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Annual Report is also available
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the Netを掲載しています。ぜひ、併せてご覧ください。
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当社では、ウェブサイトでもAnnual│Annual Report 2019│Net One Systems Co., Ltd

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and securities
reports, as well as the latest IR news
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One Systems’ basic approach to social and environmental issues and an overview of related initiatives
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Annual Report 2019

JP TOWER, 2-7-2 Marunouchi, Chiyoda-ku, Tokyo 100-7024〒100-7024
東京都千代田区丸の内二丁目7番2号 JPタワー
ir@netone.co.jp
03 ‑ 6 2Relations
5 6 ‑ 0 6 1&5Investor（広報・IR室）
PublicRelations Office

水なし印刷・ノン VOC インキ・FSC 認証紙

マーク

Net One Systems provides support for utilizing
and leveraging ICT, helping people and companies
to “connect” and “communicate” and ultimately
drive “change” in society.

Networks enable people to “connect” to exchange data and to “communicate” to convert raw data into useful
information. By connecting people to people, and people to society, we can spur communication and propel“connect” and “communicate” and ultimately drive “change” in society.

Our value creation
How Net One Systems isdriving change in society

Our businessfields and value“Connecting” people to people, and people to society,spurs “communication” and drives “change” in society itself
Workers
Companies●

Businessapplications

Businessapplications

Businessapplications●

Integrated ICT platforms

SecureNetworking systems+
Computer systems

Seamless

Work styleinnovation●

Work-life
balance

IncreasecompetitivenessCentral government agencies
and local governments

Information

High quality●

Telecom carriers●

Improve public
services●

Provide newservices●

Enhancesecurity●

Improve
operatingefficiency

Connecting people

Sustainability

Our value

Workers

Build newbusinesses
using IoT andother tools

networkBusiness fields

Growth Strategy

Networks enable people
to “communicate” to convert
raw data into useful information.

Networks enable people to“connect” to exchange data.

Connecting society
Review of OperationsC O N T E N T S
Chapter 3: Sustainability

Editorial Policy

Contribute to Society Through Our Business. . . . . . . . . . . . . . . . . . . 28
Key Sustainability Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Key Issue (1) Train Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Key Issue (2) Strengthen Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Key Issue (3) Build Relationships with Stakeholders . . . . . . . . . . . . . . . . 34
Key Issue (4) Improve and Reinforce the Business Base. . . . . . . . . . . . . 36
Key Issue (5) Provide New Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Key Issue (6) Utilize ICT to Reduce Environmental Impact . . . . . . . . . . . 48

Our management vision is to be "a company trusted and supportedby all stakeholders (an Admired Company)." For this report, we haveselected key information from Net One Systems’ value creation
process, business strategy and non-financial data and presented it
in a clear and integrated manner. We have designed the report to be
used in conjunction with the Net One Systems website as part of ourefforts to communicate effectively with shareholders, investors andall other stakeholders.

Chapter 4: Review of Operations

Forward-looking Statements

Chapter 2: Growth Strategy

Business Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Enterprise Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Telecom Carrier Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Public Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Partner Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Chapter 5: Key Data

Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Non-financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

01

Annual Report 2019

This report contains forward-looking statements that involve inherent
risks and uncertainties and therefore may differ materially from
actual results. Forward-looking statements are based on information
currently available to the Company and investors should not place
undue reliance on them. The Company undertakes no obligation
to update or revise current forecasts in this report to reflect
events, changes in the operating environment or other unforeseen
developments that may occur in the future.

Skills and Sprit of TAKUMINet One Systems is one of Japan’s leading companies involvedin the integration of systems for the information network society.
To address expected changes in our market, all our engineers
are enhancing their skills, aiming to transform themselves fromsystem integration professionals to experts in utilizing andleveraging all aspects of ICT. We will remain focused on our roles
as TAKUMI (“masters” or “experts” in English) in the network
field, while also aiming to be a company that helps to change
society by taking on the challenge of creating next-generation
ICT platforms.

Annual Report 2019

Key Data

Chapter 1: Company Overview and Value Creation

Management Vision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 03
Corporate History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 04
Growth in the Network Business Field . . . . . . . . . . . . . . . . . . . . . . . . 05
Value Creation Story. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06
Chairman’s Message. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 09

President’s Message. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Review of the Fiscal 2016-18 Medium-Term Business Plan. . . . . . . . 16
Overview of the Fiscal 2019-21 Medium-Term Business Plan. . . . . . 17
Market Strategy / Executive Interview. . . . . . . . . . . . . . . . . . . . . . . . . 22
Human Resources Strategy / Executive Interview . . . . . . . . . . . . . . . 25

Company Overview andValue Creation“change” in society itself. Net One Systems provides support for utilizing and leveraging ICT, helping people to02

1 Company Overview and Value Creation
Corporate History

Aiming to be “a company trusted and supported by all stakeholders (an Admired
Company)”

Networks have been our core technology since the first days of the Company.
The network business field continues to expand as connectivity technologies
become more important.

Company Overview andValue Creation

Management Vision

Guided by our management philosophy, “Contribute to innovation in society by utilizing ICT,” our management vision
Net One Systems was established in 1988 as a specialist network installation company, focusing initially on thephilosophy and vision, our management strategy is to transform Net One Systems into a company capable of providing

procurement and sale of routers, switches and other ICT equipment. Net One Systems has grown by enhancing its

new value for future generations by driving “Three growth steps” – customer and partner growth, company growth andtechnical skills as a pioneer in the industry and by using its independent industry perspective backed by testing andemployee growth.

verification to supply advanced technologies that anticipate change.

We have also set out “seven missions” for our business – fulfill our responsibilities to customers, partners, shareholders

Today, companies now see cloud systems, IoT, AI and other ICT assets as vital to business and organizational reforms.

and employees, and contribute to the ICT market, civic society and the global environment. We will strive passionatelyThat means network technologies that securely connect all types of physical assets and functions are also becoming

and tirelessly to win the highest levels of approval from stakeholders as an Admired Company.

increasingly important, driving growth in the network business field.

Contribute to innovation in society by utilizing ICT

Business fields

Network platforms

Network platforms

All areas of ICT platforms

Customer needs

Sharing information
between business sites

Improving communication
speedsUtilizing ICT

Sustainability

Management Philosophy

Growth Strategy

is to be “a company trusted and supported by all stakeholders (an Admired Company).” Based on that management

Management Vision

To be a company trusted and supported by all stakeholders(an Admired Company)
Management Strategy

Three growth steps
Company growth

Employee growth

Value co-creation

UniquenessInitiative

April 2017
Established Net One Connect G.K.
to develop cloud platform software2017

May 2013
Opened an Innovative Office in the new head officebuilding to give customers first-hand experience of ICTShow cases modern work practices with tools
optimized to various environments

2013

Our responsibilities and contributions

Seven missions

November 2008
Established Net One Partners Co.,
Ltd. to expand business partnerships

2008

1999

September 1999
Certified as a gold partner
by Cisco Systems

Responsibility tocustomers

Responsibility topartners

Responsibility toshareholders

Responsibility toemployees

Contributions to
the global
environment

Annual Report 2019

Employees

Employees

Employees

2000

2004

2007

2010

601

1,111

1,570

2,023

FoundedContribution
to society

Examples03

Employees

October 2016
Opened a Security Operation
Center (SOC) staffed by a security
analyst team to provide 24-houryear-round monitoring services

Wider use of
information systems

Contributed tothe start of
the network era

Installed networks, mainly for
major private sector companies

Internet uptake

Improvements in
ICT system efficiency

Helped more people
benefit fromthe convenience of
networks

Took part in projects to increase
the speed of networks for telecom firms

Fiscal Year

Utilization of ICT becomes central to business reform

Supported a more
dynamic society withcloud and security
systems

Expanded business into installation of reliable,
secure cloud systems such as ICT platforms
for local governments

Key Data

Contributions to
civic society

2016

1988

Changes inmarketconditions

Contributions to
the ICT market

January 2019
Established Net One Next Co.,
Ltd. to provide ICT functionality
using refurbished products

2019- Sales

Review of Operations

Customer and partner
growthCreated new added
value throughco-creation withcustomers

Accelerated shift to integrated
services to support customer successAnnual Report 201904

1

Company Overview and Value Creation
Value Creation Story

1 Business Overview

Using our advanced network technologies as a point of difference, we areextending our business reach from networks into all areas of ICT, such as cloudsystems, security and IoT.

Net One Systems will “Contribute to innovation in society by utilizing ICT.”

Company Overview andValue Creation

Growth in the Network Business Field

Net One Systems is growing its business by providing support for all areas of ICT platforms, which bring together all the
networks and computing systems that customers need to run business applications. We provide network infrastructure,cyber security measures, cloud computing, communication tools to support work style innovation, IoT and a range ofCloud systems and security are leading to an even bigger role for networks and Net One Systems.

other systems and services in our main network business field.

emergence of cloud systems in recent years has created a new role for networks. Cloud systems can provide ICT
resources such as CPU, memory and disk capacity in servers and storage systems based on user requirements. That
has led to growth in the provision of server and storage functions over networks, leading to expansion in Net One

Net One Systems also provides comprehensive system and support solutions to accelerate the application of new ICT
tools. We target major companies and government agencies that are working to increase competitiveness by using AI,
FinTech, IoT, Big data, cloud systems and other ICT to drive innovation in business models and work practices.

Growth Strategy

The main benefit of cloud systems is that servers and storage can be used efficiently in line with actual needs. The

Systems’ business fields. Meanwhile, deploying cyber security measures to identify and contain intruders on the network
is an effective way of stopping the spread of computer viruses and preventing unauthorized data leaks. Put simply,
thanks to cloud systems and security, networks are now a key technology in making all ICT infrastructure more efficientand secure. As a company with expertise in advanced network technology, that trend is opening up more possibilities
for us to create unique value that helps Net One Systems stand out in the market.

Sustainability

Business overview

ICT platforms are continuing to evolve, with multi-cloud systems that combine elements of the private cloud and public
cloud becoming more widespread. Networks are needed to securely and effectively connect the different parts of thosecloud systems, which is also spurring growth in our business fields. As the use of digital technology and IoT gathers• Partner companies

Partner business
16.5％

pace, we are likely to see greater use of networks to connect all types of assets in society. That will create even more

Fiscal 2018

opportunities for Net One Systems to contribute to innovation in society.

• Central government agencies,
local governments

Existing

S h if t t o c lo u d c o m p u t in g

• Educational and social infrastructure

Applications

Applications

Applications

Servers

Servers

Servers

Storage

Storage

Storage

Applications

maintenance andVirtualserver• Internet service providers (ISP)

Telecom carrier market
19.5％• Telecom carriers

The Other segment covers businesses that are not included in reportable business segments

operation of systems for
all areas of ICT platforms

VirtualserverServices
41.2％

Fiscal 2018

Breakdown ofrevenue by
category

Products Procurement and sale of
58.8％ ICT equipment, software andother products

Network
Controls CPUs / memory /disks and other
ICT resources

Growth in
Net One Systems’
business field

Network platform

Key Data

Virtualserver• Finance

Applications

Design, installation,

Change innetwork boundary• Non-manufacturing (transport, services)companies• Healthcare providers

Applications

Breakdown ofrevenue bymajor customer
market• Manufacturing (automobiles, electronics, etc)

Review of Operations

Public market
35.0％

Shift to cloud computing –driving growth in our business fields and allowing us to create unique valueEnterprise market
28.8％(System integrators, etc)

Privatecloud

Complete
ICT platform(multi-cloud)Publiccloud

All transfers of data rely on networks, so our understanding of communication
flow means we can optimize the entire ICT platform and enhance security

05

Annual Report 2019

Annual Report 201906

1

Company Overview and Value Creation
Value Creation Story

2 Business Characteristics

3 Our Value Creation Process

Our multi-vendor approach and expertise in utilizing ICT, backed by powerfulverification capabilities, allow us to provide high-quality, high-value-added
optimized solutions.

Net One Systems focuses on communication with both customers and ICT vendors. Through close cooperation withNet One Systems has no affiliations to a single vendor or corporate group. Using the benefits of our multi-vendor

leading overseas vendors, we access the latest information about the global network industry and provide feedback

approach, we can propose optimal systems from an objective standpoint by combining the best products fromto vendors about the needs of the Japanese market, resulting in a shared technology roadmap with a horizon ofvendors in Japan and overseas. We also independently assess new technology at our technology research facility –several years. Net One Systems does much more than provide solutions for customers’ technical issues. To address

one of Japan’s largest. Using those powerful verification capabilities, we can provide full support to customers during

diverse needs, we run a program that allows customers to see first-hand the benefits of fully deployed cutting-edge

the deployment of new systems, such as predicting potential issues based on the method of system migration andtechnologies, giving them an insight into how ideal ICT environments will look in the future. Net One Systems also

developing measures for any issues that may occur.

Growth Strategy

We communicate closely with customers and ICT vendors, allowing us to deploy
optimal solutions and create the kind of added value that only Net One Systems
can provide.

Company Overview andValue Creation

Value Creation Story

installs, uses and evaluates next-generation ICT solutions and services in-house before providing them to customers.
Using know-how gained from installing systems in-house prior to offering them to customers, we can also propose

also proactively learn from our failures, as well as our successes, to help customers reduce the time they need for trial

solutions and services that incorporate ideas about potential applications after installation. Those three strengths are

and error in system deployment. That is part of our rigorous customer-oriented approach in all phases of projects – fromanchored by human resources instilled with our TAKUMI expertise – the ability to leverage advanced technologies

ICT platform design through to operation – helping Net One Systems to create unique added value.

to meet the demands of customers – and by strong bonds with business partners and our skills and know-how as apioneer in the industry.
In our business field, we compete with manufacturers that have significant capital resources, but Net One Systems is

Sustainability

The know-how we gain is then used to provide ideas and suggestions to customers about how to deploy new ICT. We

able to create unique value by using its multi-vendor approach, powerful verification capabilities and expertise in utilizing

Business characteristics

ICT to provide high-quality, high-value-added optimized solutions. We aim to continue growing by cultivating close
relationships with customers that support that approach.

Our value creation process×

TAKUMI

Understandcustomer needs

Combine products from vendors
to create solutions and services
optimized to Japan’s quality
requirements

Share information
on demand trends

Provide expertisein utilizing ICT

Japanese market needs fed backto vendor head offices

Leading overseas
vendors’ head offices

Japanese customers
Verification /Evaluation / Integration④

Provide expertisein utilizing ICTCreate added value
Optimal solutions and services foreach customer + utilization
know-how
Cutting-edge technologies fromoverseas

×②③

Strengths andcharacteristics

Ability to freely combine
various products without
being tied to a single
brand

Annual Report 20193
Expertise inutilizing ICT

Proprietary testing and quality
control at large-scaletechnology researchfacility guarantees
performance

New services and products
also used in-house, verifying
in-field effectiveness

Net One Systems uses solutions
and systems in-house
Accumulates expertise in how to
use systems, as well as merits
and pitfalls

Vendors improve existingproducts, develop new products
Shared technology roadmap

Hidden assets
supporting
Net One Systems’
strengths

Intellectual capitalSocial capital

Human capital

07

2
Powerful
verification
capabilities

1
Multi-vendor
approach

Key Data①

Review of Operations

Verification /Evaluation / Integration

Skills and Sprit ofTechnologies and expertise accumulated as a pioneer in the industry

Elevated awareness of security issues
Pride in system quality

Strong bonds with business partners

TAKUMI

Experience in delivering
actual services

expertise passed on to our personnel

Annual Report 201908

1

Company Overview and Value Creation"Increase customer satisfaction” is a phrase we hear often in our business, particularly in the sales frontline. However,I think our industry sometimes falls short of that goal. We need to stop for a minute and think about why all the newtechnology is being developed. In terms of utilizing ICT, we have to talk with customers about how to get the most out

We will continue to support
growth of customers’“Admired Company”

business partner by showing them new ways of using technology, while also remaining focused on what is importantto them – simple and accurate operation of ICT systems with minimal faults. Pursuing customer success – making a
positive contribution to the development of customer businesses – will remain an enduring part of our approach.
In April 2019, we established a Customer Success (CS) Department to expand sales of system operation services andprovide consulting services to improve system operation. The division has been positioned as a specialist team to help
customers optimize ICT utilization.

