Although the world economy is undergoing a gradual recovery, there are uncertainties in international politics and the outlook for the future has become unclear. Many companies have been moving forward with the digital transformation of their businesses and with their "as-a-service" trend, and both their business departments and their IT departments are taking the initiative with respect to the adoption and utilization of ICT. Within the ICT market, there has been an expansion in the scope of software-defined services, dominance of the IaaS market by a small number of overseas providers, and increases in the sophistication and development of AI, with rapid changes in the market structure. Competition is wide-ranging and fierce, and it is intensifying on a global level.
Based on these changes in the market environment, NTT Communications has established a new corporate vision, "Vision 2020," and a new corporate slogan: "Transform. Transcend." During FY2016, under this new slogan, NTT Com worked to promote its offerings for solutions models that push "global seamlessness" to its fullest extent, while also pursuing automation and improvement of process efficiency, strengthening its competitiveness through its own digital transformation, and working on business process innovations and the creation of new business models for NTT Com's customers.
Specifically, through its "seamless ICT solutions," an optimized, global combination of various services including clouds, data centers, networks, applications, security, and managed ICT in which NTT Com has a particular strength as a telecommunications provider, NTT Com has produced an ICT environment that is uniformly managed on a global level, flexible, on-demand and low-cost, and safe and secure, and supports business operations. Through its seamless ICT solutions, NTT Com has contributed to innovation in business processes, such as accelerating customers' decision-making processes and improving productivity, and has supported the creation of new business.
In addition, in an analyst vendor comparison report that evaluates IT vendors on a worldwide basis, NTT Com was named to the top "Leader" position in the global network business field for the fourth year in a row. Furthermore, NTT Com was also named to the "Leader" position for the second year in a row in an assessment of cloud business operators in the Asia-Pacific region. NTT Com further enhanced the competitiveness of its services based on its Global Cloud Vision. NTT Com's key measures by type of service were as follows:
o Cloud Computing Platforms
"Enterprise Cloud," a cloud service for businesses that has platforms deployed at 14 bases in 11 countries around the world, substantially increased its functionality in Japan in March 2016, and from April 2016 has been expanding in various countries abroad as well. In addition, NTT Com's new partnerships with other companies included the signing of a collaboration agreement with Mirantis Japan, Inc. in October 2016 to provide OpenStack managed private cloud services, a collaboration agreement with NTT Data Corporation, Pivotal Japan K.K., and Intel Corporation in November 2016 to develop and deliver cloud-native solutions, a collaboration agreement with Virtustream, Inc. and EMC Japan K.K. in February 2017 for the development and distribution of shared-cloud platform services that support large-scale SAP systems, and a collaboration agreement with Microsoft Japan Co., Ltd. in March 2017 for joint development and marketing cooperation on hybrid cloud platforms for corporate customers.
With respect to NTT Com's Nexcenter data center services, NTT Com launched the Virginia Ashburn 2 (VA2) Data Center in April 2016 and the Tokyo 9 Data Center in December 2016. NTT Com also commenced the construction of the Virginia Ashburn 3 (VA3) Data Center in December 2016.
In addition, with respect to NTT Com's "SDx+M" solution, which utilize software-defined technology, beginning in March 2017, NTT Com started offering the "Software-Defined Exchange Service (SD-Exchange)," which provides seamless and secure high-speed global connection between "Enterprise Cloud," "Nexcenter" and multiple other cloud services, including "Amazon Web Services."
o Data Networks
In October 2016, NTT Com launched the "Secure Internet Connectivity Function (vUTM)" security option service for the high-quality, high-reliability "Arcstar Universal One" VPN. Additionally, for its "Arcstar Universal One Multi-Cloud Connect" services, with which a multi-cloud system can be built on a secure closed area network, NTT Com launched an enhanced function that enables immediate connection and bandwidth changes on-demand in April 2016, enabled connections to United Kingdom-based cloud platforms in June 2016, enabled connections to United States-based cloud platforms in October 2016, and launched options that comprehensively support the installation, implementation, and operation of "Amazon Web Services" in December 2016.
In September 2016, NTT Com launched the "OCN vWAF" service, a SaaS-based security service that protects customers' web servers from unauthorized access, for NTT Com's "OCN" Internet connectivity service.
For its high-speed LTE communication service, "OCN Mobile ONE," NTT Com launched Wi-Fi spots that offer free connections in July 2016, "burst transfer functions" that improve communication speeds starting September 2016, a device warranty service "Anshin Hosho" ("Peace of Mind Warranty") covering repair and replacement of smartphones that went into use in October 2016, and high-capacity and sharable 20GB/month and 30GB/month plans in February 2017.
