree. In the future, if it becomes difficult for him to continue to execute the business operations for any reason, there may be an impact on our group’s business operations, etc. |
| Probability of occurrence | Small |
| Impact | Large |
| Countermeasures | In addition to the above measures, SHIFT Group has reduced dependence on representatives for business execution by appointing persons with management experience at other companies as full-time Executive Directors. In addition, we have strengthened the structure of the Board of Directors by inviting Outside Directors with abundant experience and advice from the Nominating Committee. |