Growth Strategy

businesses as anof new technology, rather than just installing it for them and leaving them to do the rest. We need to be their dependable

Company Overview andValue Creation

Chairman’s Message

We estimate customers actually use only around 20-30% of the functionality of ICT tools, at the most. Our sales teams
aim to show customers ways of using the technology, not just selling it to them. But it typically takes around three years
before customers appreciate what we are trying to do. However, the knowledge and expertise we have built up over
the years from numerous projects is likely to become a major point of difference in the market for Net One Systems. By
creating the CS Department, we aim to work with sales teams to rapidly optimize ICT utilization for customers.
One way of verifying whether our ideas fit customer needs is by putting them into practice. In some cases, ICT systems
that worked well at the time of installation lose their relevance as business conditions at the customer change. Net One
Systems is fortunate to have many engineers who like communicating with customers. When highly trusted engineers

Sustainability

Takayuki Yoshino
Chairman and CEO
Net One Systems Co., Ltd.

communicate closely with customers, service levels improve. The CS Department also provides our engineers with

Our new management team’s first year: strengthening systems to lift productivity

new opportunities to develop their careers. Engineers attached to the CS Department monitor how customers use
technology and then provide advice about how to get the most out of ICT. This is a new role for them.

One year has passed since we overhauled our management team in June 2018. A new generation is moving into senior

Net One Systems’ unique ESG – how we contribute to society and the environment

work style innovation using ICT tools. As expected, the new team has spurred some positive changes over the last year.
Discussions by the Board of Directors have been energized and newly appointed directors, including our president, areA fundamental part of our business is “reference” – sharing insights from our own success and failures in the utilization

working very hard in their new roles.

of ICT. We believe that business model has a positive impact on society and the environment. To give an example,
our experience of using ICT to create working environments where employees can work wherever they want, helps

Our outside executive directors, who come from diverse business backgrounds, are also actively providing their advice

customers to improve business efficiency and save energy. That unique Net One Systems’ contribution reduces negativeand input about the Company’s goals at board meetings and in other situations. When we formulated the new Medium-social and environmental impacts.

Review of Operations

roles across the Company. They are targeting further gains in productivity by improving business processes, including

Term Business Plan, we received valuable advice from them about the financial aspects of business development, butalso about developing our personal and professional relationships through work practices and communication.

Another way we are having an impact is by cultivating the next-generation of human resources by providing training forhigh school and university students. The ICT sector faces a global labor shortage, while cyber security is a major issue.
Seeing a need to foster human resources for the ICT sector as a whole, we launched a 12-month cyber security training
program for students at several colleges of technology and universities in fiscal 2018.

Japan’s ICT equipment makers are struggling to move away from their product-out approach to development. Fromtheir perspective, added value is still defined by the equipment seller, not the buyer. That means we have to understandWe are also making our voice heard on social issues. For example, in summer 2018, we started supporting research andcustomers' objectives for introducing ICT tools. By achieving positive outcomes in line with those objectives, we cantesting into security for robotics systems as part of a robotics course at a partner university, along with our insights into

help customers capture added value from their ICT tools for the first time. Because Net One Systems does not makecurrent security issues. We are also involved in providing ICT security courses at a college of technology. Our aim is toequipment, we can follow a market-in approach that emphasizes the needs of users, rather than the product-out

support the development of the ICT market by encouraging students who studied the practical aspects of cyber security

approach favored by manufacturers. That is one of our strengths.

to apply their skills and knowledge in careers in our industry. Those programs, which draw on Net One Systems’ unique

Key Data

Pursuing added value with customers will lead to “customer success”

perspective, should help produce more graduates in the ICT security field, which will also benefit our business.

09

Annual Report 2019

Annual Report 201910

1

Company Overview and Value Creation

2 Growth Strategy
Company Overview andValue Creation

President’s Message

ICT has the power to make lives better
When I was appointed president in 2008, I was told that Net One Systems’ business was hard to understand for an
outsider. That prompted us to actively increase information disclosure to external stakeholders. We have learned a
lot about information disclosure from key partners Cisco Systems, Juniper Networks and VMware – some of North
America's global ICT companies – but we have also continued to provide more information about our differentiation
strategy for the Japanese market. We understand that investors carefully select investment targets only after thoroughly
hope to hear their advice on many different topics to support Net One Systems’ ongoing development.
I would like to end with a small dream I have – a world with no workaholics. Japan is still grappling with the issue ofoverwork. For many people, work is still the central focus of their lives. The best work-life balance differs from person toperson, but we need to drive a radical change in our society so that ordinary people have more time to pursue hobbies

company that provides newvalue to customers, we have toGrowth Strategy

researching and understanding individual companies. As we work to increase dialog with shareholders and investors, I

To stand out as an attractive

improve in three areas – initiative,
uniqueness and value co-creation.

and entertainment. Demands for more leisure time, coupled with the need to complete work more efficiently andaccurately, are likely to drive the creation of new services. That could also change the way ICT is used, such as making
it more user-friendly. Everybody has different ideas about what makes us content. I believe ICT has the power to makeSustainability

all our lives better, now and in the future. That is and will remain my constant goal.

Toru Arai
President and COO
Net One Systems Co., Ltd.

Aiming to be an attractive company with a unique Japanese take on ICT
Since my appointment as president in June 2018, I have met and spoken to many customers and investors, giving
me more opportunities to hear direct feedback about our Company. I gained some useful insights during my dialog
with different customers. Some told me they were serious about achieving a digital transformation (DX) – using ICT
After listening to them, I'm still confident that Net One Systems is heading in the right direction. Meanwhile, the positive
feedback I received about our employees shows how hard our people work to make their projects a success. That
highlights one of Net One Systems’ strengths – human resources.

Review of Operations

to overhaul their businesses – while others said they were struggling to get the most out of their current ICT systems.

Under our new Medium-Term Business Plan, which runs from fiscal 2019 through to fiscal 2021, our vision is to standout as an attractive company that provides new value. For us, an attractive company means a company that is staffedby highly motivated people. Compensation, office facilities, personnel systems and workplace relationships are someways to raise motivation. By putting all those elements in place and ensuring employees are self-motivated, we will beable to create a corporate culture that makes it easier for our people to take on the next challenge, even when things

The ICT sector is unique in that companies will only be successful if they can provide secure, seamless systems that

Key Data

might not be going well.

can be used anywhere and that are compatible with global standards. In that environment, I want Net One Systems toshow its characteristics as a Japanese ICT company. North American companies are good at standing out in the market
by introducing new ideas and technologies faster than anyone else. That means they are also the first to offer “betaversions” during adjustment phases. In contrast, Japanese corporate users of ICT are more skeptical about new ideas,
instead preferring to keep their familiar and reliable products and equipment.

11

Annual Report 2019

Annual Report 201912

2

Growth Strategy

Medium-term growth strategy
Management Philosophy “Contribute to innovation in society by utilizing ICT”

Rapid growth in the number of cloud service providers, mainly in the US
Focus of vendor lineups is shifting from hardware to software

Three basic strategies: Focus on creating high added value
Expand focus markets andnew models- Extend market coverage

Growth of customer/partner
Value co-creation
Three growth steps

Growth of employees
Initiative

Become an attractive company
that can provide new value

Growth of the company
Uniqueness

Provide added value through initiative, uniqueness and value co-creation

Sustainability

It’s our job at Net One Systems to close that gap. Our goal is to introduce the latest global equipment, customize it to

Drive the Integrated
Service Business- Increase the service ratio

Growth Strategy

Implement Work Style
Innovation 2.0/DX- Increase productivity

Customers are prioritizing investment in ICT,
which is now seen as vital to business reform

Net One Systems is creating new value by
integrating cloud platforms and offering enhanced security
We aim to step up our efforts to provide new value by
creating added value together with customers

Company Overview andValue Creation

Net One’s value creation in a changing environment

the requirements of Japanese companies and then provide the resulting systems to international users. If we can dothat, motivation will rise even further, helping Net One Systems become an attractive company.

We made steady progress under our previous Medium-Term Business Plan, which ran from fiscal 2016 through fiscal
2018. However, we have no intention of easing off now just because the Company is doing well. With our new Medium-

Aiming to be a company that can create new value, even when conditions are changing

the kind of added value we need to provide in order to stay competitive in that kind of market. Recently, we have seenchanges in what our customers want from us. Instead of simply supplying products and equipment, more customers
want us to be a business partner that can help solve the issues they face. We have already worked with many customers
to overcome issues in their business, so we know how to tackle any problem, and that has also given us a good insight
into the potential challenges that lie ahead.
From a technology perspective, advances in multi-cloud systems, which link and combine multiple cloud services,
have reduced the need for BCP and Disaster Recovery. Those advances in cloud systems are also transforming thethat anticipate customer needs. At the same time, we believe the trend towards multi-cloud systems is a businessour customers grow. Interesting new ideas and approaches will emerge from combining our customers’ businesses andthe ICT products developed by our partners with our own expertise in utilizing ICT.
To implement new initiatives, we need every one of our employees to be more resourceful and independent. If they canuse original, creative thinking to consistently come up with the best answers, customers will support and accept them,
helping to drive Net One Systems' growth. To become a company where customer growth is aligned with employee
growth, I want to create a corporate culture that actively supports employees who are motivated and ambitious. If we
can encourage employees to be creative and take opportunities with both hands without fear of failure, I’m confident we
can transform Net One Systems into an attractive company.

Key Data

way people and companies work. To remain competitive in our fast-changing industry, we have to offer solutions

Net One Systems’ growth prospects will be very limited if we don’t continue to provide products and services that help

Review of Operations

Our industry is undergoing a major shift, with the leading companies switching positions. We constantly think about

Term Business Plan, we are focusing on three growth steps in order to create value with our customers and partners.

Executing our growth strategy while tackling risks and challenges

opportunity for companies that have a strong position in networks, like Net One Systems. That’s because as connections
to the cloud become more complex, the way networks are designed will become a key factor. For example, the more

Attracting, retaining and training personnel is one of the issues we face in executing our growth strategy. Also, amid

places that people use to connect to the cloud, the greater the need for security. As a company that understands how

faster-than-expected developments in our market, there is a risk we will fall behind and our services will fail to resonate

data flows across networks and harnesses that knowledge to design the best connections, Net One Systems is well-with customers. However, as mentioned in my introduction, Net One Systems’ strength is its people. Our employees

placed to create new value.

are self-sufficient, independent and creative, or as we like to say, our people have “initiative.” I’m confident we can passon that initiative to the next-generation of employees by training them to be well-versed in our corporate culture thatencourages free thinking.

13

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Annual Report 201914

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Growth Strategy

I will continue to nurture the importance of that “Net One

We steadily executed our growth strategy, putting the foundations in place for the next plan

Systems DNA” to ensure they take on new challenges
without fear of failure.
It’s important for us to continue talking to our employees
about our growth strategy so that they are personallyinvested in that strategy. By accurately communicating
market over the next three to five years, we canencourage employees to step up individually and work
towards our shared vision. As part of that communication
with employees, we stream a monthly video message toexplain our management approach, such as our thinking on the three growth steps and advice about business initiatives.
To make sure our message is getting through, we survey employees after each video message and hold Q&A sessions.
Meanwhile, there is a risk that we may not be able to see all the potential issues that lie ahead. To centralize and clarify
all information about risk, we have established a new Risk Management Office that reports directly to the president. Our

With earnings recovering sharply, now is the time to sustain that growth and push our performance higher, rather than besatisfied with the current position. The time when companies like Net One Systems could make a profit simply by selling
equipment is over, and we now need to raise the share of services in our business to drive the next phase of growth.
My main objective as president is to gradually transform Net One Systems into a company that regularly generates
operating income in excess of ¥20 billion.

Net One Systems has a unique position in Japan due to the lack of companies with a strong presence in networks.

billion, operating income of ¥11 billion and an operating margin of 6.5%.
In business with existing customers, we developed proposals to upgrade ICT functions for cloud computing using their
existing network platforms and provided support to help them use cloud resources more widely and enhance data
security. Those efforts paid off, with the Group seeing strong demand from all customer segments – private-sector
enterprises, central and local governments, and telecom carriers – lifting profit growth sharply during the plan.
In new market development, we focused on three markets, industrial IoT (IIoT), corporate and global.
In the IIoT market, we started deploying ICT for smart factories, which uses networks to link all areas of manufacturing
to improve efficiency. In the corporate market, we supported telecom carriers’ strategy of providing managed services tosmall and medium-size enterprises (SMEs).
In the global market, we fell short of our targets, but we put the framework in place for business expansion in the ASEAN region
with the acquisition of Asiasoft Solutions Pte. Ltd. in September 2016 (renamed Net One Asia Pte. Ltd.,consolidated subsidiary).
To drive our shift to the service business, we moved the focus of our business model away from equipment sales toservices, with the rollout of new solutions mainly focused on cloud services and network security, as well as the launch of
capital services, which give customers access to ICT equipment and resources on a subscription basis. In fiscal 2018, we
repositioned all the Group’s business activities as “Integrated Service Business,” providing support for all phases of the ICT
lifecycle – from platform design and deployment to operation and optimization – to add more value for customers.
As a result, revenue, operating income and the operating margin exceeded our targets in all three years of the plan.

Our business activities also contribute to society and the environment. I want to communicate that important role weplay in society to our customers by incorporating those social and environmental elements into our growth strategy.

Medium-Term Business Plan (Fiscal 2016-18) Review: Financial Target

In the fiscal year ended March 2019, the consolidated dividend payout ratio was 35.1%. Our basic policy is to achieve

Dotted lines: Initial targets upon release in fiscal 2016

hand, Net One Systems needs working capital of ¥15 billion. We are also budgeting around ¥10 billion for M&A activity,
primarily targeting companies with strong human resources. That means we need a minimum of ¥25 billion in cash on

New markets / New solutions¥181.9bna payout ratio of “at least 30%,” but our aim is return more than one-third of profits to shareholders. In terms of cash on
Revenue¥145.1bn¥157.2bn

hand, but we see no real need to hold cash above that level. If cash on hand is ¥25 billion, or regularly exceeds ¥30¥155.0bn

5.1％

billion, we will work to return it to shareholders through share buybacks and other means.

Actual=Plan¥170.0bn
Achieved

7.2％

IIoT market
Target: ¥4.0bn

approach. To drive the stable development of our business, we need to establish a service-oriented business model. Our
market is changing at a rapid pace, but the approach we are taking is in line with trends in the market. If we continue
to steadily implement our strategies, I’m confident we will see solid results. I hope we can count on your continued
understanding and support as we work to create a company that generates value for shareholders and investors.