For its "SDx+M" solution, which utilizes software-defined technology, NTT Com began offering the "Software-Defined Network Service (SD-NS)," which flexibly builds and manages overlay networks over multiple lines through software control, in March 2017.
o Voice Communications
For its unified communication service "Arcstar UCaaS," NTT Com expanded the range of its services for large enterprises. For example, Arkadin SAS, an NTT Com group company, completed the acquisition of Applicable Limited, a leading UK provider with a particular strength in implementing Microsoft-based unified communication services, in September 2016.
For voice-based services, in October 2016, NTT Com launched the unlimited calling service "Business Mobile" for business customers, allowing customers who make a high volume of calls from cellular telephones to receive a higher discount. In February 2017, NTT Com also launched a website for changing settings, such as strengthening security, when using BYOD. Furthermore, with respect to its "OCN Denwa" service, which is offered to customers with "OCN Mobile ONE" SIM cards with voice support, in August 2016, NTT Com launched the "OCN Denwa Unlimited 5-Minute Calls Option," which can be used as often as desired at a fixed price, launched the "OCN Denwa Unlimited 10-Minute Calls Option," which increased the call-time provided under a fixed price plan, in February 2017, and, in March 2017, launched a wholesale service for "OCN Denwa" for MVNOs that can reduce calling charges on low-cost smartphones.
With respect to international hubbing services, NTT Com launched the "A2P SMS International Hubbing Service" in November 2016 for use with A2P SMSs (Application to Person Short Messaging Services), which are messages sent by businesses to individuals for marketing or authorization or other purposes. The service relays international messages via the most appropriate route to minimize delays and to ensure delivery.
o Applications and Content
In October 2016, NTT Com launched the "MySign" service, which supports the use of the public personal identification services that use the My Number card.
With respect to services that utilize AI (Artificial Intelligence), NTT Com launched the "Communication Engine 'COTOHA,'" which can understand natural Japanese conversation with a high degree of accuracy and actively asks for necessary information for "human-like conversations." In addition, in January 2017, NTT Com launched the "Semantic Search Engine 'COTOHA Chat & FAQTM,'" an AI-based query resolution support service for business customers that displays appropriate answers in response to queries entered by website users, and also launched the beta version of the "Industry-Specialized AI Translation Platform Service," which provides highly accurate AI-based translation functions.
o Solution Services
In August 2016, NTT Com expanded the AI capabilities it had installed on the managed security services operations platform of "WideAngle," NTT Com's comprehensive risk-management service, substantially strengthening its cyber-attack analysis logic. In addition, in October 2016, NTT Com launched the "Rapid Incident Support Warranty" and "Standardized Malware-Infected Device Inspection" options for security incident responses. Furthermore, in February 2017, NTT Com began offering a "Proactive Response" option that automatically shuts down communications with infected devices after any unauthorized access to a company's internal systems is identified. NTT Com has been working to provide services that comprehensively support risk management and counter-measures against increasingly sophisticated and malicious security threats in conjunction with NTT Security (Japan) K.K., which commenced operation in August 2016.
For SDx+M solution that utilizes software-defined technology, in October 2016 NTT Com launched a "Software-Defined LAN Solution (SD-LAN solution)" that builds an office-based LAN structure combining both solidity and flexibility.
NTT Com added "SD-NS," "SD-Exchange" and "SD-LAN Solutions" in March 2017 to its total managed ICT service "Global Management One," enabling full-life cycle support from design, construction, maintenance, operation, and analysis for the entirety of customers' ICT environment on a global basis.
o New Service Areas
NTT Com's IoT business promotion included collaborations with partner businesses, including application platform providers and device companies, as well as providing services that are suited to all use-cases, from "Factory" to "Product" and "Vehicle," utilizing NTT Com's network, cloud, and data center assets that are deployed worldwide and are available to NTT Com as a carrier, in order to contribute to business transformation and productivity increases by enabling the rapid realization of business ideas through IoT.
With respect to SDx+M solution that utilizes SDx technology, beginning in March 2017, NTT Com expanded the functionality of its "Cloud Management Platform (CMP)" system, which enables the centralized management of cloud services, such as "Enterprise Cloud," "Amazon Web Services" and "Microsoft Azure," with on-premise systems that customers have built, supporting "SD-NS," "SD-LAN Solution," and "SD-Exchange."
In connection with sales, NTT Com has developed solutions proposals that contribute to the Digital Transformations of customer companies from a company-wide Go-to-Market perspective, including through its entry into mutual collaborations. For example, NTT Com signed a three-year technology partnership agreement with the McLaren-Honda Formula 1 racing team, commencing mutual collaboration towards building an ICT foundation with optimized performance to support the Formula 1 team with the latest technology for networks, clouds, IoT, data collection, and analysis. In addition, NTT Com worked on the global rollout of efficient and effective sales efforts by establishing its sales channel portfolios and solution models to meet the needs of the target market, supporting customers' "transformation of existing business" and "creation of new business models" by strengthening its offerings with solution models that utilize seamless global services to the fullest extent.
