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Evidence suggests that outsourcing currently accounts for a mere 1% of the overall software testing market, so who handles the other 99%?
Existing developers handle testing as part of their duties.
What is your position on international business?
In the future, we may need to seriously pursue expansion into overseas markets in order to reach ¥1 trillion in net sales. Even speaking strictly of the Japanese market, though, there is still plenty of potential for business cultivation at this time, so we do not currently see international expansion as a top priority strategy.
There has been a spate of security incidents in recent years, such as illicit translations and customer information leaks. Does SHIFT have any involvement in such incidents?
SHIFT Group has taken part in measures to deal with the occurrence of such incidents and implement improvements, but we refrain from referring to specific customers by name.
SaaS and cloud services are making inroads. How closely is SHIFT involved in such projects?
We are involved to a certain extent, but SHIFT Group’s services provide a comprehensive range of coverage, from SaaS and cloud conversion projects through legacy development, which accounts for the greater part of today’s market. Hence, at this juncture, SaaS and cloud related fields are not a particularly major source of sales for SHIFT.
How does SHIFT deal with the chronic shortage of engineers in the IT industry?
We have a number of measures in place. We are intensifying our use of recruiting strategies that are effective regardless of the shortage of IT engineers. We are making use of our CAT examination to recruit personnel from non-IT backgrounds who nevertheless have the potential to hit the ground running, and we are conducting video interviews to shorten recruiting lead times. Further details are available at the link provided.
Will the issue of SAP’s 2027 support deadline problem have any impact on SHIFT Group’s business?
We think it will be beneficial to SHIFT Group. The so-called “2027 problem” (formerly the “2025 problem”) is the termination of support for legacy SAP ERP software in 2027. One of the problems this presents is that the shortage of engineers familiar with SAP and the looming deadline means there are not enough personnel able to deal with a sudden spike in demand. SHIFT Group has launched a special SAP task force to address needs resulting from the 2027 problem. As quality assurance specialists, we provide comprehensive services from consulting through testing.
Will the government’s 2022 launch of a new Digital Agency have any effect on SHIFT Group’s business?
We are currently looking into specific potential impacts, but if the effects of the new Digital Agency’s establishment manifest themselves as growth in public sector demand or promotion of digitalization throughout Japan, we would consider those to be beneficial impacts.
Has DX had any impact on SHIFT Group’s business?
DX, an abbreviation of “Digital Transformation,” is a movement that aims to transform business and daily operations utilizing the latest digital technology. For companies, DX presents a huge inescapable wave as they are forced to become more competitive by leveraging new technologies to drive their own transformations. Hence, with DX driving accelerated migration and new development, we have a palpable sense of a continual growth trend in demand directed toward SHIFT Group.
How does SHIFT assess the barriers to market entry?
We believe there are substantial barriers to market entry.
Software testing has traditionally been a task performed by engineers with “professional intuition.” Engineers’ main interest also generally lies in development, and they are also generally averse to performing testing work, which is generally considered to be a dull process. Even if an ambitious professional were to start up a software testing company, without a systemized methodology like SHIFT has, those personnel with development experience and knowledge may have to comply, but for the aforementioned reasons such people are few and far between. Since this situation presents an impediment to business scalability, the fact of the matter is that it is quite difficult to compete with SHIFT Group.
In addition, when a major development vendor launches a subsidiary or new department specializing in software testing, a kind of hierarchy tends to form between the development and QA teams, and for a development engineer, being assigned to such a new entity is seen as a demotion, which hinders their career prospects at those companies.
At SHIFT Group, though, we undertake inner branding to promote software testing as a profession worthy of pride since as long there is software development there will also be an essential need for software testing. Since consulting services for manufacturers were originally SHIFT’s main line of business, we have established a new perception of the software testing work we have undertaken as “professional intuition” that was not readily included in the IT industry’s hierarchy structure. Thus, we have promoted the notion of software testing as a job that anyone can be capable of performing. This set of strengths and differentiation factors, have made it hard for would-be competitors to catch up with us in all manner of ways, including human resources, positioning, and technologies.
We have also independently developed our own patented software testing tool called the CAT System, which we use to conduct standardized software testing without relying on individual skills. We have also compiled an internal database of software bugs and related information acquired through the testing we have conducted. By continually analyzing that data, we have further evolved it into a knowledge base, the utilization of which enables us to provide consulting services on upstream processes. Hence, even if a potential competitor were to attempt to imitate our business model, we believe we possess a level of knowledge and a solid reputation beyond the reach of such would-be competitors.
What kind of competition do you have?
As a provider of software quality assurance services, SHIFT has worked since its very inception to develop a standardized software testing system that takes the element of human variability out of the equation to deliver consistent quality control. With highly qualified personnel deployed to project execution, we have made great strides in enhancing the efficiency of these operations.
In the entertainment sector, there are two publicly traded software testing specialists. However, in the enterprise market, which is our main domain of business activity, there are no competitors offering the kind of specialization in quality assurance that SHIFT provides.
When it comes to consulting, PMO services and other such areas in the upstream stages of the development process, we could potentially face competition in some cases from certain consulting firms or developer vendors, but we believe the unique character and strengths of SHIFT Group lie in our ability to provide not just limited services, but end-to-end services from development through testing, post-launch maintenance administration, and peripheral support.
How big is the market?
About ¥5 trillion. The “Basic Survey on the Information and Communications Industry” estimates Japanese IT industry at ¥15 trillion, and according to the “Software Development Data White Paper 2018-2019,” software testing accounts for roughly 34% of the total software development process. Based on that data, we estimate that the software testing market is worth about ¥5 trillion.
Moreover, as of 2020, most software testing is performed by engineers at user companies or system integrators (development companies) in addition to their duties as developers, and we estimate that so far only a small portion of testing is outsourced to software testing/quality assurance specialists like SHIFT.