15

Annual Report 2019

Operatingmargin1.7％
Operatingincome¥2.4bnFY2015Cloud systems
with security
Target: ¥10.0bn

Not Achieved
Global market
Target: ¥4.0bn

3.7％

We reinforced our management structure in June 2018, putting in place the foundations for a stronger team-based

Achieved

Plan
6.5%

4.5%

Actual3.1%¥5.7bn¥8.2bn¥13.0bn¥4.5bn¥7.0bn¥11.0bn

Plan Year 1

Plan Year 2

Plan Year 3

FY2016FY2017FY2018Key Data¥146.0bn¥161.1bn

Review of Operations

A final work for shareholders and investorsdevelop new markets, and ④ drive our shift to the service business. The plan’s final year targets were revenue of ¥170

Sustainability

aim is to identify risk early to mitigate any potential impact.

to our growth strategy: ① secure investment from existing customers, ② increase business with existing customers, ③Growth Strategy

our goals based on the expected challenges in the

In our previous Medium-Term Business Plan, which ran from fiscal 2016 to fiscal 2018, there were four main elements

Company Overview andValue Creation

Review of the Fiscal 2016-18 Medium-Term Business Plan

Achieved
Corporate market
Target: ¥6.0bn

Plan
Actual=Plan

ActualAnnual Report 201916

2

Growth Strategy

Three growth steps and three basic strategies to create high added value in a changing ICT market
The ICT market has entered a period of major change. Cloud service companies are growing rapidly, ICT vendors are

Focus markets
Targeting three markets likely to see advances in the utilization of ICT

Company Overview andValue Creation

Overview of the Fiscal 2019-21 Medium-Term Business Plan

shifting focus from equipment to software, and customers are driving digital transformation (DX) in their businesses.
Net One Systems has created new value by integrating cloud systems and providing network security services. Goingforward, we will continue to transform our business to ensure the Group is capable of providing new added value that
supports the growth of customers.

Education market

Target customer: Large hospitals

Target customers: Education boards

Target customers: Large manufacturers

Public hospitals, national university hospitals,
hospital groups, etc

Prefectures and cities with populations of
200,000 or more

Makers of automobiles, robots, machine tools, etc

Smart factory market

will work jointly with customers and business partners to create new value that helps them raise productivity (“value

Current demandCurrent demandCurrent / future demand

co-creation”). To support that, each employee will have to be more creative and responsive (“initiative”) and Net One

Integrating ICT platforms for different
medical systems

Security to protect student data inelementary and secondary schools

Improvements in factory productivity

Systems will have to become a company that is recognized by customers for creating unique value (“uniqueness”).
The plan also includes three basic strategies: expand focus markets and new business models, drive the Integrated
Service Business, and implement a new initiative called Work Style Innovation 2.0/DX.

The Group will pursue growth by focusing on markets and customer segments where it can leverage the strengths of its
Integrated Service Business. In existing markets, the Group will expand its business through continuous developmentof solutions geared toward the use of cloud systems and improvements in security. In focus markets, the Group will
strengthen its proposals for three markets that are likely to see advances in the use of ICT - healthcare, education and

Future demand

Future demand

Revised guidelines to spur use ofcloud services

Wider use of Edtech (cloud services)

Security for medical ID / My Number ID systems
Shift from internal hospital optimization tointer-hospital optimization

Distance learning and interaction between
students and teachers
System operation services to address shortage of
ICT personnel

Preventative maintenance, traceability,
manufacturing automation

Deployment of integrated IoT platforms
for productionCollect, organize, analyze production data
Link with cloud services
Security for production systems
Operation services for production systems

Common themes in the healthcare and education markets are the integration of ICT platforms for different systems,

Sustainability▪ Basic Strategy (1):Expand focus markets and new business models – extend market coverage

Work style innovation for education professionals
Security to protect medical data
Integration of ICT platforms for different
Work style innovation for healthcare professionals
education systems

Growth Strategy

Our new Medium-Term Business Plan is designed to achieve that objective based on three growth steps. The Group

Healthcare market

security, and work style innovation. In the healthcare market, we will also focus on optimizing inter-hospital ICT
platforms, while in the education market, we will provide support for human resources development, etc. In the smart
factory market, we aim to support wider use of production facility data.

smart factories. Additionally, the Group will implement two new business models: Managed Service Providers (MSP)
improve price competitiveness and profitability.

Extend market coverage

Two new business models designed to capitalize on the shift from ICT ownership to use

Focus on markets and customer segments
where the Integrated Service Business can pursue added value
Generate growth in focus markets, new business models and existing markets,
focusing on major companies and organizations (including large corporate groups)
Existing markets
Revenue: extra growth

Focus markets[Core solutions]
Multi-cloud / Improved security / Work style innovation

Cultivate

Refurbishment business
17

Annual Report 2019

Provision of products and solutions to support MSP services
Efficient, indirect way of approaching new customer segments

Refurbished products, third-party maintenance services
provided by new subsidiary
Balances cost-competitiveness with high margins(MSP: Companies that operate ICT equipment on behalf of users)

New

Smart factory market
Managed Service Providers (MSP) support

Refurbishment businessSupport

Education market
New business models

Managed Service Providers (MSP) support

MSP

New products / Refurbished productsManaged services(Networks / Security / Cloud systems)

Customer

Existing

Develop
SolutionsSmallcompanies

Medium-size
companies

Key Data

Focus markets / New business model
Revenue: +¥25bn growth (FY2019-21)
Healthcare market

New business models

Review of Operations

support, which enables SMEs to efficiently run their businesses, and Refurbishment business, which helps companies

Large
companies

Provides only the required functions for optimum cost
Also provides long-term maintenance support packages
All customer segments

New customer segments

Annual Report 201918

2

Growth Strategy

In the MSP support model, we aim to approach new customer segments or work with customers to help them manage
ICT systems as part of corporate group management.

▪ Basic Strategy (3):Implement Work Style Innovation 2.0/DX – increase productivity
Since 2010, Net One Systems has been working to completely overhaul its work practices under a project called WorkIn the refurbishment model, our new consolidated subsidiary Net One Next Co., Ltd., which started operations in April
2019, will provide unique maintenance services for ICT products with expired vendor warranties to help customers

Style Innovation 1.0. We have upgraded ICT tools and office environments, introduced flexible personnel systems andraised awareness of new work practices. Under our new Medium-Term Business Plan, we are accelerating those efforts
by implementing Work Style Innovation 2.0/DX, the plan’s third basic strategy. In North American companies, digitaltransformation (DX) refers to practices involving the restructuring of their businesses, such as using ICT to quantify
headcount in management divisions where M&A deals have led to overlap, retraining and redeploying personnel, and▪ Basic Strategy (2):
Drive the Integrated Service Business – expand service business

reducing headcount. In contrast at Net One Systems, with Work Style Innovation 2.0/DX, we are customizing DX forthe business environments of Japanese companies that want to harness digital tools to visualize their operations andincrease productivity. We aim to further increase customer satisfaction by providing practical solutions through our

As part of efforts to increase the service business ratio, we have repositioned all the Group’s activities as “Integrated“netone on netone” approach (using Net One experiences to benefit Net One businesses), which references our own

Services Business.” Our goal is to contribute to the development of customers’ businesses by pursuing added value

successes and failures in work style innovation.

Growth Strategy

effectively allocate investment.

Company Overview andValue Creation

We have selected two new business models to capitalize on the shift from ICT ownership to use.

from the standpoint of “customer success.” We will create high-value-added services to address customer needs, suchas developing solutions that enable customers to securely utilize multiple cloud systems, and providing capital services
Sustainability

that allow them to use ICT platforms for a monthly fee, helping to limit initial ICT investment costs. Using this new
approach, we want to forge closer links with customers as their vital partner to drive growth in the service business.

Increase the service business ratio

Increase productivity

Provide high added value to customers

Capital services

OperatePlan
Consulting

Maintain

Project management

Net One: Clear improvement in speed, accuracy and quality of work

Design / Install

DeployICT platform enabling secureuse of multiple cloud systems

Work Style
Innovation
2.0/DX

Systemize all work; automatically link workflow, reduce number of person-hours to minimum

Work Style
Innovation
1.0

Create environments that enable all employees to work anytime, anywhere with any device

Overhaul work rules

Wide range of ICT tools

Upgrade system platform

Flexible personnel systems

Train personnel

Key Data

OperateAnnual Report 2019

Proposenetone on netone

Provide ICT platforms that drive work style innovation based on Net One’s experience

Standpoint of customer success

Lifecycle services

19

Customers: Significantly reduces time needed to design and deploy new systems

Address the shift from ownership to use with subscription-based services

Optimize

netone service
Infrastructure

Increase companywide productivity by overhauling all operations and integrating systems
Insights from our own successes and failures provided as added value to customers

Review of Operations

All Group activities repositioned as “Integrated Service Business”
Pursue added value for customers from the new standpoint of customer successFree office environments

Annual Report 201920

2

Growth Strategy
Company Overview andValue Creation

Market Strategy / Executive Interview▪ Medium-Term Business Plan Targets
Our goal is to transform Net One Systems into a company capable of generating high added value, based on three

Aiming to be a leading

growth steps and three basic strategies. In the plan’s third year, we are targeting revenue of ¥25 billion from focus
markets and new business models. Together with expansion in existing markets, we aim to drive revenue growth andprovider of integrated

further improve profitability. In the plan’s final year, we are aiming for revenue of ¥220 billion, operating income of ¥21
billion, an operating margin of 9.5%, a service business ratio of 50% and ROE of 16.8%.

Growth Strategy

services that support
customers to realize change

Medium-Term Business Plan Targets
Business modeltransformation
Fiscal2021

Results

Targets

220.0
181.9

Operatingmargin7.2%

9.5%

Reforms to adapt to new era(Integrated Service Business)

Revenue¥142.4bn 143.1

145.1

157.2

187.5

161.1
8.0

200.0

8.5

Shinji Hirakawa
Executive Vice President
In charge of East Japan Business Unit 1
In charge of West Japan Business Unit

9.5

7.2

Takafumi Takeshita
Senior Vice President
In charge of East Japan Business Unit 2
In charge of Central Japan Business Unit

Sustainability

Fiscal2018

Sustained growth(Cloud systems / Security)

Net One Systems has established a customer-oriented regional marketing structure, but business segments are divided

41.2%

50.0%

5.1
Operatingmargin

2.2％

ROE

14.0%

16.8%

along market lines.

3.7
2.9

In the enterprise market, which is focused on private-sector companies, we will continue to target growth with cloud

1.7

systems, security solutions and support for work style innovations. To supplement those efforts, we will also extend ourOperatingincomereach into new focus markets, primarily smart factories, and develop new business models, such as providing support

3.1bn

4.2

2.4

5.7

8.2

13.0

15.0

17.0

21.0

2013

2014

2015

2016

2017

2018

2019

2020

2021 (FY)for Managed Service Providers (MSP).

Review of Operations

Servicesbusinessratio

In the telecom carrier market, we will continue to focus on expanding the service platform business. Another new
business model is refurbishment, where we plan to tap into strong underlying demand for refurbished products from
customers in both the enterprise and telecom carrier markets.

educational and public infrastructure companies. We will continue to focus on security solutions and cloud systems,
while also extending our reach into new focus markets with solutions for customers in the healthcare and education

Key Data

In the public market, Net One Systems mainly supplies services to central government agencies, local governments andfields.
In all markets, we will continue to work on expanding our business in security solutions and cloud systems to build up
our position as an Integrated Service Business that supports the digital strategies of customers.

21

Annual Report 2019

Annual Report 201922

2

Growth Strategy
Company Overview andValue Creation

In the partner business, we will expand our solutions

Focus markets / new business models

business aimed at partners in each sector and also
deploy solutions for MSP.

Takeshita: Our smart factory projects are where we havebeen able to really leverage our experience from the past
few years. Working with customers onsite to drive value

existing markets, focus markets and new businessco-creation has given us an edge. During the three years

models, aiming to increase sales in fiscal 2021 by roughlyof the previous Medium-Term Business Plan, we built up¥38 billion compared with fiscal 2018. In this section,

experience in this area by working with customers. That

we talk in more detail about our strategy to achieve thatexperience is now a highly useful asset. Another areatarget.

where customers value our support is facility engineering,

Growth Strategy

In all business segments, we will tap into growth inwhere we design cabling layouts and install equipment

Business environment and basic strategy

and systems for smart factories. With large robots
operating in factories, ensuring the safety of the humanTakeshita: Net One Systems’ strong performance inworkforce is of paramount importance. We therefore needrecent years has been driven by enterprise and telecom

expertise in safety management when upgrading facilities.

carrier customers who have adopted our proposals as core elements of their digital and management strategies.
Only a handful of companies in Japan have the capability to install smart factory networks in the most challenging
corners of manufacturing sites. Other network companies transferred their engineers to different businesses whenconcentration 2.0.” Positioning enterprise and telecom carrier customers as central to their management strategy, we

the network market matured. In contrast, Net One Systems has remained focused on the network field, giving it anwant to build closer relationships with customers who can work with us to create value, or what we call “value co-advantage in today’s smart factory market.

creation.”

Sustainability

One of the key approaches of our new Medium-Term Business Plan can be best described as “selection and

Hirakawa: Education is also a promising growth market from the perspective of ICT. We are fielding a rising number
Hirakawa: Customers continue to steadily invest in network security, which is now an important management issueof queries from educational companies and organizations that want to centralize the operation of separate learningfor customers in both the public sector market and the enterprise market. There is also rising interest in digitization

systems and teacher support systems. They also want us to oversee their training programs to utilize ICT and raise theand digital transformation (DX). We are seeing accelerating use of the public cloud, as it allows customers to increaseskills of educators.

business operations, such as maintenance and system operation.

As that market grows, we expect more competitors to emerge, but companies will need to have broad expertise in ICT
platforms, as well as the capability to realize policies that change the way ICT is used in education settings and that also

Our fundamental strategy is to target large organizations, systems and groups. Using security solutions as the entry

reflect the thinking of education boards. That is a very specific skill set that not all companies have.

point, we will target business opportunities for entire regions, corporate groups, supply chains and value chains.

Review of Operations

investment in “offensive” ICT to drive business growth while also optimizing investment in “defensive” ICT to protect

In the healthcare market, we see growth opportunities beyond individual hospitals. ICT is likely to be used more widely to
Takeshita: Security is a common theme for cloud systems, work style innovation, DX and other trends in our industry.

support regional collaboration and cooperation between hospitals and providers of diagnostic services, as well as acrossAs customers increasingly utilize ICT, we are seeing an increase in competing demands for systems that are secure

the healthcare supply chain. Depopulation in Japan’s regional areas is undermining local healthcare provision. Against

but are also easy to use. It’s important to balance those needs as a first step in any project. As cloud systems andthat backdrop, we expect the utilization of ICT to gain momentum as local healthcare providers seek ways to increaseother ICT become more advanced, Net One Systems and its customers are face a growing number of questions –cooperation and use preventative healthcare more widely. We also expect to see progress with the MSP business model.

unauthorized cloud systems. In other words, we have to think about how to utilize ICT, not just the technology itself. That

Takeshita: There are many companies in our industry with strong positions in the ICT market for small and medium-means providing insights from our own experiences (“reference”) is also becoming very valuable. We run a customer

size enterprises (SMEs), a customer category that Net One Systems has not traditionally focused on. However, we serve

satisfaction survey every year. The results of the survey indicate customers want Net One Systems to be more proactive

the SME market indirectly. For example, we offer easy-to-use security packages to companies that provide ICT services

in providing information, not just the information they ask for. That illustrates how customers are looking to us for greater

to many SMEs. We plan to target the SME market more aggressively, as we have many other ideas for products andinput and support, which is something we appreciate and hope to fulfill.

services tailored to SMEs. Refurbishment is another new business area where we are seeing considerable interest fromKey Data

how to effectively control entire corporate groups, what borders to set for security systems, and how to limit the use ofcustomers. If we can encourage customers to switch the focus of ICT platform investment from purchasing equipment toacquiring only the functions they need, equipment vendors that develop those functions are likely to welcome that trend.