In the field of operations, NTT Com worked to utilize digital technology as a source of its competitiveness to accelerate simplification/automation/standardization, and reinforced its capability to handle combined service projects and deepen its customer contact points. NTT Com also built delivery, maintenance, and operations processes to meet the needs of combined service projects, and worked on full and complete automation of standard operations. Further, in October 2016, NTT Com commenced operation of the "Asia Pacific Gateway" high-bandwidth optical submarine cable network in order to increase its cable capacity within Asia and to enhance connectivity with Asian countries. In addition, construction of the undersea cable-laying vessel "Kizuna," to be operated by NTT World Engineering Marine Corporation, began in March 2017 to strengthen NTT Com's ability to lay and maintain cables.
In order to promote seamless global management, NTT Com has implemented a globally standardized ERP system across each NTT Com group company. Furthermore, with respect to procurement, NTT Com undertook an evaluation of modifications to its procurement systems, and fundamentally streamlined its procurement processes for resales, office products, low-cost items, and supplier management. NTT Com also worked to improve its process efficiency by advancing the standardization of its service procurement, increasing the use of databases and setting suitability check-flows to reduce costs, and promoting the flow-through of contracting and payment tasks (electronic estimates/contracts/invoicing). In addition, in human resources, NTT Com focused on personnel recruitment, retention, and training to be able to offer even more sophisticated services, such as by providing engineering experience to all of its younger staff members.
In terms of CSR, in October 2016, NTT Com published a review of basic principles in the CSR Report 2016. In the area of environmental protection activities, NTT Com established its Environmental Declaration and Environmental Targets for 2030 in November 2016. In addition, NTT Com is working to protect the environment and to reduce its own environmental burden by making air conditioning systems at its data centers and communication buildings more efficient, improving air flow, and expanding the installation of automatic air conditioning control systems.
With respect to security, NTT Com has started initiatives to reduce security risks and to strengthen its collaboration and support system with its group companies in order to further reinforce cyber security measures at group companies both in Japan and overseas.
In terms of diversity, NTT Com has been actively promoting a highly productive ICT-enabled workplace environment for its own employees that allows them to adopt flexible working practices, achieve an improved work/life balance and thereby achieve their full potential, regardless of age, gender, nationality, religion or physical ability/disability. Based on NTT Group's gender equality plan targeting a doubling of the percentage of women managers to 8.9% in 2020, NTT Com additionally continues to support the career development of female employees and the appointment of female managers, and also actively hires more female employees. As a result of these measures, NTT Com was recognized in the Ministry of Internal Affairs and Communications' newly established "100 Pioneers in Teleworking," and also received the highest certification, "Eruboshi," from the Minister of Health, Labor and Welfare, based on the Act on Promotion of Women's Participation and Advancement in the Workplace.
As a whole, NTT Communications Group's consolidated operating revenues decreased for the first time in four years, decreasing 36.1 billion yen (-2.7%) over the prior fiscal year to 1,283.0 billion yen. However, operating income increased 14.3 billion yen (+12.1%) compared to the prior fiscal year to 132.5 billion yen.
Non-consolidated operating revenues for NTT Communications by service were as follows. While revenues from NTT Com's Cloud Computing Platforms increased 2.0 billion yen (+2.9%) over the prior fiscal year to 72.0 billion yen, revenues from Data Networks increased 14.9 billion yen (+4.0%) to 384.8 billion yen, and solution services revenues increased 1.1 billion yen (+0.7%) to 163.4 billion yen, Applications and Contents revenues decreased by 0.9 billion yen (-2.6%) compared to the prior fiscal year to 37.7 billion yen and Voice Communications revenues decreased 9.5 billion yen (-3.7%) to 250.7 billion yen. As a result, NTT Communications' total non-consolidated operating revenues increased, for the second year in the row, by 5.5 billion yen (+0.6%) over the prior fiscal year to 923.8 billion yen.
As a result of increased telecommunication equipment expenses from the provision of Hikari Collaboration Model services, total operating expenses increased 4.1 billion yen (+0.5%) compared to the prior fiscal year to 831.3 billion yen.
As a result of the above, operating income increased by 1.4 billion yen (+1.5%) compared to the prior fiscal year to 92.5 billion yen, marking the first time in nine years that NTT Com's operating revenues and operating income both increased over the prior fiscal year, and net income increased by 12.6 billion yen (+17.5%) to 85.0 billion yen.