NEW YORK: Small and medium businesses (SMBs or companies with up to 999 employees) in Japan are on track to spend $67.5 billion on information technology (IT) and telecommunication in 2008, up some 5.4 percent over 2007, driven mainly by accelerating investments among Japan's SMBs on IP-based communications, according to the latest study by New York-based Access Markets International (AMI) Partners, Inc.

IP communications usage is expected to grow at the rate of about 50 percent in 2008 over 2007. "Overall market size for IP-based communications is still embryonic in the Japan SMB space, but IP-based Centrex services are rapidly replacing conventional PBX," says Yuki Uehara, New York-based research analyst at AMI-partners. Moreover, wireless IP phones integrated with IP communications are becoming relatively popular among medium businesses (MBs, or companies with 100-999 employees). Small businesses (SBs, or companies with up to 99 employees) on the other hand, are prone to be attracted by Windows Mobile-based smart phones."

Widely adopted broadband connectivity has been encouraging SMBs to adopt cost-saving and efficient voice communication technology. Also, the fiber optics-based networking infrastructure available throughout Japan has enabled telecom carriers to offer scalable and quality services which are often bundled with WAN and/or VPN services at prices affordable for SMBs.

Also, there is a large pool of first-time adopters in the Japan SMB space due to lagging deployments of PBX, compared to their US counterparts. Japan SMBs have greater penetration of remote sites than their US counterparts, but many of those who have branches do not have internal communication systems. Major inhibitors are the cost of ownership. In-house implementation of PBX requires not only large overhead cost, but also internal expertise to maintain the system and additional investments to upgrade or to add functionalities. Moreover, today's pace of technological innovations shorten the overall lifecycle of the system. However, improving quality and flexibility of today's IP-Centrex services significantly reduces those inhibitors.

"SMBs are often uncertain about the bottom-line benefits of sophisticated IT products and services available in the market today," Ms. Uehara says. "However, it is relatively easier to justify the investment to IP communication services because the cost saving and efficiency are more tangible. Integration with mobile communication devices is likely to be the driver of IP communication services in the next few years."

Japan has lagged in offering "smart phones" due to the proliferation of already-smart-enough cellular phones featuring comparable functionalities as what-are-called smart phones in the rest of the world. However, focusing on business needs mobile communication carriers have recently released business phones—including Windows Mobile-based devices.

Most models are not only compatible with various business applications, but also come with advanced security controls such as remote lock and deleting data in the case of loss, wireless LAN connectivity and voice-over-IP (VoIP). "SBs that do not have legacy communication infrastructure are better positioned to take advantage of deploying such business phones," Ms. Uehara says.