23

Annual Report 2019

Annual Report 201924

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Growth Strategy

With (2), the goal is to visualize our workforce andimprove training. The new personnel system, which is
being rolled out in 2019, will define job descriptions forservices, but conditions have changed, and I don’t see any real obstacles to wider adoption. For customers that areeach of the four remuneration streams and each employee

investing heavily in their businesses or are implementing major M&A deals, subscription-based services are a usefulgrade, based on criteria such as work objectives,

stopgap to prevent a spike in investment costs. Given rapid advances in technology and the way that technology is

responsibilities, required skills, behavior and outcomes, inutilized, subscription-based services can be a very effective tool for companies. Many customers are in fact now looking

order to clearly set out what is expected of organizations

to us for ways of using subscription-based services in their businesses, and we plan to develop new proposals thatand individual employees. To upgrade personnel training,satisfy their requirements.

we will review current programs, bring more training inhouse and improve the skills of instructors. The new job

Building our presence in the ASEAN region

descriptions, which will be the basis for autonomous
career path building by employees, and upgraded training

Takeshita: Network needs have typically been strong in Asia as a direct extension of IT systems. However, recently,

programs that encourage employees to learn from eachneeds are becoming more diverse as companies look to utilize ICT in areas such as cloud systems and work styleother, will support our efforts to increase the “initiative”

innovation, in addition to networks. We think now is a good time to launch services that leverage Net One Systems’powerful technical capabilities and high levels of quality. We are also starting to see many new needs emerging, such as

Shinji Hirakawa
Executive Vice President

Growth Strategy

Takeshita: Many in the industry did not expect large Japanese companies to take to the idea of subscription-based

Company Overview andValue Creation

Prospects for growth in subscription-based servicesof employees – one of the growth strategies in the new
Medium-Term Business Plan.

demand for smart factories in Thailand. We anticipate growth opportunities in terms of the geographical areas we cover,work practices. Our work style innovation is also linked to efforts to create model case studies for ICT utilization in work
settings, based on Work Style Innovation 2.0/DX, one of the plan’s basic strategies, and our “netone on netone” approach.

Human Resources Strategy / Executive Interview

Driving three growth steps by improving employee “initiative”
Net One Systems believes human resources strategy is one of the key components of a strong management base.

develop original ways of implementing them. To help employees get into the habit of backcasting, which starts with

we are putting priority on helping employees develop

setting desired goals and working backwards, in their work and careers, we set clear job descriptions as part of theand grow, backed by experience and extensive dialogue

personnel reforms in fiscal 2018.

between managers and employees.

Hirakawa: We run working groups led by employees to identify any issues in our business. This is also part of efforts

We overhauled our personnel systems in fiscal 2018.

to encourage “initiative.” The groups look at issues such as how AI can be used to support digitization, or how we can

The focus was on (1) adjusting remuneration systems, (2)increase productivity. One working group identified the issue of how to turn new public cloud-based solutions into “gamechangers” for customer businesses. Everyone in the working groups is striving to address those questions. We also

work style innovation.

need to strategically implement the “job crafting” approach, which gives frontline employees room to create their own
ways of working, instead of relying on top-down plans.

With (1), our aim is to attract the best possible talent tosupport the provision of cutting-edge, advanced ICT

25

Annual Report 2019

Takafumi Takeshita
Senior Vice President
Chairman, Human Resources Council** An advisory body for the Management Committee; discusses key systems andinitiatives related to organizations, personnel and human resources development

Key Data

reinforcing human resources and (3) pushing ahead withmarket rates.

Net One Systems’ definition of “initiative”

We call that “initiative.” More specifically, we want each employee to be able to set their own goals and plans andwho can realize change in society. To achieve that goal,based on job category and set employee pay based on

as a key part of efforts to improve “reference”– sharing insights about how we utilize ICT.

Takeshita: Our primary focus for human resources is to ensure every single employee feels motivated and energized.

and attract highly motivated, productive professionals

systems. We established four remuneration streams

In addition to reinforcing the Group's management base, our human resources strategy will be showcased to customers

Review of Operations

The objective of our human resources strategy is to train

Sustainability

With (3), we want to continue driving work style innovation by introducing various personnel systems that allow for flexible

not just the solutions and services we provide.

Employees from the manager level up need to play a role in devising new business models. To help them, we areshowing them ways of identifying and acquiring the key components for business models. Net One Systems started asa technology-focused company, so we like to see engineers develop new business models. We have many engineersthat are attuned to sales, and development divisions also work closely with frontline staff.

Annual Report 201926

2

Growth Strategy

3 Sustainability

Our corporate culture and style

Leveraging our know-how about effective application of ICT
to improve the sustainability of customer businesses and society

Takeshita: Assumptions about the external environment that we use in our business strategies are not always accurate. Thatmeans, in some cases, business strategies may have different expected outcomes. While some strategies miss the mark,We are using our expertise in utilizing ICT and advanced ICT platforms to help customers overcome issues in their operations.

others can exceed expectations. However, Net One Systems’ frontline operations have a strong capacity to adjust trajectory

We support our customers in various ways, such as helping them migrate to digital technology to enhance the value theyto achieve target outcomes, allowing us to change our strategies as needed. Personnel systems are the same. There’s noprovide their clients, solving labor shortage issues through work style innovation, improving business continuity during naturalneed to have personnel systems that never change. In fact, we should adapt our systems in response to the Company's

disasters, and reinforcing information security.
By maximizing value, minimizing risk and helping customers utilize their resources effectively, we improve the sustainability

Hirakawa: Net One Systems needs to foster a corporate culture where it’s ok to express different opinions and toof our customers’ operations and society as a whole. Net One Systems’ own sustainability is therefore intrinsically linked topraise each other. I believe that ensuring “psychological safety,” where people feel free to express ideas and opinions,creating a sustainable society and helping customers generate sustainable growth.

will drive innovation. That will support the creation of a corporate culture where people can share and learn naturally.

Growth Strategy

growth, business conditions and prevailing issues. It then becomes important to determine the timing of those changes.

Company Overview andValue Creation

Contribute to Society Through Our Business

Hiring and training human resources
Takeshita: We continue to aggressively hire mid-career personnel, but we have also made the big decision to
double the number of new graduate hires from 50 to 100. We plan to use various approaches to identify and recruit

Sustainability

Management Philosophy

new employees, such as asking for recommendations from teachers and professors at universities and colleges ofContribute to innovation in society by utilizing ICT

technology, hiring former staff, and providing internship opportunities. In the ICT industry, some companies offer highstarting salaries to attract the best talent. But we do not think that is particularly effective. Instead, we believe that thecapacity to train anybody to become a top engineer is more important.
Social challenges

Our Businesses

Contribute to Society Through Our Business

Hirakawa: There is a real battle for human resources in our industry at the moment, but we are confident prospective
employees will choose Net One Systems. We are helping our people to grow and develop. Overall, I believe employee
satisfaction is high and we also offer them the chance to create their own career opportunities.

Labor shortages

Current issues and new approaches
Takeshita: We want our people to be recognized as true engineers. By giving them the same recognition as people inmanagerial positions, they can become specialists. In November 2018 we launched a new multi-job system, which gives
our employees the opportunity to work at other companies and vice-versa. The main aim of the system is to help them
gain new skills and make networking contacts in specialist fields.

Verification /Evaluation / Integration

Globalization
Natural disaster
response
measures×

Provide expertisein utilizing ICT

Reduceenvironmental
impactOptimizecustomerresources

Minimizecustomerrisks

Social transformation

Digitization /ICT Governance

Sustainable society

Resource
optimization

Higher quality of life

Work styleinnovation

Safe and secure society
More convenient society

Security
measuresMore efficientenergy usage

BCP measures

Innovative companies

Smarter energy
use

Review of Operations

Data security

Providevalue

Maximize
value
provided bycustomers

Solutions

Hirakawa: We are collating employee work data to improve the effectiveness of resource planning. The data is being
categorized along individual project and technology lines, and can also be used to visualize team compatibility based on
and sales personnel, as well as give us a clear picture of project characteristics such as stress levels. Using that data,
we plan to build systems that help us rapidly decide, for example, which projects to focus on at the start of each year.

Example of ICT utilization

https://report.netone.co.jp/en/sustainability/contribution/reference.html

Key Data

which personnel are involved in the same projects. Digitization is allowing us to create accurate skill maps for engineers

By sharing new data-driven approaches, our goal is to create a steady stream of new ideas and working groups.
Please refer to the next section, as we have positioned human resources as one of our key sustainability issues “KeyIssue (1): Train Personnel”.

27

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3

Sustainability
Tackling Key Issues

Aiming to become an Admired Company by tackling key issues to grow in a sustainable
manner with society

Key Issue (1)< Social > Train Personnel

Basic approach
Net One Systems has identified a number of key sustainability issues related to its business activities: train personnel,

At Net One Systems, we strive to cultivate personnel who can put customers’ ideas into practice, based on our belief that “there

strengthen security, build relationships with stakeholders, improve and reinforce the business base, provide new value, andis an optimal solution for every customer.”Company Overview andValue Creation

Key Sustainability Issues

utilize ICT to reduce environmental impact. We plan to address those issues as a matter of priority to ensure the Group grows
Our ideal employee has three key characteristics:

stakeholders to become an Admired Company.

(1) The ability to address customer needs using a wealth of expertise in cutting-edge technologies and the desire to boldly
take on groundbreaking new challenges(2) The ability to lead innovation by leveraging communication skills and building collaborative relationships with all project
partners(3) The ability to work independently towards goals in self-designed career path scenarios

Growth Strategy

in a sustainable manner with society. In each category, we aim to contribute to change in society and win the trust of all

To foster those skills, we are strengthening human resources development with a range of training and education programs.

Grow in a sustainable manner with society

Net One Systems’ training framework

Goal-based
training

Stakeholders

Management Philosophy “Contribute to innovation in society by utilizing ICT”

Customers

Three basic strategies: Focus on creating high added value
Implement Work Style
Innovation 2.0/DX- Increase productivity

Drive the Integrated
Service Business- Increase the service ratio

Expand focus markets andnew models- Extend market coverageContribute tochangein society

E grade Training for
promoted employees

Shareholders

Three growth steps

Growth of employees
InitiativeE
Partners

Employees

Growth of the company
Uniqueness< Social >Strengthen security< Social >Build relationships
with stakeholders< Governance >Improve and reinforce
the business base

< Social >Provide new value< Environment >Utilize ICT to reduce
environmental impact

Executive training

Future leader
training

Training for newly
appointed directors /managers

Future specialist
training

S

External
seminars
Support togain PMP*
qualifications

J grade Skills
improvement trainingJ

the Global environment

Orientation for
mid-career hirese-learning

Gradebased
follow-up
S grade Training for training
promoted employees

the ICT market

Civic society< Social >Train personnel

Other

S grade Skills
improvement training

Trust

Key sustainability issues

Executives

Annual training

Management
strategy

Product andequipment
management

Corporate vision

Legal & CSR

Personnel
systems

Capital services

ICT toolsFirst-year employees
Follow-up training

Front-officebusinessA

Facility technologyGroupprocurement

Life planning
Secondarycareers, etc.

Finance
Accounting
Operation services
Front-office skills
improvement

Future leader training
Training to identify and foster
candidates for future leadership
positions in the Net One Group

Goal-based training
Training programs for employees
to independently develop their own
career plans and adjust behavior
based on their own strengths andweaknesses

Key Data

Training courses to help employees
acquire the business skills theyneed to execute their roles;
expected for each job level skills
are reinforced through repeat
learning in follow-up training.

Diversity training

Technology
acquisition

New employee
training

Grade-based training

Career training

 tudy seminarsS
run by eachbusiness
department

Medium-termbusiness plan

Introductionof businessdepartments

Second- and thirdyear employees
Follow-up training

Work skills training

Review of Operations

Growth of customer/partner
Value co-creation

Become an attractive company
that can provide new value

Grade

Sustainability

Grade-based training

Annual training
Training programs to help
employees acquire the businessskills and knowledge they needrelevant to their age, time at theCompany and job type

* Project Management Professional

29

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3

Sustainability

Visualizing human resources development
We believe daily experience in the workplace is the basis for employee growth. To make that experience more effective,
one-on-one interviews with team managers are available to employees to encourage regular communication about what
employees need to focus on to grow and develop.

of categories, including (1) career plans, (2) goal-setting and progress toward goals, (3) skills development plans, (4) skills
inventories, and (5) competency feedback. This approach helps us to drive human resources development in the workplace
based on a clearer picture of current conditions.

Designing diverse career paths
We plan to introduce a new job description system in 2019. The new system clearly sets out individual responsibilities, actions
and skills expected for each role under existing job grades, in line with the specific missions of each organization.

< Social > Strengthen Security

Basic approach
Net One Systems has been a pioneer in the network field since it was founded. By actively exploiting new products andtechnologies and supplying them to customers, we have contributed to advances in information technology in a rangeof fields, from industry and the economy to arts and sciences. At Net One Systems, ensuring information is handledappropriately and securely is a key responsibility to society and one of our most important management issues.
Information security is becoming increasingly important in modern society. In response, we are strengthening the Group’s
security stance based on internal risk management guidelines and our lineup of security products and services. We plan toreference our own experience from moves to strengthen security to improve the service menu for customers.

Growth Strategy

Specifically, managers use a talent management system to record details about each employee’s growth across a number

Key Issue (2)Company Overview andValue Creation

Net One Systems is implementing a number of other initiatives in human resources development:Internal risk management
Basic Policy on Information Security
To protect our information assets, we are implementing a range of measures in line with our Basic Policy on Information
Security, such as ensuring compliance with and appropriate management of regulations, and conducting education andclearer picture of where they need to improve, helping them to set and work towards goals independently.

training for employees. Information security measures in all areas of the Group have received ISMS certification from anaccredited third-party.

We believe job descriptions are important tools for employees to explore their own career paths, so we plan to integrate theminto our existing internal job posting systems, etc.

CSIRT framework

Sustainability

By creating more detailed descriptions of what we want from each employee in the workplace, our aim is to give them aAs cyber-attacks become more sophisticated, ensuring internal cyber security is one of our responsibilities to society. We

Introducing multiple personnel systems
We are upgrading our employee work systems to help the Group’s diverse personnel grow and develop in whatever situations

have established a Computer Security Incident Response Team (CSIRT) framework covering all divisions in the Group to
respond rapidly to any cyber security incidents in Net One Systems’ networks and speed up decision-making.

they face during their lives, while also helping them balance work and life commitments.

time select – the option to limit working hours to pursue personal development goals or contribute to the local community, (2)Information Security Audit Departmentarea select – the option to work in a specific region without being transferred to other areas, and (3) job select – the option to

ISMS Officechoose specific roles or responsibilities based on personal circumstances.

Information Management Department

We have also launched a Multi-Job System, which gives employees the option to take on secondary jobs at other companies

Information System Management Department

to improve their career prospects. Likewise, we allow employees from other companies to take second jobs at Net One

Facility Management Department

Systems, giving us access to talented people.

Information Security Education and Training Department
Product Management Department

System, removes the need to select core working hours. Together, these systems are designed to make work practices more

Public Relations Department

flexible, creating more room for employee creativity and growth.
As with our existing work style innovation solutions, we aim to use the know-how gleaned from these internal personnel
systems to improve productivity at customer sites as well.

Information Management
Department Administrator

Information System Operation
Officer

Information System
Operation Administrator

Facility Management Department
Officer (site managers)

Facility Management
Department Administrator
Key Data

Under our Remote Working System, limits on working hours, days and locations are not restricted, while the Flexi Work

Information Management Security
Officer (each department / office)

Review of Operations

Chief Information Security Officer (CISO)

For example, under our Work Select System, employees have access to a wide range of work style choices, including (1)NetOne-CSIRT• KPIsMajor information security incidents requiring external reporting

0 incidents

Employee participation rate in information security e-learning courses

100%

Net One Systems believes human resources strategy is one of the key components of a strong management base. For moredetails, see “2 Growth Strategy: Human Resources Strategy / Executive Interview.”

31

Annual Report 2019

Annual Report 201932

3

Sustainability

Basic approach

Key Issue (3)< Social > Build Relationships with Stakeholders

Basic approach

Amid advances in ICT technology, security threats and risks are becoming more sophisticated, making existing approaches

Our management vision is to be “a company trusted and supported by all stakeholders (an Admired Company)”. To achieve

and measures increasingly obsolete. Net One Systems provides a range of security services that ensure the reliable andthat vision, we have set out “seven missions” for our business – fulfill our responsibilities to customers, partners, shareholders

secure operation of public ICT platforms.

and employees, and contribute to the ICT market, civic society and the global environment. The Group’s sustained growth isCompany Overview andValue Creation

Providing security services

dependent on building trust with our various stakeholders. Net One Systems is working to create those connections throughdialogue with stakeholders.

Growth Strategy

We also provide research and training for customers and run courses at universities and colleges of technology to cultivate
security professionals that understand and can utilize the latest security technologies.

The Net One Group’s seven missions ▶ https://www.netone.co.jp/english/company/mission.html
Cloud security: Optimized security packages tailored to the cloud development stage of customers
Network security: Comprehensive network security for entire organizations, including secure cloud access and internal LAN

Dialogue and engagement with stakeholders

IoT security: Optimal security solutions based on visualizing all IP devices, including IoT devices and PCs

Responsibility to customers

Endpoint and mobile security: Protection from sophisticated attacks and rapid threat response based on activity detection,

We have set up a committee, which includes members with back-office roles, to improve customer satisfaction. As part of its

analysis and control

activities, the committee runs customer satisfaction surveys and engages in dialogue with customers. We are also working
to raise awareness of customer satisfaction among all employees with the Customer Satisfaction Improvement Day andSecurity services: Cutting-edge technologies to visualize security risks and achieve high-level security operations

meetings to share examples of successful sales activities.

Network academy: Cultivating information security personnel and providing security courses to customers tailored to thelevel of user proficiency

Responsibility to partners
To become a trusted company that prospers with society based on shared values with business partners, the Net One Group• KPI
Number of engineers certified by Palo Alto Networks*: Top company in Japan*A network security vendor supplying world-class next-generation firewalls

has formulated Partner CSR Guidelines, which bring together all policies that partners need to understand and put into
practice, such as the Net One Group Code of Conduct and our CSR Policy. We also conduct health and safety seminars forpartners involved in project engineering work.

Dialogue with shareholders is key to sustaining growth and increasing corporate value over the medium and long term. We
promote constructive dialogue with stakeholders in line with our dialogue policy.

Installing virtual desktops that protect vital information from cyber-attack

In fiscal 2018, the Company’s Chairman and President held meetings with shareholders in Japan six times and withshareholders overseas 19 times, while the Public Relations & Investor Relations Office held a total of 211 investor meetings.
Responsibility to employees

using security systems in-house and its strong track record of implementation.

Net One Systems has set up training programs to support personal growth and development and ensure equal opportunities

In June 2017, we installed a virtual desktop environment for Tokorozawa City Hall to reinforce security. As cyber-attacks

for all employees. The Company is also working to provide safe and comfortable working environments that take into accountbecome more sophisticated, local governments in particular need to put in place robust security measures to protect

employee health. We are also promoting the concept of RCT* to underpin mutual respect, smooth communication and strong

vital information such as data for the My Number national ID system. In the project for Tokorozawa City Hall, we deployed

teamwork.

a view transfer-type virtual desktop environment. The system isolates the internet environment from the work system

33

environment, ensuring data in work systems is protected from any cyber-attacks.

Our employee helpline serves as the first contact point for a wide range of topics, from compliance consultations to mental

Net One Systems was able to optimize cost and performance for the customer by designing and configuring the virtual

health and career counseling advice, helping to improve workplace environments and boost employee motivation.

desktop environment after in-house system operation and verification results.

*Respect, Communication, Teamwork: A shared communication approach designed to create strong links between the Company and employees, enhance
workplace environments and improve working conditions.

Annual Report 2019

Annual Report 2019

Key Data

Net One Systems provides solutions tailored to the security challenges of each customer, drawing on its own experience ofReview of Operations

Responsibility to shareholders

Reference case study – reinforcing security

Sustainability

Physical security: Integrated physical solutions and image analysis solutions

34

3

Sustainability

Key Issue (4)Contributions to the ICT market■ Board of Directors (As of June 13, 2019)

ICT has the potential to create a better future for society. As a company aware of its key role in the ICT market, we aim

Company Overview andValue Creation

Case studies: See Key Sustainability Issues “Key Issue (1): < Social > Train Personnel”< Governance > Improve and Reinforce the Business Baseto contribute to the development and expansion of the market by constantly monitoring the latest trends and actively
introducing new technologies.

Growth Strategy

Contributions to civic society
The Net One Group is working to realize a sustainable society as a corporate citizen. We aim to contribute to society
and the environment by supporting employees’ volunteer activities and implementing our own social programs. We open
our doors to the public for company tours and take part in work experience programs learning through realistic role-playand explore careers and also hold employee charity events and hands-on seminars to encourage employees to become
volunteers.
Contributions to the global environment
The Group's core principle of business management is to “fulfill its responsibilities to society through all businessactivities as a good corporate citizen.” In all our business activities, we aim to contribute to the creation of a sustainable

Sustainability

society by using cutting-edge ICT to prevent global warming and by taking steps to save energy and resources. We alsoseek to be a company trusted by wider society, not just our customers, by encouraging each one of our employees tohave a high level of awareness about the environment at all times.
For more information, see Key Sustainability Issues “Key Issue (6): < Environment > Utilize ICT to Reduce Environmental
Impact”

https://report.netone.co.jp/en/sustainability/issues/issues3/feature/main/05/teaserItems1/01/
linkList/0/link/stakeholder_01.pdf(Front row, from left)(Back row, from left)

Outside Executive Director . . . . . . .  Rieko Nishikawa

Senior Vice President  . . . . . . . . . . .  Takuya Tanaka

Outside Executive Director . . . . . . .  Kunio Kawakami

Executive Vice President . . . . . . . . .  Shinji Hirakawa

Chairman & CEO . . . . . . . . . . . . . . .  Takayuki Yoshino

Senior Vice President  . . . . . . . . . . .  Takahisa Kawaguchi

President & COO . . . . . . . . . . . . . . .  Toru Arai

Senior Vice President  . . . . . . . . . . .  Takafumi Takeshita

Outside Executive Director . . . . . . .  Mitsuo Imai

Senior Vice President  . . . . . . . . . . .  Fumihiko Shinoura

35

Annual Report 2019

Key Data

Outside Executive Director . . . . . . .  Ryugo Hayano

Review of Operations

Please visit our website for more detailed information about the above themes ▶

Annual Report 201936

3

Sustainability

Inside25%

The Company’s management vision is “to be a company trusted and supported by all stakeholders (an admired

Outside36%

company).” The Company believes it can become an admired company by fulfilling its responsibilities to customers,
partners, shareholders, and employees, and being committed to making a positive contribution to the ICT market, civic
truly admired company, and is therefore committed to continuing to work and improve so that it receives the highest
rating as an admired company from all stakeholders.

In order to attain this objective and to enhance its corporate value over the medium to long term, the Company

Inside64%

Outside75%

continuously strives to enhance and strengthen corporate governance to realize transparent and fair decision-making ina swift and decisive way.

■ Corporate governance reforms

2005■ Key features of corporate governance

2010

2015

Governance structure:

One outside executive director appointed (June 2004)

Fiscal 2019
Term of office for
Executive Directors:

Number of independent
executives:

1

7

year

Term of office for executive directors reduced from two years to one (June 2006)
Advisory Committee established (December 2009)
Vice President system introduced (April 2011)
Stock option compensation system introduced (June 2012)
Female outside executive director appointed (June 2015)

Assessment of effectiveness of Board of Directors(June 2016)
Audit & Supervisory Board Member contact
point added to compliance reporting andadvice line (October 2017)

Number of
Outside Executive Directors:

11

4

Number of
Audit & Supervisory
Board Members:

Number of
Outside Audit &Supervisory Board Members:

4

Vice President System（Number of board members）
15

3

Advisory Committee

Number of
Board ofDirectors meetings:

12* In FY2018

Number of
Audit & Supervisory
Board Members:

13* In FY2018

Review of Operations

Corporate Governance Guidelines published(November 2015)

Number of
Executive Directors:

Sustainability

Company with
an Audit &Supervisory Board

Growth Strategy

Based on its management vision stated above, the Company advocates sustained growth as its foremost priority.

Ratio of
Outside Audit &Supervisory
Board Members(FY 2019)

Ratio of
Outside Executive
Directors(FY 2019)

society, and the global environment. The Company also believes that third parties should decide whether or not it is aCompany Overview andValue Creation■ Basic approach to corporate governanceAccounting Auditor

Deloitte Touche
Tohmatsu LLC

12

6

Management 2

Key Data* Specialist fields of outside executive directors

9

Academia 2

3

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

■Outside Members of Audit & Supervisory Board ■Full-time Members of Audit & Supervisory Board■Outside Executive Directors ■Inside Executive Directors

37

Annual Report 2019

2018

2019

(FY)

The Company has appointed four outside executive directors to provide objective andimpartial advice and supervision to strengthen oversight of the Board of Directors.

Annual Report 201938

3

Sustainability

Fiscal 2019
Shareholders Meeting

Elect / dismiss
Determine cap for
remuneration

Advisory Committee

AttendBoard of Directors(Chairman: Chairman & CEO)

Audit &
Supervisory Board

Audit
reportExchange
opinions

Elect / dismiss

Accounting Auditor
Deloitte Touche
Tohmatsu LLC

Accounting audit

Advise / report
Exchange
opinions

Instruct / report

Business execution
organization
President & COO

Internal Audit OfficeAppoint / oversee

Takayuki Yoshino

Chairman & CEO

Toru Arai

President & COO

Risk & Compliance Committee

Shinji Hirakawa

Advisory
Committee

Management
Committee

Chairman
Chairman

Executive Vice President

Takuya Tanaka

Senior Vice President

Fumihiko Shinoura Senior Vice President
Kunio Kawakami

Outside Executive Director

Independent

Chairman

Mitsuo Imai

Outside Executive Director

Independent

Observer

Rieko Nishikawa

Outside Executive Director

Independent

ObserverRyugo Hayano

Outside Executive Director

Independent

Observer

Toru Matsuda

Full-time member

Masamichi Kikuchi

Outside member

Independent

AttendObserverKeiichi Horii

Outside member

Independent

AttendObserverHideki Suda

Outside member

Independent

AttendObserverAttendObserverObserver

Chairman■ Board of Directors meetings(responsible departments, subsidiaries, etc.)

Audit &
Attendance Supervisory Board
members
Attendance rate

Audit & Supervisory Board

Audits the execution of duties by executive directors andexercises its authority with respect to the appointment anddismissal of accounting auditors and their compensation from an
independent and objective standpoint.

Advisory Committee

Investment & Financing Committee

Discusses and reports on matters related to executive
compensation and the appointment and dismissal of executive
directors and vice presidents, with the remit of increasing
management transparency and fairness and reinforcing corporate
governance.

Discusses and decides on matters related to investment andfinancing to ensure an appropriate and efficient decision-making
framework for investment and financing matters in the Board of
Directors.

Management Committee

Risk & Compliance Committee

Carries out appropriate and timely discussions and decisions
with respect to fundamental and important Company matters to
improve management efficiency.

Discusses and reports on important matters related to Grouprisk management and compliance activities in order to reinforce
compliance and ensure sustained growth in corporate value.

No. ofproposalsTimerequired

Jul

May

Jun

9/9

9/9

11/11 11/11 11/11 11/11 11/11 11/11 11/11 11/11 11/11 11/11

ー

4/4

4/4

4/4

ー

4/4

Aug

4/4

Sep

4/4

Oct

4/4

Nov

4/4

Dec

4/4

Jan

4/4

Feb

4/4

Mar

Total
(average)

Apr

4/4

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

100%

Resolutions

3

6

17

4

ー

6

4

2

6

4

1

10

63
(5.7)

Reports

3

4

3

6

6

5

5

5

6

4

5

6

58
(4.8)

Explanation
(min)

35

35

35

70

60

75

50

40

60

45

65

55

625
(52)

Q&A (min)

20

5

15

25

45

55

10

15

25

35

40

10

300
(25)

Key Data

Board of Directors

Decides important matters related to the Company’s
management vision, management policy, medium-term businessplan and other management and operational issues; also
responsible for oversight of all the Group’s business activities.

Fiscal 2018

Review of Operations

Executive
directors

Business Operation Organizations

Annual Report 2019

Audit &
Supervisory Board

Takafumi Takeshita Senior Vice President

Vice Presidents

39

Board ofDirectors

Sustainability

Investment & Financing
Committee

Management
Committee

Position

Takahisa Kawaguchi Senior Vice President

Audit

Appoint /oversee

Execution ofdutiesName

Fiscal 2019

Growth Strategy

Advise / reportElect / dismiss
Determine cap for
remuneration■ Composition of corporate bodies and committees

Company Overview andValue Creation■ Governance structure* Rough estimates used for “time required”* The number of board members increased to 11 from June 2018 after a number of appointments and retirements approved at the 31st Annual General Meeting of
Shareholders in the same month* Details of main proposals discussed by the Board of Directors in fiscal 2018:
Assessment of board effectiveness, medium-term business plan, response to revisions to Japan’s Corporate Governance Code, establishment of subsidiaries andother companies and additional investments in those companies

Annual Report 201940

3

Sustainability
Company Overview andValue Creation■ Discussion with Outside Executive Directors

Imai: I agree. Companies obviously have to grow profits
to achieve their earnings targets, but they also have tokeep shareholder interests in mind. Decisions need to

Focusing on Net One Systems’ efforts to

be based on whether outcomes are positive or negative

maintain growth amid major changes inneglects shareholder interests would not be doing theirjob properly.
Growth Strategy

the ICT market

for shareholders. An outside executive director who

Nishikawa: As the only outside executive director witha humanities background, I see my role as reminding
the Company about the human angle of its business,
which can sometimes be forgotten in the race to develop
new technology. Cultivating employees with “initiative"
is one of the three growth steps in the new MediumTerm Business Plan. I think “initiative” will be the mostimportant skill that people need to compete against AI inthe job market.

education field for many years, I believe it is vital for companies to develop human resources and identify future leaders
to ensure their businesses continue to develop and remain competitive over the long term. To assess whether a

Sustainability

Hayano: Succession planning has already come up in this discussion. As somebody who has been involved in thecompany has organizational longevity, I look at whether the company is cultivating future leaders and what specific steps
Outside Executive Director

Outside Executive Director

Outside Executive Director

Ryugo Hayano

Rieko Nishikawa

Mitsuo Imai

Kunio Kawakami

Mr. Hayano is a professor emeritusof the University of Tokyo. He has
gained a wealth of knowledge andexperience as a university professor
specializing in physics, as well as
considerable insights from his roles
in various agencies and foundations.
He was appointed to his current postin June 2018.

Ms. Nishikawa is a professor in the
Faculty of Law at Keio University.
She has considerable expertise andexperience as a university professor
specializing in the legal field. She
was appointed to her current post inJune 2015.

M r. I m a i b u i l t u p c o n s i d e r a b l eexpertise and experience in theinformation and communications
business field during his career at
Hitachi Cable. Ltd. (now Hitachi
Metals, Ltd.). He also has experiencein managerial roles. He wasappointed to his current post in June2012.

During his time at Kanto Denki Koji
Co., Ltd. (now Kandenko Co., Ltd.),
Mr. Kawakami gained considerable
expertise and experience in theinformation and communications
business field. He has also served
as an executive director at otherco mpani es. M r. Kaw akam i was
appointed to his current post in June2009.

Views on the role of outside executive directors
Kawakami: In the roughly 10 years since I was appointed, I’ve seen that Net One Systems is a company where things
get done easily. Net One Systems is a very young company. Management is willing to make major changes, taking
Company’s workplace regulations and internal rules. In turn, that framework is leading to the creation of a more flexible
workplace for employees.
I believe our role as outside executive directors is to draw on our experience and expertise to provide advice to theCompany in our specialist fields. In the business execution decision-making process, we focus on transparency,
objectivity and appropriateness, while also preventing conflicts of interest, monitoring compliance and developing

transform how its engineers think and the way it trains them. I’m keeping a close eye on the Company’s progress in thatarea.

New Medium-Term Business Plan

How outside executive directors helped develop the plan
Kawakami: Outside executive directors were observers in meetings held to discuss the formulation of the new plan.
The Company conducted intense talks in the fiscal year that the plan was announced, while meetings in subsequentfiscal years will be focused on follow-up reports and discussions about updates to the plan. Based on our close
relationship with the company’s management side we provide input when our opinions differ, or when we think further
examination of a topic is necessary or responsibilities need to be clarified, helping to improve mutual understanding that
ultimately leads to a plan we can all agree on.
Imai: Essentially, our job is to be observers in the process, while ensuring everybody has a chance to express their

Key Data

advice from outside executive directors if needed. That openness to change has led to dramatic improvements in theit is taking, in addition to its prospects for growth. To shift its business towards services, Net One Systems also needs toReview of Operations

Outside Executive Director

opinions, including younger employees. The more meetings we attend, the more we learn about the Company’s
employees and as well as its specialist terminology. Sometimes, we have to answer questions, instead of asking them.
Some people have asked me how my previous company approached certain issues, or my opinion on Net One Systems’
characteristics as a company.

succession plans. We have a broad remit, but our most important job is to protect the interests of shareholders.

41

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3

Sustainability

2018

September

OctoberNovemberCompany Overview andValue Creation

Issues and risks related to the new plan

New Medium-Term Business Plan formulation process
DecemberJanuary

2019

Kawakami: The biggest challenge we face is human
February

resources. Above all, Net One Systems needs toimplement human resources training that puts priority

Offsite meeting for
directors

on the needs of its people, cultivate highly skilled andDiscussions about business performance and issues in current fiscal year

considerate employees, and make its workforce more

Scenario planning

Growth Strategy

international. We have to win the trust of customers as aservice business while keeping up to speed with constantDiscussions about approach for subsequent fiscal years

advances in technology. To that end, it is important forevery employee to have their own skills and expertise.

New Medium-TermBusiness Plan
formulation meeting (1st)

Decide basic strategies for the whole Group

Imai: Looking back over the last 10 years, I think theprevious Medium-Term Business Plan was a success.

New Medium-TermBusiness Plan
formulation meeting (2nd)

In the past, Net One Systems relied to a great extent on

New Medium-TermBusiness Plan
formulation meeting (3rd)investment by telecom carriers and lacked the capability
Decide separate
strategies foreach business

New Medium-TermBusiness Plan
formulation meeting (5th)New Medium-TermBusiness Plan
formulation meeting (6th)to supply entire ICT platform systems to customers. In
recent years, Net One Systems has made some progressin moving away from product and equipment sales to systems solutions. The Company will need more time to develop
its business further, but I think employees are now changing their approach. I don’t think we have enough momentum
yet in the business to drive the new Medium-Term Business Plan, as probably only about 30% of the workforce is on

Sustainability

New Medium-TermBusiness Plan
formulation meeting (4th)board with the new approach. So, if such workforce will increase to 70 or 80%, I think Net One Systems can achieve theplan’s final-year operating income target of ¥21.0 billion.
Nishikawa: My background is law, so I tend to focus on risk management. While the Company does seem to be doing

involved in formulating the plan. Of course, if we see something that could have a negative impact on the Company, wewell at the moment, I think management’s stance on risk management lacks sufficient awareness of external factors.

have to try and stop it, but it can be hard to judge our involvement as observers in the process.

That’s because developments in the real world do not always dovetail nicely with the growth and development ofcompanies and employees. To what extent has Net One Systems taken political and economic trends into account when

Hayano: During the plan’s formulation period, I made an effort to attend offsite meetings. Taking part in site visits andformulating its targets? Depending on market conditions, customers could stop buying Net One Systems’ products andmeetings away from head office was useful, because it gave me greater insights into the discussions and it also allowed

services, which would require a major revision to the Company’s targets.

Review of Operations

Nishikawa: We attend the meetings to get information about the business plan, but we have to avoid getting directly

me to meet the Company’s potential future business leaders, not just the directors who attend board meetings.
Hayano: I think there are three main risks. First, customers in Japan. In the US, companies have embraced the move
Kawakami: In addition to meetings to formulate the Medium-Term Business Plan, we attend twice-monthly meetings of

to subscription-based service models such as Software as a Service (SaaS), which allow them to use ICT services

the Management Committee. These meetings give us an opportunity to meet and get to know other Net One Systems

without the need to own software or hardware. However, Japanese companies, particularly those that Net One Systems

employees. Our role at the meetings is to put forward the opinions of ordinary shareholders.

deals with, have been more cautious about following the trend in the US. We think they will need more time to adopt thethe ratio of services in its business will coincide with a change in mindset at Japanese corporations.

to meet customers. The event allows us to talk directly with them and take part in seminars about the latest trends in theindustry.

Key Data

subscription-based service approach. We therefore need to keep an eye on whether Net One Systems' drive to increase
Net One Systems also holds a semiannual event for senior managers at customer companies, which gives us a chance

The second risk is recruitment. Net One Systems needs to hire more employees, but competition for people, particularly
new recruits, is very tough at the moment.

Nishikawa: It’s hard to get an accurate picture of corporate governance just by attending board meetings. That’s why
outside executive directors also attend other meetings as observers to gain more detail about the Company’s current

The third risk is growth in Asia. The new Medium-Term Business Plan assumes strong growth in Asia, but we think theposition and its position for the future.

targets will be hard to achieve unless head office becomes more proactive and invests more aggressively in the Asia
business.

43

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3

Sustainability

to grow with customers, so we will be watching closely to

Until now, affiliated local companies have been actively engaged in overseas business, but we will now need to work

see if it heads in the same direction as them. Specifically,closely with people from affiliated local companies that have become part of the Net One Group, which could raise someI want to see the Company cultivate personnel who canchallenges.

explain the new approach to customers and grow with

Company Overview andValue Creation

Kawakami: In Asia, we are targeting Japanese companies that have expanded their business in the ASEAN market.

them, and whether the company properly evaluates andcommends such employees.

Kawakami: Now that the Medium-Term Business Plan has been launched and the Company is implementing its

A message to shareholders,investors and other stakeholders

initiatives, we naturally have to oversee various aspects of the plan – progress with implementation, compliance, risk

Growth Strategy

Our approach during the planmanagement, monitoring from the perspective of sustainability, and checking for conflicts of interest. In terms of project
management – my area of expertise – I will be focusing on project estimates, costs and processes amid an increase in

Kawakami: The Company has to constantly think

the ratio of services in Net One Systems’ business. As somebody with an engineering background, I’m interested in how

about how to support shareholders and investors.

the Company trains its engineers. I look forward to taking part in training programs with employees to gain a deeper

Net One Systems raised its dividend per share for theunderstanding.

fiscal year ended March 2019, and it plans to raise thedividend again for the fiscal year ending March 2020. The
Company’s executives travel the world meeting investors

to respond when something goes wrong. If it does encounter a problem, Net One Systems will need to face up to any

as part of the Group’s investor relations dialogue. I think

issues and adjust its approach, in addition to galvanizing its employees. Our role as outside executive directors is tothose efforts have fostered a good level of understanding

calmly point out what the Company should do.

between the Company and its shareholders and investors.

Nishikawa: Because we are outside executive directors, we need to keep the right distance from the Company. As a

Imai: Net One Systems has four outside executive directors, which is more than many other companies. We also havecompany in the ICT sector, Net One Systems has a responsibility to look after the employees of its customers, as well as

one female outside executive director. Overall, I think Net One Systems is taking a proactive approach to corporate

its own employees. During the plan, I will be watching to see if the Company considers these aspects, and more.

governance. That kind of robust corporate governance framework is not cheap, so we need to ensure the Company

Sustainability

Imai: Medium-term business plans don’t always progress smoothly, so it is important for a company to be preparedderives benefits from its investment. Two outside executive directors are better than one, so four should allow us
Hayano: The ICT sector is going through a period of major change. Similar to the transformation that occurred when theto provide even more advice and oversight. I hope to make an even greater contribution to Net One Systems going
forward.

we are now seeing a radical shift away from ownership touse. New services are starting to emerge. For example, in

Nishikawa: Appointing women to the role of outside executive director is important to introduce different perspectives.

applications, the SaaS model is rapidly gaining ground,As a company that has taken the lead in that respect, Net One Systems shows it has a forward-looking culture.

and, in transportation, the concept of Mobility as a

Appointing female executive directors is important, but it’s also important to not put too much emphasis on genderService (MaaS) is now becoming a reality. One of the key

inside the Company. For women to work at Net One Systems, we need to show them that women are simply part of whoelements in the new Medium-Term Business Plan is the

we are as a company. I see that as one of my roles as a female outside executive director.

Review of Operationsindustry moved from mainframe computing to servers,

Company’s decision to redefine all the Group’s activities
Hayano: The industry has changed dramatically over the years, but since it was founded, Net One Systems has always

in the plan also underscore the Company’s shift in focus

sought out new opportunities and tested their business potential. I think it’s important to create a corporate culture

to services. To achieve those targets, Net One Systems

where young employees have the freedom to seek new challenges and develop them into new businesses. That's

needs to train its employees and change their approach,where Net One Systems shows its strengths. Net One Systems is the kind of company where new employees can growbut it also needs to persuade companies about theand develop. Supporting that, the Company is putting in place the necessary training and evaluation systems and is

merits of service-based models. It’s unclear at this point

preparing to implement a package of work style innovations. Those efforts send out a powerful message to shareholders

whether that view will be widely accepted by Japaneseand investors, as well as to young people who might want to work here in the future.

Key Data

as “Integrated Service Business.” The financial targets

ICT companies. That will depend on whether customers
support the new approach, not just Net One Systems’
own efforts to persuade them. Net One Systems needs

45

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3

Sustainability< Social > Provide New ValueKey Issue (6)■ Basic approach
Net One Systems has been active in the ICT field since the dawn of networks. That has given us early access to thelatest technologies, which has enhanced our expertise and our unique role in connecting various types of networks,
while also supporting the Group’s own transformation.

■ New Business Promotion Office tasked with accelerating the creation of new businesses
We established the New Business Promotion Office in April 2017 as a specialist department tasked with developing
new businesses. The office's mission is to spur wider use of ICT by creating new businesses based on completely new
approaches. The office is also responsible for trialing new businesses and using “Ideathons” and a wide range of otherinitiatives to drive innovation.

As a global corporate citizen, Net One Systems aims to ensure the world’s rich environment is preserved for future
generations through various measures in its daily business activities designed to create an environmentally friendly
society. Specifically, we aim to prevent global warming, reduce energy consumption, eliminate the use of paper andreduce industrial waste and CO2 emissions. We are also utilizing ICT – our core business – to provide and drive theuptake of environmental solutions.

■ Environmental policy and framework
Basic philosophy
Net One Systems’ core principle of business management is to “fulfill its responsibilities to society through all businessactivities as a good corporate citizen.” In all our business activities, we aim to contribute to the creation of a sustainable
society by using cutting-edge ICT to prevent global warming and by taking steps to save energy and resources. We alsoseek to be a company trusted by wider society, not just our customers, by encouraging each one of our employees tomaintain a high level of awareness about the environment at all times.

■ Basic policy
Reduce CO2 emissions with green ICT technologies
Implement activities to reduce energy and resource use
Comply with all environmental regulations
Maintain and improve the environmental management system
Conduct environmental training
Disclose environmental data

EMS* structure■ Training programs to foster innovative human resources

Chief Environmental Officer

To help our employees acquire "initiative" so that each one of them can independently drive innovation, we aredeveloping and running training programs designed to enhance creativity and adaptability.

Exploring new technologies to drive ICT utilization

Spur innovation
Foster innovative
human resources
47

Annual Report 2019

New Business Promotion Office
Tests new business ideas, runs internal venture company system,
holds Ideathons
Training programs
Multi-job systems, etc.

Environmental Management Officer

Internal Audit Leader

Environmental Affairs Department

Internal Audit Team

Environmental Management
Department Officer

Environmental Management
Department Officer

Environmental Management
Department Officer

Environmental Management
Department Administrator

Environmental Management
Department Administrator

Environmental Management
Department Administrator

Businesses and services
that provide new value

Key Data

Multi-job system
We introduced a multi-job system in November 2018 to help employees acquire skills in new fields, support networking
and accelerate the development of future human resources. Under the system, Net One Systems employees can workat other companies and vice-versa. In fiscal 2019, two employees have been hired by other companies.

New businessdevelopment

Review of Operations

Ideathons
We held an Ideathon for employees in 2017 as a way to get them involved in the creation of new business ideas. Since
2018, we have also been holding joint Ideathons with other companies and students, spurring the creation of a wide
range of new ideas.

The Net One Group is committed to environmental protection as part of its corporate social responsibility, underscoredby one of the Group’s stated missions – “Contributions to the Global Environment.”

Sustainability

Internal venture company system
Employees with new business ideas can present them to the Company. After a screening process, Net One Systems
selects promising ideas for further development through its internal venture company system, which can lead to theestablishment of new subsidiaries or departments. Once an idea passes the first stage of screening the employee who
presented the idea is transferred to the New Business Promotion Office, the Company’s specialist department tasked
with developing new businesses, for six months to focus on making the new business idea a success. In the fiscal year
under review, the Company received 18 proposals. Of those, one passed the first stage of screening. The business idea
has been tested and we are now seeking to take it to the next level through a joint venture with multiple partners.

■ Basic approach

Growth Strategy

Under our new Medium-Term Business Plan, we also are aiming to “Become an attractive company that can provide
new value.” Utilizing ICT to provide new value is our management vision and has been an integral part of our corporate
history.

< Environment > Utilize ICT to Reduce Environmental Impact

Company Overview andValue Creation

Key Issue (5)*All departments have an environmental management officer and administrator* Environmental Management System

Annual Report 201948

3

4 Review of Operations

Sustainability

KPI
Medium- and long-term environmental target: Reduce unit energy consumption by an average of 1% each year over five years
Target achieved, with average change in unit energy consumption below 99.0; average change for fiscal 2013-17 is 95.3.

Our business is broadly divided into four segments based on the type of customers they serve.
In the enterprise, telecom carrier and public markets, we supply solutions directly to customers. In the partner business,
we sell products and services through our business partners. We support all aspects of ICT infrastructure, including

Company Overview andValue Creation

Business Overview

cloud systems and cyber security solutions. In all the markets where the Net One Group operates, we install efficientsystems by optimally configuring networks, cloud systems and security solutions. We also show customers how to get

Unit energy consumption

the best out of their systems. Going forward, we will step up efforts to transform the Net One Group into an organization

4,000

0.025

Energy usage (kl)Unit energy consumption (energy usage / sales)

0.02240.02150.0218

3,500

0.020

0.01970.0185

3,000

0.015
2,500

• Partner companies(System integrators, etc.)

0.010

3,190

3,076

3,161

3,094

Partner business％

16.5

Breakdown ofrevenue by major
customer market

0.005

500

0

0.000
2013

2014

2015

2016

2017 (FY)• Central government agencies,
local governments• Educational and social infrastructurecompanies• Healthcare providers

Public market％

35.0• Non-manufacturing (transport, services)• Finance• Internet service providers (ISP)

Installs cloud systems for manufacturers,
financial institutions, transport companies and ISP andutilizes ICT to improve efficiency, establish industrial IoT
and support work style innovation

Telecom carrier market％• Telecom carriers

19.5

Works with customers to build public infrastructure suchas cloud service platforms for business and large-scale
networks
The Other segment covers businesses that are not included in reportable business segments

Using an electricity monitoring system to control data center electricity usage
Net One Systems has introduced an electricity monitoring system (temperature based) at its data center. Electricity
flow is monitored on an individual outlet basis and alerts are displayed when electricity usage exceeds set values. The

Fiscal 2018 consolidated revenue ¥181,935 million, consolidated operating income ¥13,012 million

system also allows us to manage power use in the whole data center by remotely controlling power sources. Verification*From fiscal 2019, Industrial IoT (IIoT) has been renamed “Smart factories” to clearly define one of the Group’s focus

equipment, which accounts for roughly 70% of all power usage in the data center, is automatically shut down when notmarkets.

Review of Operations

Helps government agencies, educational bodies,
medical institutions and public utilities implement
security measures and upgrade cloud systems

28.8

Fiscal 2018

2,973

1,000

Enterprise market• Manufacturing (automobiles, electronics, etc)％

Sustainability

Provides ICT equipment and services tosystem integrators and other business
partners; helps partners implement systemsolutions, their key area of expertise

2,000

1,500

Growth Strategy

that can provide new added value by working with customers to support their growth.
（kl）

in use, helping to save energy.

Key Data

49

Annual Report 2019

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4

Review of Operations
Enterprise Market
Revenue ¥52,329 million Operating income ¥3,263 million

Business Overview
Objectives
Utilize ICT to expand the use of cloud systems and security
solutions and drive work style innovation
Share of revenue (fiscal 2018)

28.8％

Key markets / sectors
L a rg e e n t e r p r i s e s i n t h e f i n a n c i a l , m a n u f a c t u r i n g , n o n manufacturing and Internet service providers (ISP) sectors

Performance in fiscal 2018

Operating environment
Sustained strong demand related to cloud systems, security andwork style innovation

to work style innovation was firm. IIoT-related business was also strong. Those trends supported growth in bookings

Strengths and characteristics
T he enterprise business has built up a high level of trust withcustomers after many years of providing high-quality network
infrastructure.
B acked by that trust, we share with customers the Group’s
knowledge and experience of utilizing ICT. Our flexible approachallows customers to install practical cloud systems, reinforce
security and implement work style innovation.

Operating income rose 3.8% year on year to ¥3,263 million but the operating margin declined 0.1 of a percentage point

Key growth themes
Work Style Innovation 2.0/DX
Smart factories
Solutions for MSP
Develop the refurbishment businessPrediction and detection of cyber-attacks and system failures

In fiscal 2019, we forecast steady demand for security solutions, the installation of multi-cloud and other cloud systems,
and work style innovation. We also anticipate growth in the new fields of smart factories and solutions for MSP. We see
those trends supporting growth in bookings and revenue compared with fiscal 2018. We forecast bookings of ¥56.0
billion, up 9.2% year on year, and revenue of ¥57.0 billion, up 8.9% year on year.
A common capital investment theme for customers in the enterprise market is digital transformation (DX) – investing

becoming more important, and we are also fielding more inquiries from customers about using ICT in personnel training.

（Million yen）

We see these trends as major opportunities, supporting the Group’s shift to an “Integrated Service Business” that

25,00056,00049,967

Initiatives for fiscal 201922,53551,293

20,95345,14920,00021,498references its own experiences to provide added value to customers.

20,49818,632Medium-and long-term outlook

40,000We need to constantly communicate with customers to understand the issues they face and their requirements, which

15,000will help us to continue providing solutions in line with their needs. That approach is vital to ensure sustained growth

30,00020,000strategy, which is designed to support work style innovation, and the launch of our refurbishment business, which
provides support for products and equipment when manufacturer after-sales support contracts expire. In the smart

5,000

10,000factory field, manufacturers are increasingly utilizing data in production activities. IoT systems to manage and visualize
2015

2016

2017

2018

▪ Revenue

2019(Estimate)

(FY)

2015

2016

2017

2018

▪ Operating income / operating margin（Million yen）
57,00060,0000

2019(Estimate)(FY)

be used even more widely to centrally control and optimize entire factories.

（Million yen）

(%)

4,000

10.0

52,32950,00046,83447,78849,680MSP customers. We will also use our MSP solutions to target large enterprises, aiming to help them manage and control

2,117

their corporate groups.

6.3
6.2
2,025

30,000

2,000

1,426
4.3

1,000
10,00051

2015

Annual Report 2019

2016

2017

2018

2019

(Estimate)

(FY)

0

companies in the region and local companies. In security solutions, our basic approach will be to utilize ICT. Goingforward, Net One Systems will continue to provide support for all areas of ICT platforms, including developing proposals

3.6

20,0000

In the ASEAN market, subsidiary Net One Asia Pte. Ltd. will lead efforts to increase business proposals for Japanese
5.0

1,719

Key Data

40,000In the mid-size company market segment, we will provide solutions to MSP, allowing us to efficiently roll out services for

3,263
3,145
3,000

factory production lines are gradually gaining momentum in the manufacturing sector, but going forward, IoT is likely to

Review of Operationsin the enterprise business. For example, customers have shown strong interest in our Work Style Innovation 2.0/DX

10,0000

Sustainability（Million yen）

50,000to 6.2%.

help customers optimize their business operations. Grand designs for network infrastructure and cloud systems are▪ Order backlog

Bookings

51,262and revenue, with bookings rising 0.1% year on year to ¥51,293 million and revenue increasing 5.3% to ¥52,329 million.

in ICT to drive business innovation. Meanwhile, there is a growing need for system maintenance and operation to

Segment performance (reference only)

60,000Demand for security solutions and cloud systems remained strong in fiscal 2018 across all sectors, and business related

Growth Strategy

Share of revenue(fiscal 2018)

Strategy and Vision

Company Overview andValue Creation

Enterprise Market

for cutting-edge security systems that utilize AI and deep learning.

494
282

2015

2016

2017

2018

(FY)

0.0

Annual Report 201952

4

Review of Operations

An accelerating digital revolution in manufacturing – centrally managing andvisualizing production activities to increase factory productivity

Information andcommunications
technology (ICT)Operational
technology (OT*)

Objectives
Explore new business opportunities through collaboration with
telecom carriers
Share of revenue (fiscal 2018)

Share of revenue(fiscal 2018)

Production line

Operating environment
Telecom carriers continue to invest heavily to expand theircorporate businesses.
Carriers are shifting their focus to the installation of cloud systems
and other service platforms.
Strengths and characteristics
Extensive track record in the design and installation of large-scale
networks
Strong position in multivendor product integration and automatedsystem operation, backed by advanced network design capabilities

Production line

Solutions area

Key markets / sectors
Leading domestic telecom carriers

Key growth themes
Work with telecom carriers to strengthen their corporate businessSet up joint businesses in other markets and expand solutions for
MSP

19.5％

Growth Strategy

Data center

Secure connection between
ICT and OTSupport for use of IoT data

Revenue ¥35,552 million Operating income ¥3,454 million

Business Overview

Company Overview andValue Creation

Telecom Carrier Market

Manufacturing IoT cloud
Production line

Bookings

Order backlog（Million yen）

（Million yen）

50,00040,00020,00038,21837,50037,372
34,279Benefits of
installation

Sustainability

Segment performance (reference only)
Robust network connections in
production facilities
IoT data collection,organization and formation

35,38615,00014,407

14,24120172018

14,741

IoT data collected from connected production facilities /collected IoT data analyzed
and utilized / predict and detect issues in facilities / reinforce product traceability /30,00010,833

10,9742015

2016

10,00020,0005,000
10,000* Operational Technology
0

2015

2016

2017

2018

2019

(Estimate)(FY)

Revenue

0

2019

(FY)

9.7

10.0

(Estimate)

Review of Operations

create and improve production documentation

Operating income / operating margin（Million yen）

（Million yen）
50,000

(%)

4,000
3,454

40,28740,00037,23135,55237,000

2,117

3,000

30,8466.8
6.1

30,000

2,101
5.0

2,000

Key Data

2,259

20,000956
1,000
10,000053Annual Report 2019

2015

2016

2017

2018

2019

(Estimate)

(FY)

0

282

2015

2.4

494

2016

2017

2018 (FY)

0.0

Annual Report 201954

4

Review of Operations
Public Market

Strategy and Vision

Business Overview

Performance in fiscal 2018
In fiscal 2018, the service platform business for cloud and other services was firm, with bookings rising 3.2% year on
year to ¥35,386 million and revenue increasing 15.3% to ¥35,552 million. Operating income rose sharply, increasing
64.4% year on year to ¥3,454 million on strong growth in the service platform business, which achieves higher profit

Revenue ¥63,666 million Operating income ¥4,688 million

Objectives
Provide reliable and secure ICT platforms for public infrastructure
to support the sustainable development of society and Net One
Systems’ growth

Key markets / sectors
C entral government agencies, local governments, universities,
research centers, public infrastructure companies such as
electricity and gas firms, and hospitals

Share of revenue (fiscal 2018)

Operating environment
Strong demand for security solutions and cloud systems

margins than product and equipment sales. As a result, the operating margin improved 2.9 percentage points to 9.7%.

Initiatives for fiscal 2019
Telecom carriers are likely to continue expanding their service platform businesses in fiscal 2019. We forecast bookings

Share of revenue(fiscal 2018)of ¥37.5 billion, up 6.0% year on year, and revenue of ¥37.0 billion, up 4.1% year on year, supported by efforts tocapture demand for service platforms.

Key growth themes
Trend towards cloud-based ICT platforms and increased security
Growth in the healthcare market and education market

35.0％

In cloud service platforms, we will sell optimized configurations of the latest products, such as network equipment for

Growth Strategy

Strengths and characteristics
Consulting services that help customers clearly identify the issues
they faceOptimization of the full ICT lifecycle, from design, installation andmaintenance to operation, optimization and in-field improvement of
ICT platform

Company Overview andValue Creation

Telecom Carrier Market

data centers, servers, storage equipment, virtualization software and automation systems. Product sales will also be
combined with design, installation and maintenance support as part of a package of high-value-added services. We will
also develop our position as an “Integrated Service Business” targeting telecom carriers, as well as work with them to

Segment performance (reference only)
Bookings

We also see continued strong demand for network-based security solutions. We are targeting further growth in fiscal

Order backlog（Million yen）

（Million yen）

69,83140,00070,0002019 by helping telecom carriers to build more robust security infrastructure.

33,84359,00060,00031,84350,738

Medium- and long-term outlook

Sustainability

look at ways of providing services to end-users.

52,87330,00050,00025,678

Telecom carriers have a large number of corporate customers and are stepping up efforts to reinforce their businesswith those customers. In the corporate market, Net One Systems can provide high-level technological support

21,556

36,69420,00018,641

30,000these solutions for MSP open up a range of possibilities. Telecom carriers are also increasingly interested in using
20,000refurbishment business as they have a lot of facilities and equipment.

10,00010,000We are not actively expanding business in the 5G facility market, as we are currently putting priority on profit margins.
However, 5G-enabled systems have the potential to create a range of new business opportunities and markets.

0Companies are now stepping up research and development into solutions and services that take advantage of 5G

Revenuetechnology. As 5G technology develops, we anticipate more opportunities to sell 5G solutions and we plan to focus onproviding services that use 5G networks.

2015

2016

2017

2018

2015

2016

2017

2018

2019

(Estimate)(FY)

Operating income (loss) / operating margin（Million yen）

70,00057,00046,715(%)

5,000

63,66650,000

10.0

4,688

4,000
2,117

48,751
3,000

40,000

Cloud service platform business – example

0

7.4

2,152

37,998

5.0

1,864
2,000

4.4
4.0

30,000Key Dataof their businesses with cloud services, security and corporate services anchored by the Group’s technologies.

(FY)（Million yen）

60,000Going forward, we will continue to develop proposals that win the trust of customers, helping to support the development

2019(Estimate)

Review of Operations

for ICT platforms, potentially creating win-win relationships with telecom carriers and corporate users. We believe

40,0001,000

20,000

494
-90

0.0

0

10,000-0.2

Support installation ofcloud service platform

55

Annual Report 2019

Telecom carriers provide
cloud services to corporate users

Corporate customer

0

2015

2016

2017

2018

2019

(Estimate)(FY)-1,000

2015

2016

2017

2018

(FY)

Annual Report 201956

4

Review of Operations
Partner business

Strategy and Vision

Business Overview

Revenue ¥30,028 million Operating income ¥2,117 million

Objectives

Performance in fiscal 2018
In the public market, revenue and profits increased sharply, supported by strong demand for security solutions andcloud systems, as well as some large orders. Bookings increased 32.1% year on year to ¥69,831 million, revenue rose
30.6% to ¥63,666 million, operating income increased 117.8% to ¥4,688 million and the operating margin improved 3.0
percentage points to 7.4%.

Explore the potential of new added-value collaborative businessformats that utilize the latest technologies
Share of revenue (fiscal 2018)

Strengths and characteristics
Handles a wide range of products from overseasP rovides quality assurance, technology verification and valueadded services such as proposal support, system maintenanceand operation
Identifies cutting-edge ICT equipment and solutions in overseas
markets and helps introduce them into Japan

Share of revenue

Key growth themes
Expand the solutions business aimed at partner companies
Develop and launch solutions for MSPLeverage Group synergies with Net One Systems(fiscal 2018)

16.5％

Segment performance (reference only)
Bookings

Order backlog（Million yen）

（Million yen）

40,0007,000

31,607

Existing approach:
Each medical department has own server-based system
Medicaldepartment
systemMedicaldepartment
systemMedicaldepartment
systemNew platform:
Separate medical department systems from ICT platform
Medicaldepartment
systemMedicaldepartment
systemMedicaldepartment
system

Separate

6,000

25,0005,000
20,181

20,0004,000

15,0003,000

10,000

2,000

5,000

1,000

0

2015

2016

2017

2018

2019

(Estimate)

(FY)

0

57

Not dependent on the end of server maintenance period, allowing long-term use of medical department system and realizing lower costs
Reduces time medical department system is offline for server repair or maintenance
Simple and rapid ramp-up/down of ICT resources, better security, centralized system management

Annual Report 2019

2015

2016

2017

2018

2019

(Estimate)(FY)

Operating income / operating margin（Million yen）
40,000（Million yen）

(%)

3,000

10.0

35,00035,00030,98530,0282,117

30,000

7.1

24,9172,000

25,00020,00019,506

1,426

5.0
4.6

15,0001,000
494

10,000282

Shared virtual platform / Virtual network

Benefits of
installation

6,352

Key Data

How cloud-based ICT platforms can be used at large hospitals (shared virtual platform)

6,550

25,294

Revenue

In the public market, which covers public infrastructure, the Group can provide unique value that ensures the secure andreliable utilization of ICT and that also helps to revitalize Japan’s regions. That approach will support the creation of asustainable society, and also help to transform Net One Systems.

6,300

Review of Operations

We see a range of possibilities in the healthcare market. The focus of optimization is moving away from standalone
hospitals to cooperation between hospitals to maintain regional healthcare services. Pharmacy supply chains andpreventive healthcare are other areas where ICT can be applied in the healthcare market. In the education market, we
anticipate growing demand for ICT in areas such as Edtech, distance learning and interaction between students andteachers, as well as system operation services to address a shortage of ICT personnel in the sector.

7,930

35,00035,00030,000

The Group’s business strategy of offering cloud-based ICT platforms and improved security has gained the most tractionin the public market. Customers are investing in “offensive” ICT and DX to transform their business models. We aim to
help them achieve that transformation with the use of AI, deep learning and other new technologies.

7,930

8,000

30,787

Medium- and long-term outlook

Sustainability

In the public market, each customer faces unique issues in their operations, but strong demand for security solutions
and cloud-based ICT platforms is a common theme across the market, giving Net One Systems an opportunity toleverage its strengths in network security. In the healthcare market, we will address demand for ICT platform integration
at large-scale hospitals, which tend to use separate platforms for different medical systems, as well as demand for
security to protect medical data and work style innovation for healthcare employees. We will also target demand forcloud service use by revised guidelines, for security solutions to medical IDs and the My Number ID system. In the
education field, we are seeing rising demand in a number of areas – security solutions to protect child and student data,
work style innovation for education professionals, and the integration of ICT platforms for different education systems.
We will target that demand with proposals for integrated ICT environments that include security solutions, virtual desktop
infrastructure (VDI) and other functions.

Operating environment
Strong demand from system integrators

Growth Strategy

Initiatives for fiscal 2019
In fiscal 2019, we will continue to focus on security solutions and cloud systems. We will also roll out new solutions forthe healthcare and education markets. However, with a number of large projects booked in fiscal 2018 set to drop out,
we forecast bookings will decline 15.5% year on year to ¥59.0 billion and revenue will drop 10.5% to ¥57.0 billion.

Key markets / sectors
Specializes in business partner collaboration
Uses partner companies to increase the Group’s market coverage

Company Overview andValue Creation

Public Market

0

2.0
1.4

5,000

2015

2016

2017

2018

2019

(Estimate)

(FY)

0

2015

2016

2017

2018

(FY)

0.0

Annual Report 201958

4

Review of Operations

Strategy and Vision

In the MSP market, we will target demand from SMEs by supplying partners with solutions that allow their users to easily
install and manage equipment. Our user-friendly solutions reduce equipment deployment costs and help users rapidly

Overview of the Partner Business

restore systems if an issue arises.

Founded as a Net One Group company in 2008, Net One Partners
marked its tenth anniversary last year. In the year after Net One
Partners was founded, we concluded the world’s first "solutions
distributor" contract with Cisco Systems, Inc., kicking of ourinvolvement in the provision of value-added network solutions. Overthe years, we have focused on working with partner companies
with strong positions in system solutions for specific industries andsectors, helping to expand the Net One Group’s reach into businessfields covering major companies and SMEs.

Effective from April 2019, Net One Partners took over responsibility for the New Business Promotion Office from Net One
Systems. Since Net One Partners was founded, we have rapidly supplied our partners with new products from vendors
in Japan and overseas. Building on that relationship, we will work with them to create new businesses, backed by newtechnologies and their expertise.

Medium- and long-term outlook
In the partner business, we will continue to deploy solutions tailored to the specific needs of each sector and step
up cooperation with Net One Systems as a member of the Net One Group. We will provide sales support to Net One

Growth Strategy

Systems to help it expand sales channels for the unique products and equipment in our portfolio. We will also generateGroup synergies by working closely with Net One Systems – mainly through a direct sales approach – to improve ourability to propose new solutions that are in tune with end-user trends and market characteristics.
We will collaborate with Net One Systems USA, Inc., the Group’s US subsidiary, to create new businesses by investingin overseas venture companies with promising technologies and human resources. To reinforce our organization, weTakuya Tanaka
President & CEO
Net One Partners Co., Ltd.

will overhaul business processes by using automation, and recruit and train personnel with unique skills. We will also
strengthen systems that allow us to rapidly identify cutting-edge ICT technologies, including new business formats,

Sustainability

Our strength is the technical backup we provide to partnercompanies, who can select equipment from a wide rangeof overseas products and sell them with confidence to theircustomers, as well as the support we give partner companies rightthrough to their end-users. Specifically, we ensure equipment meetsthe quality assurance standards of Japanese end-users, carry out
technology verification, help partner companies market products
to their customers, and provide system maintenance and operation
services. We also rapidly identify and gain access to cutting-edge
ICT equipment developed by overseas venture companies andother suppliers, configure it for the needs of the Japanese market
and supply it promptly to our partner companies.

Company Overview andValue Creation

Partner business

configure them for the needs of the Japanese market and deliver them to partner companies as soon as possible.
Our goal is to reinforce Net One Partners’ position as a “high-value distributor” that can quickly adapt to the latest

Performance in fiscal 2018technologies and shifts in business models without being constrained by existing ICT business approaches.

In fiscal 2018, we deployed solutions with a focus on profitability, including unique products and services such as cloud
Review of Operations

management solutions and face-recognition software. Internally, we improved the management of transactions in foreign

Net One Partners Business Modelcurrencies and overhauled business processes. Those initiatives, along with the streamlining of backoffice processes,
helped lift operating income 48.5% year on year to ¥2,117 million, despite a 3.1% decline in revenue to ¥30,028 million.
The operating margin improved 2.5 percentage points to 7.1%. Efforts to expand and strengthen the customer basepaid off, with bookings rising 2.7% to ¥31,607 million.

Companies
deploying
ICT

Manufacturing
Factories
Plant facilities

Initiatives for fiscal 2019
In fiscal 2019, we will work to expand our solutions business with all types of partners and deploy solutions for MSP. We

Public infrastructure

FinanceUtilities
Banks
Schools / Universities
Securities companies
Healthcare / Welfare providers
Insurers
Distributors

Services
HotelsRetailers

ICT

Telecom carriersInternet providers
Media companies

Provide solutions with partner companies

forecast bookings of ¥35.0 billion, up 10.7% year on year, and revenue of ¥35.0 billion, up 16.6%.

ICT infrastructure to cyber-physical security systems. Our strategy is to grow the business by working with partners

Connected
industries

Store
digitization

Digitalentertainment

Data centers
Cloud computing

Networking

Mobility & wireless

Digitalworkplaces

to deploy solutions that address the specific needs and concerns of each sector based on industry-wide trends, notjust the viewpoint of partners. One example is solutions for distributors and retail stores that help them to attract morecustomers and drive sales. Using Wi-Fi and monitoring cameras, our solutions can help retailers understand how

New and uniqueproducts

Key Data

In the solutions business, we will roll out solutions that combine all types of products and equipment, from IoT and

Digital security
PhysicalCybershoppers behave in store, while our omnichannel solutions enable consumers to buy and receive the products they wantanytime, anywhere.

59

Annual Report 2019

*Business flow

Net One Partners
Partner companies

Partner companies: provide cutting-edge ICT products / related solutions
Customers: provide system integration

Annual Report 201960

5 Key Data
Bookings

Operating income /Operating margin

Revenue(million yen)(million yen)

200,000
180,000
163,935
146,890

181,935

157,236

160,000

170,164

143,173

12,000142,551

120,000

6,000

60,000

4,000

2,453

1.0

20,000
0

0
2014

2015

2016

2017

2014

2018 (FY)Net income attributable toowners of the parent

2015

2016

2017

Earnings per share
(yen)
110

2015

2016

2017

105.28

100

(yen)
40

6,000

4,000

30.00

1,508

2014

2015

2016

2017

2018 (FY)

Total assets
Equity ratio

Net assets

103,623

102,613 103,365

56.4

2014

2015

2016

2017

57,3284,000

Capital expenditures

Depreciation

2,945
2,922

3,000
2,793

2,791

2,809

2,846
2,707

2,504

0
2014

2015

2016

2017

2018 (FY)

2016

2017

2014

2018 (FY)

2015

2016

2017

2018 (FY)

16.4

16.8

20

351

353

376

380

399

10

2014

2015

2016

2017

2018 (FY)00

New graduate recruits
by genderStress check ratio(No. of hires)

(%)

100

Male

(%)

Female ratio

90
80

50
32

92

80

90

92

35

31

2015

2016

2017

66

64

68

69

60

30

40

20

20

2,306

ROE

50
43.5

42.9

36.7
28.6

20

1,000

4

2015

0
2016

2017

2018 (FY)

2016

30
18

20

14

10

9.7

Male

4.4
4.3

0

2018 (FY)

2017

8.55

7.11

11.4

(%)

100

7.84

100

8.16

97

100

100

0
2019 (FY)(%)(No. of employees)
3,000

2,500

No. of engineers
Total number of registered employees
Ratio of engineers

80

2,000

55.9

57.4

80
70

31

34

32

60

1,500
1,283

40

25

5.5

2,296

1,289

1,269

2,246

2,276

58.1

57.3

55.8

6.50

4

1,331
2,321

50

1,378

40

2,372

30

1,000

20

2

20

10

500
10

0
2016

2017

2018 (FY)

0

0

0
2015

2018

60
46

40

2.5

2014

2017

100

30
8.0

2016

Ratio of engineers of
all employees*

No. of employees taking childcare leave
Ratio of employees returning to work after childcare leave
50

7.28

2015

2018 (FY)Childcare leave ratio /return to work ratio

20
2.7

0
2016

8.83

7.72

7.14

6
6.8

2017

(No. of employees)

Female

8.21

2

2015

(Years)
10
14.0

12

6

40

*Ratio of employees who have received a stress check

Average years worked at
Net One Systems

ROA

8

2014

2014

2018 (FY)

ROE·ROA
16

70

26

40

10

10

10

0

2015

0

16.5

Female830

20,000

2014

14

40

20

0.0

0

60,36340,000

1.0

0

20

15.7

17

(%)

(million yen)

50
66,85855,533

2

15.3

34.7

2014

2018 (FY)

2,000
57,113

2

40

0

0

53.1

80,0002

2

500*Average ratio of paid leave used per employee

54.0
55.3

40
30

20

3,568

60

49

Key Data

55.0

45

21

70
106,827

2.0

45

5

125,498

120,000

460

Capital expenditures /Depreciation
（％）
80

3.0

10

17.85

Total assets /Net assets / Equity ratio(million yen)

40

6

61

10

0

50
1,000

60

15

20

60

63

28

20

45.20

30

1,000

52

80

Review of Operations

2,000

60

4.0

100

30.00

29.07

2,457

1,973

25

40

3,000

1,941

58

8.0

(%)

30.00

1,900

1,500

76

80

67.16

50

3,822

8.7

8

1,893

70

81

Paid leave ratio

60

5,000

80

37.00

30.00

70

5,682

5.0

90
1,945

30

80

7,000

2018 (FY)

35

90

8,000

9.1

100

89

6.0

11.2

Dividends per share

8,913

9,000

7.0

Female ratio

2,000

100

8

Male

Sustainability(million yen)
10,0000.0
2014

2018 (FY)

100

(%)

Female

2.0

1.7

2,000

0

10

3.0

2.9

40,00020,00060,0003.7

4,205

80,00040,0004.0

Use of remote working (all employees)
Use of remote working(employees on reduced
working hours for childcare)

8.0
8

12

(No. of employees)

(%)

9.0

16.2

14

5.0

10.0

5,747

100,000
80,000(%)

Number of overtime hours
Ratio of employees working excess hours

18

Employees* by gender

Growth Strategy

5.1

8,000

60,0006.0

8,241

100,000

100,000

7.0

10,000120,000

140,000

7.2

Remote working(Monthly average; hours)
20

16

140,000

140,000(%)
8.0

13,012

Operating income
Operating margin

161,107

145,180

Productivity(million yen)
14,000180,000

188,332

160,000

Company Overview andValue Creation

Non-financial Highlights

Financial Highlights

2014

2015

2016

2017

2018 (FY)

2014

2015

2016

2017

2018 (FY)

0

0
2014

2015

2016

2017

2018 (FY)*Employees (registered at Net One Systems) excludes staff seconded from external partners,
includes employees seconded to subsidiaries and employees on short- and long-term leave

61

Annual Report 2019

Annual Report 201962

Glossary

Term

Capital services

A type of financial service that allows customers to continue using new ICT systems by reducing CAPEX.

Customer successA technical support process that involves working with customers to help them achieve optimum systemutilization. Through ongoing monitoring of ICT system usage post-installation, gaps in expected system
performance can be identified and rectified. Proposals can also be made to update existing systems inline with advances in technology.

Digital transformation (DX)The utilization of ICT to create new earnings models or deliver substantial improvements in businessefficiency.

Game changer

Refers to changes to existing approaches or rules that can spur competition between companies indifferent sectors and transform industry structures, leading to the creation of new business models.

Industrial IoT (IIoT)The use of IoT in industrial settings. IIoT is being used to improve efficiency in various industries throughthe visualization of site information, such as digitizing the condition and operating environment ofmachinery and devices, and supporting automation.

Overview of the Company
Company name

Net One Systems Co., Ltd.

Websitehttps://www.netone.co.jp/english.html

EstablishedFebruary 1, 1988

Paid-in capital¥12,279 million (as of March 31, 2019)

Number of employees

2,294 (Consolidated as of March 31, 2019)

Business activities	Net One Systems provides innovative information platform solutions andservices that help the leading organizations better strategize information andcommunications technology (ICT).

Integrated service business

A type of business that provides integrated support for all phases of the ICT lifecycle, from ICT platform
design and installation to operation and optimization. Service provision is focused on combining multiple
functions to help customers utilize ICT to solve business challenges.

Job crafting

A process that empowers individual employees to creatively redesign their own jobs and actions toimprove job satisfaction.
Support services covering all areas of ICT, from network connectivity through to system operation,
provided by managed service providers (MSP). As part of the service menu, specialist engineers conduct
a number of analytical processes when ICT systems and equipment are installed. Users pay a monthly
fee for management services, making ICT as accessible as consumer electronics.

Net One Business Operations G.K.

Managed services

MaaS (Mobility as a Service)

The provision of seamless mobility services across a wide area to improve convenience for users, basedon new cooperation between companies in various industries.

Net One Systems USA, Inc.

Multi-cloud

The provision of optimal cloud services by using and linking up public cloud services provided bymultiple companies for different applications.

netone on netone

A customer support model that promotes the active deployment of ICT at customers based on Net One
Systems’ utilizing model, mitigating customer concerns about new system installation and helping themrapidly derive benefits from ICT.

Private cloud

The provision of internal cloud computing environments as a service by companies to business divisions,group companies and other areas of their organization.

Psychological safety

A condition where individuals are not excessively concerned about the opinions of others with respect
to their actions, creating an environment that facilitates candid opinions without fear of negative
consequences.

Public cloud

63

Meaning

The provision of cloud computing environments as a service to companies and individuals.

Subsidiaries

Net One Partners Co., Ltd.
Net One Connect G.K.
Net One Next Co., Ltd.
eXtreak, Inc.
Net One Systems Singapore Pte. Ltd.
Net One Asia Pte. Ltd.

Stock Information
Stock Exchanges

First section of Tokyo Stock Exchange

Listed date

December 20, 2001

Securities code

7518

Number of shares
per trading unit

100 shares

Reference

A process conducted by customers to assess projects implemented by other companies prior to
installing their own ICT systems. Net One Systems typically uses examples of its own systems as
reference points for customers.

Business year

From April 1 to March 31

Refurbishment

ICT systems are typically comprised of the latest technologies and products. However, as morecustomers source functions externally to utilize, guaranteeing the reliability of those functions is
becoming increasingly important. Amid rapid technological advances at manufacturers, ensuringcontinuous use of ICT equipment is a growing challenge. That is spurring demand for refurbishedproducts – equipment guaranteed to function and operate reliably – leading to business models basedon the provision of those products.

Number of authorizedshares to be issued

200,000,000 shares

Smart factories

Factories that use IoT networks to acquire and accumulate data from various devices and facilities andfrom the activities of onsite personnel. Data gleaned through that process is analyzed and utilized tocreate added value.

Stock Transfer Agency

Software as a Service (SaaS)

The provision of software functions to users over the network. SaaS allows users to select only thesoftware functions they require for each application, minimizing usage.

Subscription / subscription-typeservices

Functions or services for which users pay a recurring fee based on period of use. Subscription andsubscription-type services allow users to pay a monthly fee to utilize assets, instead of acquiring themoutright, avoiding the need for significant initial investment and complicated asset management.

Virtual Desktop Infrastructure (VDI)

An approach that integrates the management and use of PC resources. VDI improves control of ICT bymaking resources easier to manage. Users operate networked terminals with desktop PC interfaces, but
no data is stored on the terminal itself, helping to improve data security.

Annual Report 2019

Total number ofshares issued	86,000,000 shares (includes 1,328,696 treasury shares) as of March 31, 2019
Sumitomo Mitsui Trust Bank, Limited